CVS Health Corporation · NYSE:CVS
CVS Health — CVS Caremark — Investor Day (December 2013)
42 slides from CVS Health's investor day presentation, Dec 18, 2013
Slide 1: Driving Enterprise Growth
Driving Enterprise Growth Larry Merlo President & Chief Executive Officer Analyst Day December 18, 2013
Slide 2: CVS Caremark: Winning With Ability & Agility
CVS Caremark: Winning With Ability & Agility Ability Agility 2
Slide 3: CVS Caremark: Winning With Ability & Agility - Ability
CVS Caremark: Winning With Ability & Agility Ability Unmatched breadth of assets and expertise to drive innovation and deliver results 3
Slide 4: CVS Caremark: Winning With Ability & Agility - Agility
CVS Caremark: Winning With Ability & Agility Nimbleness to capitalize on shifting market and customer demands Agility 4
Slide 5: CVS Caremark: Winning With Ability & Agility
CVS Caremark: Winning With Ability & Agility Ability Agility 5
Slide 6: Today's Key Takeaways
Today’s Key Takeaways THE THE THE THE OPPORTUNITY MODEL FOCUS RESULT Changes in Unique model Greater focus on Enhanced environment creates total enterprise shareholder create sustainable growth value significant competitive opportunities advantages 6
Slide 7: Today's Key Takeaways: The Opportunity
Today’s Key Takeaways THE OPPORTUNITY ! CVS best positioned for the Changes in retailization of health care environment create ! Purposeful innovation to significant meet changing needs of opportunities clients and customers 7
Slide 8: Today's Key Takeaways: The Model
Today’s Key Takeaways THE MODEL ! Enhancing access, lowering Unique model costs and improving health creates outcomes sustainable competitive ! Consumer-driven, channel- advantages agnostic solutions will win 8
Slide 9: Today's Key Takeaways: The Focus
Today’s Key Takeaways THE FOCUS ! Winning lives / capturing Greater share of spend, whether or focus on total not we’re the PBM enterprise growth ! Only CVS Caremark has the integrated assets to deliver breakthrough products 9
Slide 10: Today's Key Takeaways: The Result
Today’s Key Takeaways THE RESULT ! Driving productive long-term Enhanced growth shareholder value ! Generating significant free cash flow ! Optimizing capital allocation 10
Slide 11: Innovation You'll Hear About Today
Innovation You’ll Hear About Today Partner with Health Plans Jon Roberts Expand Role in Specialty Alan Lotvin Integrated Digital Offering Helena Foulkes Unlock Adherence Josh Flum Transform Primary Care Andy Sussman Differentiate for Providers Andy Sussman 11
Slide 12: A Purpose-driven Company And Strategy
A Purpose-driven Company And Strategy … Working Towards Enterprise Success 12
Slide 13: Agenda
Agenda ! Delivering on our promises ! Driving enterprise growth 13
Slide 14: Agenda
Agenda ! Delivering on our promises ! Driving enterprise growth 14
Slide 15: Key Accomplishments Since Last Year
Key Accomplishments Since Last Year Meeting financial EPS growth of 14+% targets Retail share Retained >60% of 2012 share gains growth International Drogaria Onofre in Brazil expansion MinuteClinic ~150 new clinics expansion Successful PBM 96% retention rate; selling season Significant new business
Slide 16: We're Succeeding In The Marketplace
We’re Succeeding In The Marketplace ! Nearly doubled dispensing share for Caremark members at CVS/pharmacy ! Transformed pharmacy convenience with Maintenance Choice ! Capitalized on wins with health plans across the enterprise ! Applied data to drive our adherence advantage 16
Slide 17: Growth Strategy Capitalizes On Unique Competitive Advantages
Growth Strategy Capitalizes On Unique Competitive Advantages ! Winning lives, whether or not we’re the PBM … ! … Capturing greater share of Rx spend across all channels ! Driving operational efficiency and excellence in execution ! Innovating to better meet evolving customer needs Strong outlook for
Slide 18: Agenda
Agenda ! Delivering on our promises ! Driving enterprise growth 18
Slide 19: CVS Caremark Is Well-positioned For Growth In A Changing Landscape
CVS Caremark Is Well-positioned For Growth In A Changing Health Care Landscape ! 1 Coverage expansion & payor mix 2 ! Retailization of health care ! 3 Greater focus on cost and quality 4 ! Evolving pharmacy economics 19
Slide 20: Coverage Expansion & Payor Mix: 30+ Million People Gaining Coverage
1 Coverage Expansion & Payor Mix: 30+ Million People Gaining Coverage U.S. Health Care Coverage (lives in millions) Growth 301 Individuals/ 25 79% 263 Exchanges 14 57 Medicaid 18% 48 66 Medicare 32% 50 Employer- 151 153 1% sponsored 2013E 2018E Importance of government and health plans rising Source
Slide 21: Our Advantage: Capture Growing Medicare & Medicaid Spend
1 Our Advantage: Ability To Capture Growing Medicare & Medicaid Spend Across The Enterprise Retail PBM (CVS/pharmacy share (Caremark share of of script volumes) PBM managed lives) Medicare 18% 19% Medicaid 20% 28% Sources: CVS Caremark analysis; IMS Health; Centers for Medicare & Medicaid. 21
