CVS Health Corporation, together with its subsidiaries (collectively, CVS Health), is a leading health solutions company.
The company has more than 1,000 walk-in and primary care medical clinics, a leading pharmacy benefits manager with approximately 90 million plan members and expanding specialty pharmacy solutions, and a dedicated senior pharmacy care business serving more than 800,000 patients per year. It serves an estimated more than 36 million people through traditional, voluntary and con...
CVS Health Corporation, together with its subsidiaries (collectively, CVS Health), is a leading health solutions company.
The company has more than 1,000 walk-in and primary care medical clinics, a leading pharmacy benefits manager with approximately 90 million plan members and expanding specialty pharmacy solutions, and a dedicated senior pharmacy care business serving more than 800,000 patients per year. It serves an estimated more than 36 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (PDP).
Segments
The company operates through Health Care Benefits, Health Services, and Pharmacy & Consumer Wellness segments.
Health Care Benefits segment
The Health Care Benefits segment operates as one of the nation’s leading diversified health care benefits providers, serving an estimated more than 36 million people as of December 31, 2024. The Health Care Benefits segment has the information and resources to help members, in consultation with their health care professionals, make more informed decisions about their health care. The Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental, and behavioral health plans, medical management capabilities, Medicare Advantage and Medicare Supplement plans, PDPs, and Medicaid health care management services. The Health Care Benefits segment’s primary customers, its members, primarily access the segment’s products and services through employer groups, government-sponsored plans or individually. The Health Care Benefits segment also serves customers who purchase products and services that are ancillary to its health insurance products.
Health Care Benefits Products and Services
The company refers to insurance products (where it assumes all or a majority of the risk for medical and dental care costs) as Insured and administrative services contract products (where the plan sponsor assumes all or a majority of the risk of medical and dental care costs) as ASC. Health Care Benefits segment products and services consist of the following:
Commercial Medical: The Health Care Benefits segment offers point-of-service (POS), preferred provider organization (PPO), health maintenance organization (HMO) and indemnity benefit (Indemnity) plans. Commercial medical products also include health savings accounts (HSAs) and consumer-directed health plans that combine traditional POS or PPO and/or dental coverage, subject to a deductible, with an accumulating benefit account (which may be funded by the plan sponsor and/or the member in the case of HSAs). Principal products and services are targeted specifically to large multi-site national, mid-sized and small employers, individual insureds and expatriates. The company offers medical stop loss insurance coverage for certain employers who elect to self-insure their health benefits. Under medical stop loss insurance products, the company assumes risk for costs associated with large individual claims and/or aggregate loss experience within an employer’s plan above a pre-set annual threshold. The segment also has a portfolio of additional health products and services that complement its medical products, such as dental plans, behavioral health and employee assistance products, provider network access and vision products. The company sold Insured plans directly to individual consumers through the individual public health insurance exchanges (Public Exchanges) in 17 states as of December 31, 2024.
Government Medical: In select geographies, the Health Care Benefits segment offers Medicare Advantage plans, Medicare Supplement plans and prescription drug coverage for Medicare beneficiaries; participates in Medicaid and subsidized Children’s Health Insurance Programs (CHIP); and participates in demonstration projects for members who are eligible for both Medicare and Medicaid (Duals). These Government Medical products are further described below:
Medicare Advantage: Through annual contracts with the U.S. Centers for Medicare & Medicaid Services (CMS), the company offers HMO and PPO products for eligible individuals in certain geographic areas through the Medicare Advantage program. Members typically receive enhanced benefits over traditional fee-for-service Medicare coverage (Original Medicare), including reduced cost-sharing for preventive care, vision and other services. The company offered network-based HMO and/or PPO plans in 46 states and Washington, D.C. in 2024. For certain qualifying employer groups, the company offers Medicare PPO products nationally. When combined with the company’s PDP product, these national PPO plans form an integrated national Insured Medicare product for employers that provides medical and pharmacy benefits.
Medicare PDP: The company is a national provider of drug benefits under the Medicare Part D prescription drug program. All Medicare eligible individuals are eligible to participate in this voluntary prescription drug plan. Members typically receive coverage for certain prescription drugs, usually subject to a deductible, co-insurance and/or co-payment. The company offered PDP plans in all 50 states and Washington, D.C. in 2024.
Medicare Supplement: For certain Medicare eligible members, the company offers supplemental coverage for certain health care costs not covered by Original Medicare. The products included in the Medicare Supplement portfolio help to cover some of the gaps in Original Medicare and include coverage for Medicare deductibles and coinsurance amounts. The company offered a wide selection of Medicare Supplement products in 49 states and Washington, D.C. in 2024.
Medicaid and CHIP: The company offers health care management services to individuals eligible for Medicaid and CHIP under multi-year contracts with government agencies in various states that are subject to annual appropriations. CHIP are state-subsidized insurance programs that provide benefits for families with uninsured children. The company offered these services on an Insured or ASC basis in 16 states in 2024.
Duals: The company provides health coverage to beneficiaries who are dually eligible for both Medicare and Medicaid coverage. These members must meet certain income and resource requirements in order to qualify for this coverage. The company coordinates 100% of the care for these members and may provide them with additional services in order to manage their health care costs.
The company also has a portfolio of transformative products and services aims at creating a holistic and integrated approach to individual health and wellness. These products and services complement the Commercial Medical and Government Medical products and aim to provide innovative solutions, create integrated experience offerings and enable enhanced care delivery to customers.
Health Care Benefits Provider Networks
The company contracts with physicians, hospitals and other providers for services they provide to its members. The company uses a variety of techniques designed to help encourage appropriate utilization of medical services (utilization) and maintain affordability of quality coverage. In addition to contracts with providers for negotiated rates of reimbursement, these techniques include creating risk sharing arrangements that align economic incentives with providers, the development and implementation of guidelines for the appropriate utilization and the provision of data to providers to enable them to improve health care quality. As of December 31, 2024, the company’s underlying nationwide provider network had approximately 1.9 million participating providers. Other providers in the company’s provider networks also include laboratory, imaging, urgent care and other freestanding health facilities.
Health Care Benefits Quality Assessment
CMS uses a 5-star rating system to monitor Medicare health care and drug plans and ensure that they meet CMS’s quality standards. CMS uses this rating system to provide Medicare beneficiaries with a tool that they can use to compare the overall quality of care and level of customer service of companies that provide Medicare health care and drug plans. The rating system considers a variety of measures adopted by CMS, including quality of preventative services, chronic illness management and overall customer satisfaction. The company seeks Health Plan accreditation for Aetna Inc. (Aetna) HMO plans from the National Committee for Quality Assurance (NCQA), a private, not-for-profit organization that evaluates, accredits and certifies a wide range of health care organizations. Health care plans seeking accreditation must pass a rigorous, comprehensive review and must annually report on their performance.
Aetna Life Insurance Company (ALIC), a wholly-owned subsidiary of the company, has received nationwide NCQA PPO Health Plan accreditation. As of December 31, 2024, all of the company’s Commercial HMO and all of ALIC’s PPO members who were eligible participated in HMOs or PPOs that are accredited by the NCQA.
The company’s provider selection and credentialing/re-credentialing policies and procedures are consistent with NCQA and URAC, a health care accrediting organization that establishes quality standards for the health care industry, as well as state and federal, requirements. In addition, the company is certified under the NCQA Credentials Verification Organization (CVO) certification program for all certification options and has URAC CVO accreditation.
Quality assessment programs for contracted providers who participate in the company’s networks begin with the initial review of health care practitioners. Practitioners’ licenses and education are verified, and their work history is collected by the company or in some cases by the practitioner’s affiliated group or organization. The company generally requires participating hospitals to be certified by CMS or accredited by The Joint Commission, the American Osteopathic Association, or Det Norske Veritas Healthcare.
The company also offers quality and outcome measurement programs, quality improvement programs and health care data analysis systems to providers and purchasers of health care services.
Health Care Benefits Information Systems
The Health Care Benefits segment operates and supports an end-to-end suite of information technology platforms to support member engagement, enrollment, health benefit administration, care management, service operations, financial reporting and analytics. Platforms are supported by an integration layer to facilitate the transfer of real-time data. There is continued focus and investment in enterprise data platforms, cloud capabilities, digital products to offer innovative solutions and a seamless experience to the company’s members through mobile and web channels. The company is making concerted investments in emerging technology capabilities, such as artificial intelligence (AI) to further automate, augment and improve its operational capabilities, and to improve the experience for providers, patients, and consumers. The Health Care Benefits segment is utilizing the full breadth of the company’s assets to build enterprise technology that will help guide its members through their health care journey, provide them a high level of service, enable healthier outcomes and encourage them to take next best actions to lead healthier lives.
Health Care Benefits Customers
Medical membership is dispersed throughout the U.S., and the company also serves medical members in certain countries outside the U.S. The company offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, many of which are available nationwide. The company markets its products and services to employer groups, individuals, college students, part-time and hourly workers, health plans, providers, governmental units, government-sponsored plans, labor groups, and expatriates.
The company markets both Commercial Insured and ASC products and services primarily to employers that sponsor its products for the benefit of their employees and their employees’ dependents. Frequently, larger employers offer employees a choice among coverage options from which the employee makes his or her selection during a designated annual open enrollment period. Typically, employers pay all of the monthly premiums to the company and, through payroll deductions, obtain reimbursement from employees for a percentage of the premiums that is determined by each employer. Some Health Care Benefits products are sold directly to employees of employer groups on a fully employee-funded basis. In some cases, the company bills the covered individual directly. The company also sells Insured plans directly to individual consumers in certain geographies through the Public Exchanges.
The company offers Insured Medicare coverage on an individual basis, as well as through employer groups to their retirees. Medicaid and CHIP members are enrolled on an individual basis. The company also offers Insured health care coverage to members who are dually-eligible for both Medicare and Medicaid.
Health Care Benefits products are sold through the company’s sales personnel; independent brokers, agents and consultants who assist in the production and servicing of business, as well as private health insurance exchanges (Private Exchanges) and Public Exchanges (together with Private Exchanges, Insurance Exchanges). For large employers or other entities that sponsor the company’s products (plan sponsors), independent consultants and brokers are frequently involved in employer health plan selection decisions and sales. In some instances, the company may pay commissions, fees and other amounts to brokers, agents, consultants and sales representatives who place business with it. In certain cases, the customer pays the broker for services rendered, and the company may facilitate that arrangement by collecting the funds from the customer and transmitting them to the broker. The company supports marketing and sales efforts with an advertising program that may include television, radio, billboards, print media and social media, supplemented by market research and direct marketing efforts.
The U.S. federal government is a significant customer of the Health Care Benefits segment through contracts with CMS for coverage of Medicare-eligible individuals and federal employee-related benefit programs. Other than the contracts with CMS, the Health Care Benefits segment is not dependent upon a single customer or a few customers the loss of which would have a significant effect on the earnings of the segment.
Health Care Benefits Pricing
The company has Medicare Advantage and PDP contracts with CMS to provide HMO, PPO and prescription drug coverage to Medicare beneficiaries in certain geographic areas. Under these annual contracts, CMS pays the company a fixed per member (or capitation) payment and/or a portion of the premium, both of which are based on membership and adjusted for demographic and health risk factors. CMS also considers inflation, changes in utilization patterns and average per capita fee-for-service Medicare costs in the calculation of the fixed capitation payment or premium. PDP contracts also provide a risk-sharing arrangement with CMS to limit the company’s exposure to unfavorable expenses or benefit from favorable expenses. Amounts payable to the company under the Medicare arrangements are subject to annual revision by CMS, and it elects to participate in each Medicare service area or region on an annual basis. Premiums paid to the company for Medicare products are subject to federal government reviews and audits, which can result, and have resulted, in retroactive and prospective premium adjustments and refunds to the government and/or members. In addition to payments received from CMS, some Medicare Advantage products and all PDP products require a supplemental premium to be paid by the member or sponsoring employer. In some cases, these supplemental premiums are adjusted based on the member’s income and asset levels.
The company offers HMO and consumer-directed medical and dental plans to federal employees under the Federal Employees Health Benefits (FEHB) Program and the Federal Employees Dental and Vision Insurance Program. Premium rates and fees for those plans are subject to federal government review and audit, which can result, and have resulted, in retroactive and prospective premium and fee adjustments and refunds to the government and/or members.
Health Care Benefits Seasonality
The Health Care Benefits segment’s quarterly operating income progression is impacted by the seasonality of benefit costs which generally increase during the year as Insured members progress through their annual deductibles and out-of-pocket expense limits, continued changes in product mix between Commercial and Government medical membership and the seasonality of operating expenses, which are generally the highest during the fourth quarter due primarily to spending to support readiness for the start of the upcoming plan year and marketing associated with Medicare annual enrollment.
Health Care Benefits Competition
The largest competitor in Medicare products is Original Medicare. The Health Care Benefits segment’s ASC plans compete primarily with other large commercial health care benefit insurance companies, numerous for-profit and not-for-profit organizations operating under licenses from the Blue Cross and Blue Shield Association and TPAs.
Health Care Benefits Reinsurance
The company has several reinsurance agreements with non-affiliated insurers that relate to Health Care Benefits insurance policies. The company entered into these contracts to reduce the risk of catastrophic losses which in turn reduces capital and surplus requirements. The company frequently evaluates reinsurance opportunities and refines its reinsurance and risk management strategies on a regular basis.
Health Services segment
The Health Services segment provides a full range of PBM solutions, delivers health care services in its medical clinics, virtually, and in the home, and offers provider enablement solutions. PBM solutions include plan design offerings and administration, formulary management, retail pharmacy network management services, and specialty and mail order pharmacy services. In addition, the company provides clinical services, disease management services, medical spend management and pharmacy and/or other administrative services for providers and federal 340B drug pricing program covered entities (Covered Entities). The company operates a group purchasing organization that negotiates pricing for the purchase of pharmaceuticals and rebates with pharmaceutical manufacturers on behalf of its participants and provides various administrative, management and reporting services to pharmaceutical manufacturers. During 2023, the company completed the acquisition of two key health care delivery assets – Signify Health, Inc. (Signify Health) a leader in health risk assessments, value-based care and provider enablement services, and Oak Street Health, Inc. (Oak Street Health) a leading multi-payor operator of value-based primary care centers serving Medicare eligible patients.
The company also launched CordavisTM, a wholly owned subsidiary that works directly with pharmaceutical manufacturers to commercialize and/or co-produce high quality biosimilar products. The Health Services segment’s clients and customers are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care (Managed Medicaid) plans, CMS, plans offered on Insurance Exchanges and other sponsors of health benefit plans throughout the U.S., patients who receive care in the Health Services segment’s medical clinics, virtually or in the home, as well as Covered Entities. During the year ended December 31, 2024, the company’s PBM filled or managed 1.9 billion prescriptions on a 30-day equivalent basis.
Health Services Products and Services
PBM Solutions
The Health Services segment manages prescription drug distribution directly through the company’s specialty and mail order pharmacies and through pharmacies in its retail network. All prescriptions processed by the company are analyzed, processed and documented by its proprietary prescription management systems. These systems provide essential features and functionality to allow plan members to utilize their prescription drug benefits. These systems also streamline the process by which prescriptions are processed by staff and network pharmacists by enhancing review of various items through automation, including plan eligibility, early refills, duplicate dispensing, appropriateness of dosage, drug interactions or allergies, over-utilization, and potential fraud.
Plan Design Offerings and Administration
The company assists its PBM clients in designing pharmacy benefit plans that help improve health outcomes while minimizing the costs to the client. The company also assists PBM clients in monitoring the effectiveness of their plans through frequent, informal communications, the use of proprietary software, as well as through formal annual, quarterly and sometimes monthly performance reviews. The company administers pharmacy benefit plans for clients who contract with it to facilitate prescription drug coverage and claims processing for their eligible plan members. The company also provides administrative services for Covered Entities.
The company makes recommendations to help PBM clients design benefit plans that promote the use of lower cost, clinically appropriate drugs and helps its PBM clients control costs by recommending plan designs that encourage the use of generic equivalents of brand name drugs when such equivalents are available. Clients also have the option, through plan design, to further lower their pharmacy benefit plan costs by setting different member payment levels for different products on their drug lists or formularies, which helps guide members to choose lower cost alternatives through appropriate financial incentives.
Formulary Management
The company utilizes an independent panel of doctors, pharmacists and other medical experts, referred to as the CVS Caremark National Pharmacy and Therapeutics Committee, to review and approve the selection of drugs that meet its standards of safety and efficacy for inclusion on one of its template formularies. The company’s formularies provide recommended products in numerous drug classes to help ensure member access to clinically appropriate drugs with alternatives within a class under the client’s pharmacy benefit plan, while helping to drive the lowest net cost for clients that select one of its formularies. To help improve clinical outcomes for members and clients, the company conducts ongoing, independent reviews of all drugs, including those appearing on the formularies and generic equivalent products. Many of the company’s clients choose to adopt a template formulary offering as part of their plan design. PBM clients are given capabilities to offer real time benefits information for a member’s specific plan design, provided electronically in the Electronic Health Record at the point of prescribing, at the CVS pharmacy and directly to members.
Retail Pharmacy Network Management Services
The company maintains a national network of retail pharmacies, consisting of approximately 37,000 chain pharmacies (which include CVS pharmacy locations) and approximately 28,000 independent pharmacies, in the U.S., including Puerto Rico, the District of Columbia, Guam and the U.S. Virgin Islands. When a customer fills a prescription in a retail pharmacy, the pharmacy sends prescription data electronically to the company from the point-of-sale. This data interfaces with the company’s proprietary prescription management systems, which verify relevant plan member data and eligibility, while also performing a drug utilization review to help evaluate clinical appropriateness and safety and confirming that the pharmacy will receive payment for the prescription.
Specialty and Mail Order Pharmacy Services
The company operates mail order pharmacies, specialty mail order pharmacies and retail specialty pharmacy stores in the U.S. The mail order pharmacies are used primarily for maintenance medications, while the specialty mail order pharmacies and retail specialty pharmacy stores are used for the delivery of advanced medications to individuals with chronic or genetic diseases and disorders. The Health Services segment’s plan members or their prescribers submit prescriptions or refill requests to these pharmacies, and staff pharmacists review these prescriptions and refill requests with the assistance of the company’s prescription management systems. This review may involve communications with the prescriber and, with the prescriber’s approval when required, can result in interventions designed to help reduce cost and/or improve quality of treatment. The Health Services segment pays an administrative service fee to the Pharmacy & Consumer Wellness segment, in exchange for which the Pharmacy & Consumer Wellness segment provides pharmacy fulfillment and patient management services to support the Health Services segment’s specialty and mail order pharmacy offerings.
Clinical Services
The company offers multiple clinical programs and services to help clients manage overall pharmacy and health care costs in a clinically appropriate manner. These programs are primarily designed to promote better health outcomes and to help target inappropriate medication utilization and non-adherence to medication, each of which may result in adverse medical events that negatively affect member health and client pharmacy and medical spend. These programs include utilization management (UM), medication management, quality assurance, adherence and counseling programs to complement the client’s plan design and clinical strategies. The company offers an integrated strategy that aims to help decrease the potential for inappropriate opioid use while preserving access for those with genuine chronic pain needs through concurrent and retrospective claims’ review. In addition, this strategy aims to address potential fraud, waste, and abuse across multiple drug classes through surveillance and communications to prescribers and pharmacies. Core medication support products, such as Pharmacy Advisor and Drug Savings Review optimize utilization through digital, phone, in-person, and provider-facing outreach to help participating plan members with certain chronic diseases to identify gaps in care, adhere to their prescribed medications, ensure efficient use of those medications, and manage their overall health conditions. The CVS Weight Management program optimizes utilization of GLP-1 medication and provides the label-recommended lifestyle support and coaching to maximize and maintain weight loss on these therapies, while addressing new indications (e.g., cardiovascular disease). The company also has digital connectivity that helps to lower drug costs for patients by providing expanded visibility to lower cost alternatives through enhanced analytics and data sharing.
Disease Management Programs
The company’s clinical programs and services utilize advanced protocols and offer clients convenience in working with providers and other third parties. The company’s care management program covers diseases, such as rheumatoid arthritis, Parkinson’s disease, epilepsy and multiple sclerosis and is accredited by the NCQA. The company’s UM program covers similar diseases and is accredited by the National Committee for Quality Assurance (NCQA) and URAC.
Medical Benefit Management
The company’s NovoLogix online preauthorization tool helps identify and capture cost savings opportunities for specialty drugs billed under the medical benefit by identifying outliers to appropriate dosages and costs and helps to ensure clinically appropriate use of specialty drugs.
Group Purchasing Organization Services
The company operates a group purchasing organization that negotiates pricing for the purchase of pharmaceuticals and rebates with pharmaceutical manufacturers on behalf of its participants. The company also provides various administrative, management and reporting services to pharmaceutical manufacturers.
Value-Based Care
In response to rising healthcare spending in the U.S., commercial, government, and other payors are shifting away from fee-for-service payment models towards value-based models, including risk-based payment models that tie financial incentives to quality, efficiency and coordination of care. Value-based care (VBC) refers to the goal of incentivizing healthcare providers to simultaneously increase quality while lowering the cost of care for patients. More specifically, providers in a VBC model are incentivized to focus on more preventative care, higher quality of care and better coordination of care to create better health outcomes and avoid potentially expensive complications from illnesses that could be managed more conveniently and cost effectively.
The company is committed to expanding value-based care in the U.S. and delivering higher quality care to patients at a lower overall cost to the industry. The company operates in value-based care through two primary means: providing comprehensive primary care through its Oak Street Health primary care centers and enabling independent health systems transition to value-based care through contracting and care management services. The company’s value-based care assets typically contract with payors, primarily Medicare Advantage plans, and/or CMS.
The company’s Oak Street Health business operates retail-like, community-based centers that provide medical primary care services and support Medicare eligible patients in the management of chronic illnesses and the prevention of unnecessary acute events. The company integrates population health analytics, social support services and primary care into the care model to drive improved patient outcomes. The company contracts with health plans and CMS to generate medical costs savings, assume full financial risk of its patients and realize a return on its investment in primary care.
The company’s clinics implement a branded and consumer-focused design to create a welcoming environment that engages patients in highly accessible, convenient locations close to where patients live, work and shop. As of December 31, 2024, the company operated 239 centers across 27 states. During the year ended December 31, 2024, the company’s centers provided care for approximately 500,000 patients.
In-Home Health Evaluations
As a complement to its value-based care delivery, the company operates a large mobile network of credentialed providers in the U.S. through its Signify Health business. These credentialed providers are deployed into the home primarily to conduct in-home health evaluations (IHEs) and perform select diagnostic services. IHEs may also be performed virtually or at a healthcare provider facility. During the year ended December 31, 2024, the company performed more than 3 million IHEs. While in the home, providers perform IHEs with the assistance of the company’s longitudinal patient records and proprietary clinical workflow software with its integrated device hub. The company’s software guides clinical workflows, as well as in-home diagnostic screenings, yielding a rich patient report of hundreds of data points. The company also offers diagnostic and preventive services and provides comprehensive medication review services while in the home. Through its IHEs, the company creates a comprehensive, documented record of the clinical, social and behavioral needs of its health plan customers’ medically complex populations and seek to further engage them with the healthcare system.
MinuteClinic
As of December 31, 2024, the company operated more than 900 MinuteClinic locations in the U.S. The clinics are staffed by nurse practitioners and physician assistants who utilize nationally established guidelines to deliver a variety of health care services. Payors value these clinics because they provide convenient, high-quality, cost-effective care, in many cases offering an attractive alternative to more expensive sites of care. MinuteClinic also offers virtual care services to connect customers with licensed providers to provide access to health services remotely. MinuteClinic is collaborating with the company’s medical and pharmacy members to help meet the needs of its health plan and client plan members by offering programs that can improve member health and lower costs. MinuteClinic also maintains relationships with leading hospitals, clinics and physicians in the communities it serves to support and enhance quality, access and continuity of care.
Cordavis
The company launched Cordavis, a wholly owned subsidiary that works directly with pharmaceutical manufacturers to commercialize and/or co-produce high quality biosimilar products. Through Cordavis, the company intends to develop a portfolio of products that will provide broader access to biosimilars in the U.S. As access to biosimilars increases, it is expected to generate more competition in the market which should lead to lower costs and result in higher savings for its clients.
Health Services Information Systems
The Health Services segment’s claim adjudication platform incorporates architecture that centralizes the data generated from adjudicating retail pharmacy, specialty and mail order claims and delivering other solutions to PBM clients. The Health Engagement Engine technology and proprietary clinical algorithms help connect various parts of the enterprise and serve an essential role in cost management and health improvement, leveraging cloud-native technologies and practices. This capability transforms pharmacy data into actionable interventions at key points of care, including in retail, mail, and specialty pharmacies, as well as in customer care call center operations, leveraging its enterprise data platform to improve the quality of care. The technology leverages assisted artificial intelligence to deliver insights to the business and bring automation to otherwise manual tasks. Specialty services also connect with its claim adjudication platform and various health plan adjudication platforms with a centralized architecture servicing many clients and members. Operating services, such as Specialty Expedite, provide an interconnected onboarding solution for specialty medications and branding solutions ranging from fulfillment to total patient management. These services are managed through its new innovative specialty workflow and web platform.
The Health Services segment’s custom-built proprietary Canopy technology is a key driver of the success of its value-based care model and foundation for patients receiving a consistent, high-quality level of care. Canopy underlies every aspect of the company’s day-to-day clinical and operational workflows, allowing care teams to tailor care plans to the needs of both the patient and the business. Canopy integrates an immense amount of data about patients from a broad set of sources, including payor claims data, pharmacy data and medical records from hospitals and specialists and provides actionable insights and workflows to accelerate effective clinical management and oversight. Canopy leverages artificial intelligence and machine learning capabilities to create and refine a clinical rules engine (predictive models and prescriptive algorithms) that informs care delivery and addresses hospital admissions and readmissions, medical costs and patient retention.
Through the collaboration of its digital and technical teams, the company has established critical tools which enable patients to schedule appointments through MinuteClinic.com. Key elements of the offerings include landing pages which highlight services and answer common questions, screening capabilities to determine patient eligibility, service location locator and appointment selection tools to efficiently identify the requested service on a specified date, time, and location and registration pages to collect required patient information, accelerating check-in once at the MinuteClinic. Once scheduled, the tools provide the user with instructions and notifications, including SMS text message and email reminders, and provide digital results and records, enabling patients to view and save their medical records for convenient access at a later point.
Health Services Clients & Customers
The company’s Health Services clients and customers are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Managed Medicaid plans, CMS, plans offered on Insurance Exchanges, other sponsors of health benefit plans throughout the U.S., patients who receive care in the Health Services segment’s medical clinics, virtually or in the home, as well as Covered Entities. The Health Services segment’s revenues are primarily generated from the sale and managing of prescription drugs to eligible members in benefit plans maintained by clients. Pharmaceuticals are provided to eligible members in benefit plans maintained by clients and utilize the company’s information systems, among other things, to help perform safety checks, drug interaction screening and identify opportunities for generic substitution.
The company’s value-based care arrangements are primarily directed at independent health systems, including community hospitals, physician practices and clinics, participating in, or seeking to participate in, ACOs or contract with Medicare Advantage plans.
The company’s IHE operations customers are primarily Medicare Advantage health plans, making up approximately 86% of its total IHE volume. In 2024, the company had IHE contracts with 51 health plans in the U.S., including 22 of the 50 largest Medicare Advantage plans.
Health Services Seasonality
The majority of the Health Services segment revenues, including revenues generated from its PBM services, are not seasonal in nature.
The company’s primary care operations experience some variability depending upon the time of year in which they are measured. Typically, a significant portion of the company’s at-risk patient growth is experienced during the first quarter, after plan enrollment selections made during the fourth quarter of the prior annual enrollment period take effect. Finally, medical costs will vary seasonally depending on a number of factors, including the weather, which can be a driver of certain illnesses, such as the influenza virus.
Health Services Competition
The Health Services segment has a significant number of competitors offering PBM services, including large, national PBM companies (e.g., Prime Therapeutics and MedImpact), PBMs owned by large national health plans (e.g., the Express Scripts business of Cigna Corporation and the Optum Rx business of UnitedHealth Group) and smaller standalone PBMs.
Pharmacy & Consumer Wellness segment
The Pharmacy & Consumer Wellness segment dispenses prescriptions in its retail pharmacies and through its infusion operations, provides ancillary pharmacy services, including pharmacy patient care programs, diagnostic testing and vaccination administration, and sells a wide assortment of health and wellness products and general merchandise. The segment also conducts long-term care pharmacy (LTC) operations, which distribute prescription drugs and provide related pharmacy consulting and ancillary services to long-term care facilities and other care settings and provides pharmacy fulfillment services to support the Health Services segment’s specialty and mail order pharmacy offerings. As of December 31, 2024, the Pharmacy & Consumer Wellness segment operated retail locations, as well as online retail pharmacy websites, LTC pharmacies and on-site pharmacies, retail specialty pharmacy stores, compounding pharmacies and branches for infusion and enteral nutrition services. During the year ended December 31, 2024, the Pharmacy & Consumer Wellness segment filled 1.7 billion prescriptions on a 30-day equivalent basis and dispensed approximately 27.2% of total retail pharmacy prescriptions in the U.S.
Pharmacy & Consumer Wellness Products and Services
A typical retail store sells prescription drugs and a wide assortment of high-quality, nationally advertised brand name and proprietary brand merchandise. Pharmacy locations may also contract with Covered Entities under the federal 340B drug pricing program. Front store categories include over-the-counter drugs, consumer health products, beauty products, personal care products, and other general merchandise products. The company purchases merchandise from numerous manufacturers and distributors. LTC operations include distribution of prescription drugs and related consulting and ancillary services.
Pharmacy & Consumer Wellness revenues by major product group are as follows:
Pharmacy
Pharmacy revenues represented over three-fourths of Pharmacy & Consumer Wellness segment revenues in each of 2024. The company’s retail pharmacy operations will continue to represent a critical part of its business due to industry demographics, e.g., an aging American population consuming a greater number of prescription drugs, prescription drugs being used more often as the first line of defense for managing illness, the introduction of new pharmaceutical products, the need for vaccinations and Medicare Part D growth. Its retail pharmacy business benefits from investment in both people and technology, as well as innovative collaborations with health plans, PBMs and providers. Given the nature of prescriptions, consumers want their prescriptions filled accurately by professional pharmacists using the latest tools and technology, and ready when promised. Consumers also need medication management programs and better information to help them get the most out of their health care dollars. To assist consumers with these needs, the company has introduced integrated pharmacy health care services that provide an earlier, easier and more effective approach to engaging consumers in behaviors that can help lower costs, improve health and save lives.
Front Store
Front store revenues reflect the company’s strategy of innovating with new and unique products and services, using innovative personalized marketing and adjusting the mix of merchandise to match customers’ needs and preferences. A key component of the front store strategy is the ExtraCare card program, which is one of the largest and most successful retail loyalty programs in the U.S. The ExtraCare program allows the company to balance marketing efforts so it can reward its best customers by providing them with automatic sale prices, customized coupons, ExtraBucks rewards and other benefits. The company also offers a subscription-based membership program, ExtraCare PlusTM, under which members are entitled to a suite of benefits delivered over the course of the subscription period, as well as a promotional reward that can be redeemed for future goods and services. The company continues to launch and enhance new and exclusive brands to create unmatched offerings and deliver other unique product offerings, including a full range of high-quality proprietary brand products that are only available through CVS stores. The company carries approximately 4,500 proprietary brand products.
On-site Pharmacies
The company also operates a limited number of pharmacies located at client sites, which provide certain health plan members and customers with a convenient alternative for filling their prescriptions and receiving vaccinations.
Specialty and Mail Order Pharmacy Fulfillment Services
The Pharmacy & Consumer Wellness segment provides pharmacy fulfillment services to support the Health Services segment’s specialty and mail order pharmacy offerings, in exchange for which the Health Services segment pays an administrative service fee to the Pharmacy & Consumer Wellness segment.
Long-term Care Pharmacy Operations
The Pharmacy & Consumer Wellness segment provides LTC pharmacy services through the Omnicare business. Omnicare’s customers consist of skilled nursing facilities, assisted living facilities, independent living communities, hospitals, correctional facilities, and other health care service providers. The company provides pharmacy consulting, including monthly patient drug therapy evaluations, to assist in compliance with state and federal regulations and provide proprietary clinical and health management programs. It also provides pharmaceutical case management services for retirees, employees and dependents who have drug benefits under corporate-sponsored health care programs.
Community Location Development
CVS Health’s community health destinations are an integral part of its ability to meet the needs of consumers and maintain its leadership position in the changing health care landscape. When paired with its rapidly expanding digital presence, the company’s physical presence in thousands of communities across the country represents a competitive advantage by allowing it to develop deep and trusted relationships through everyday engagement in consumer health. The company’s community health destinations have played, and will continue to play, a key role in its continued growth and success. During 2024, the company opened 39 new locations, relocated 3 locations and closed 299 locations.
The company’s continuous assessment of its national footprint is an essential component of competing effectively in the health care environment. On an ongoing basis, the company evaluates changes in population, consumer buying patterns and future health needs to assess the ability of its existing stores and locations to meet the needs of its consumers and the business.
Pharmacy & Consumer Wellness Information Systems
The company has continued to invest in information systems to enable it to deliver exceptional customer service, enhance safety and quality, and expand patient care services while lowering operating costs. The proprietary WeCARE Workflow tool supports pharmacy teams by prioritizing work to meet customer expectations, facilitating prescriber outreach, and seamlessly integrating clinical programs. This solution delivers improved efficiency and enhances customer experience, as well as provides a framework to accommodate the evolution of pharmacy practice and the expansion of clinical programs. The company’s Health Engagement Engine technology and data science clinical algorithms enable it to help identify opportunities for pharmacists to deliver face-to-face counseling regarding patient health and safety matters, including medication adherence issues, gaps in care and management of certain chronic health conditions. The company’s digital strategy is to empower the consumer to navigate their pharmacy experience and manage their condition through integrated online and mobile solutions that offer utility and convenience. The company has also established tools which enable customers to schedule diagnostic testing and vaccination appointments through CVS.com, provide instructions and notifications to the customer regarding the services, and, following administration, allow customers to access digital results for tests and records for vaccinations.
Pharmacy & Consumer Wellness Customers
The success of the Pharmacy & Consumer Wellness segment’s businesses is dependent upon the company’s ability to establish and maintain contractual relationships with pharmacy benefit managers and other payors on acceptable terms. Substantially all of the Pharmacy & Consumer Wellness segment’s pharmacy revenues are derived from pharmacy benefit managers, managed care organizations (MCOs), government funded health care programs, commercial employers and other third-party payors.
Pharmacy & Consumer Wellness Seasonality
The majority of Pharmacy & Consumer Wellness segment revenues, particularly pharmacy revenues, generally are not seasonal in nature. However, front store revenues tend to be higher during the December holiday season. In addition, both pharmacy and front store revenues are affected by the timing and severity of the cough, cold and flu season, most notably during first and fourth quarters, resulting in higher administration of vaccines during those periods.
Pharmacy & Consumer Wellness Competition
In the areas it serves, the company competes with other drugstore chains (e.g., Walgreens and Rite Aid), supermarkets, discount retailers (e.g., Walmart), independent pharmacies, restrictive pharmacy networks, online retailers (e.g., Amazon), membership clubs, infusion pharmacies, as well as mail order dispensing pharmacies. The company’s largest LTC pharmacy competitor nationally is PharMerica.
Business Strategy
The company is building a world of health around every consumer it serves, seeking to make it easier and more affordable to live a healthier life. This means delivering solutions that are more personalized, simpler to use and increasingly digital so consumers can receive care when, where and how they desire. It addresses holistic health – physical, emotional, social and economic – and it is creating new sources of value through its integrated care model which allows it to expand into personalized, technology driven care delivery and health services, increasing access to quality care, delivering better health outcomes and lowering overall health care costs.
Government Regulations
The company is subject to various federal and state laws concerning its submission of claims and other information to Medicare, Medicaid and other federal and state government-sponsored health care programs. Potential sanctions for violating these laws include recoupment or reduction of government reimbursement amounts, civil penalties, treble damages, and exclusion from participation in government health care programs. Such laws include the federal False Claims Act (the False Claims Act), the federal anti-kickback statute (the AKS), state false claims acts and anti-kickback statutes in most states, the federal Stark Law and related state laws.
The company’s Medicare Advantage, PDP and other Medicare products are highly regulated by the U.S. Centers for Medicare & Medicaid Services (CMS).
The company’s Medicaid, dual eligible and dual eligible special needs plan products also are heavily regulated by CMS and state Medicaid agencies, which have the right to audit its performance to determine compliance with CMS contracts and regulations.
Complying with additional state requirements requires the company to make additional investments beyond those it has made to comply with HIPAA and the Gramm-Leach-Bliley Act (GLBA).
The company is subject to a variety of intersecting federal and state statutes and regulations that govern the wholesale distribution of drugs; operation of retail, specialty, infusion, LTC and mail order pharmacies; licensure of facilities and professionals, including pharmacists, technicians, nurses and other health care professionals; registration of facilities with the U.S. Drug Enforcement Administration (the DEA) and analogous state agencies that regulate controlled substances; packaging, storing, shipping and tracking of pharmaceuticals; repackaging of drug products; labeling, medication guides and other consumer disclosures; interactions with prescribers and health care professionals; compounding of prescription medications; dispensing of controlled and non-controlled substances; counseling of patients; transfers of prescriptions; advertisement of prescription products and pharmacy services; security; inventory control; recordkeeping; reporting to Boards of Pharmacy, the U.S. Food and Drug Administration (the FDA), the U.S. Consumer Product Safety Commission, the DEA and related state agencies; and other elements of pharmacy practice. Pharmacies are highly regulated and have contact with a wide variety of federal, state and local agencies with various powers to investigate, inspect, audit or solicit information, including Boards of Pharmacy and Nursing, the DEA, the FDA, the DOJ, HHS, and others. Many of these agencies have broad enforcement powers, conduct audits on a regular basis, can impose substantial fines and penalties, and may revoke the license, registration or program enrollment of a facility or professional.
The states of domicile of the company’s regulated subsidiaries have statutory risk-based capital (RBC) requirements for health and other insurance companies and HMOs based on the National Association of Insurance Commissioners’ (the NAIC) Risk-Based Capital for Insurers Model Act (the RBC Model Act).
The Employee Retirement Income Security Act of 1974 (ERISA), provides for comprehensive federal regulation of certain employee pension and benefit plans, including private employer and union sponsored health plans and certain other plans that contract with the company to provide PBM services.
The company’s subsidiaries contract with the Office of Personnel Management (the OPM) to provide managed health care services under the Federal Employees Health Benefits (FEHB) program in their service areas. The company also has a contractual arrangement with carriers for the FEHB program, such as the BlueCross BlueShield Association, to provide pharmacy services to federal employees, postal workers, annuitants, and their dependents under the Government-wide Service Benefit Plan, as authorized by the FEHB Act and as part of the FEHB program.
The company’s subsidiaries contract with the Office of Personnel Management (the OPM) to provide managed health care services under the FEHB program in their service areas. These contracts with the OPM and applicable government regulations establish premium rating arrangements for this program. In addition to other requirements, such as the Transparency in Coverage Rule note above, OPM regulations require that community-rated FEHB plans meet a FEHB program-specific minimum MLR by plan code and market. Managing to these rules is complicated by the simultaneous application of the minimum MLR standards and associated premium rebate requirements of the ACA. The company also has a contractual arrangement with carriers for the FEHB program, such as the BlueCross BlueShield Association, to provide pharmacy services to federal employees, postal workers, annuitants, and their dependents under the Government-wide Service Benefit Plan, as authorized by the FEHB Act and as part of the FEHB program. Additionally, the company manages certain FEHB plans on a cost-plus basis. These arrangements subject it to certain aspects of the FEHB Act, and other federal regulations, such as the FEHB Acquisition Regulation, that otherwise would not be applicable to it. The OPM also auditing the company and its other contractors to, among other things, verify that plans meet their applicable FEHB program-specific MLR and the premiums established under the OPM’s Insured contracts and costs allocated pursuant to the OPM’s cost-based contracts are in compliance with the requirements of the applicable FEHB program. The OPM may seek premium refunds or institute other sanctions against the company if it fails to comply with the FEHB program requirements.
In addition, the presence of operations in foreign countries potentially increases the company’s exposure to the anti-bribery, anti-corruption and anti-money laundering provisions of U.S. law, including the FCPA, and corresponding foreign laws, including the U.K. Bribery Act 2010 (the UK Bribery Act).
The company also is subject to applicable anti-corruption laws of the jurisdictions in which it operates. In many countries outside the U.S., health care professionals are employed by the government. Therefore, the company’s dealings with them are subject to regulation under the Foreign Corrupt Practices Act of 1977 (FCPA). Violations of the FCPA and other anti-corruption laws may result in severe criminal and civil sanctions, as well as other penalties, and there continues to be a heightened level of FCPA enforcement activity by the SEC and the U.S. Department of Justice DOJ.
Certain lines of the company’s businesses are subject to Treasury anti-money laundering regulations. The company also subject to regulation by the Office of Foreign Assets Control of the U.S. Department of Treasury (OFAC). The FDA regulates the company’s compounding pharmacy and clinical research operations.
The FDA regulates the company’s compounding pharmacy and clinical research operations. The FDA also generally has authority to, among other things, regulate the manufacture, distribution, sale and labeling of medical devices (including hemodialysis devices, such as the device the company is developing and mobile medical devices) and many products sold through retail pharmacies, including prescription drugs, over-the-counter medications, cosmetics, dietary supplements and certain food items.
The ACA expanded the premium rate review process by, among other things, requiring the company’s Commercial Insured rates to be reviewed for reasonableness at either the state or the federal level.
The company’s Medicaid, dual eligible and dual eligible special needs plan products also are heavily regulated by CMS and state Medicaid agencies, which have the right to audit its performance to determine compliance with CMS contracts and regulations.
The company’s PBM activities also are regulated directly and indirectly at the federal and state levels, including being subject to the False Claims Act and state false claims acts and the AKS and state anti-kickback laws.
History
CVS Health Corporation was incorporated in Delaware in 1996.