Slide 22: Our Advantage: Ability To Support Health Plans As A Leading PBM
1 Our Advantage: Ability To Support Health Plans As A Leading PBM 80+ Health Plan Clients Solutions To Address Represent ~Half Of PBM Lives Changing Needs (percent of PBM lives) Employer/ Health Plan ! Winning in government Government lines of business ! Reducing total health care costs 47% 47% ! En
Slide 23: Our Advantage: Support Health Plans Whether Or Not We're The PBM
1 Our Advantage: Ability To Support Health Plans Whether Or Not We’re The PBM Leveraging Enterprise Capabilities To Support Non-PBM Health Plan Partners ! Support consumer marketing initiatives ! Preferred or restricted networks on exchanges ! Exclusive specialty ! Convenient and affordable MinuteCl
Slide 24: Our Advantage: Well-positioned To Gain Share In Exchanges
1 Our Advantage: Well-positioned To Gain Share In Exchanges … Across The Enterprise PBM: • Participate through health plan clients on a Public carve-in basis Exchanges • Participate on a carve-in basis through PBM: health plan clients Private • Participate on a carve-out basis as a standalone PBM Ex
Slide 25: CVS Caremark Is Well-positioned For Growth In A Changing Landscape
CVS Caremark Is Well-positioned For Growth In A Changing Health Care Landscape ! 1 Coverage expansion & payor mix 2 ! Retailization of health care ! 3 Greater focus on cost and quality 4 ! Evolving pharmacy economics 25
Slide 26: Retailization Of Health Care: Consumer Choice And Accountability Growing
2 Retailization Of Health Care: Consumer Choice And Accountability Growing More Consumers Choosing Growth Of Consumer-directed Plans Their Own Health Plans Is Driving Increased Focus On Value 19% ! 5% to 8% of all lives on exchanges by 2016 13% ! ~20% of consumers will choose own health plan directl
Slide 27: Our Advantage: Consumer-friendly, Channel-agnostic Solutions
2 Our Advantage: Winning With Consumer-friendly, Channel-agnostic Solutions ! Trusted brand and name recognition ! Innovative, channel-agnostic offerings – Maintenance Choice – Pharmacy Advisor – Specialty Connect ! Convenient CVS/pharmacy & MinuteClinic locations ! Digital capabilities to enable st
Slide 28: CVS Caremark Is Well-positioned For Growth In A Changing Landscape
CVS Caremark Is Well-positioned For Growth In A Changing Health Care Landscape ! 1 Coverage expansion & payor mix 2 ! Retailization of health care ! 3 Greater focus on cost and quality 4 ! Evolving pharmacy economics 28
Slide 29: Greater Focus On Cost And Quality
3 Greater Focus On Cost And Quality ! Shift towards outcomes- Quality based payment system ! Narrow provider networks gaining traction Access Cost ! Payors increasingly focused on controlling specialty trend 29
Slide 30: Our Advantage: Support Payor And Provider Goals In New Value Models
3 Our Advantage: Ability To Support Payor And Provider Goals In New Health Care Value Models ! Lowering costs for payors to support new price sensitive offerings ! Coordinating care with providers and health systems ! Improving adherence and addressing gaps in care to support pay-for-performance mod
Slide 31: Our Advantage: Industry-leading Adherence And Clinical Leadership
3 Our Advantage: Industry-leading Adherence And Clinical Leadership Medication Possession Ratio 860 82% bps better 490 77% bps better 72% 73% Top 3 Top 3 Retail Retail 2008 / 2009 2012 / 2013 Medication adherence plays a significant role in reducing costs Note: Medication Possession Ratio (MPR) meas
Slide 32: Our Advantage: Collaborate With And Support Providers Through MinuteClinic
3 Our Advantage: Ability To Collaborate With And Support Providers Through MinuteClinic Demand For Primary Care MinuteClinic Physicians Outstripping Supply Advantages: ! Largest and fastest-growing clinic Shortage of 45k ! High-quality care PCPs ! Low-cost site of care ! EMR/IT integration with Dema
Slide 33: Our Advantage: Strongly Positioned In Narrow Network Environment
3 Our Advantage: Strongly Positioned To Participate In Narrow Network Environment Plan Sponsors And Consumers Our Increasingly Open To Narrow Networks Advantages: ! CVS/pharmacy well-positioned 23% for narrow networks – Exchanges 16% – Medicare Part D 15% – Managed Medicaid ! Unique enterprise offer
Slide 34: Our Advantage: Leading Specialty Capabilities
3 Our Advantage: Leading Specialty Capabilities Addressable Specialty Market Ability To Manage Trend Across Growing Rapidly Channels And Across Benefits 235 ! Tools and technology to manage both pharmacy and medical benefits U.S. Specialty Market 17% CAGR Medical ! Aggressive approach to formulary (
Slide 35: CVS Caremark Is Well-positioned For Growth In A Changing Landscape
CVS Caremark Is Well-positioned For Growth In A Changing Health Care Landscape ! 1 Coverage expansion & payor mix 2 ! Retailization of health care ! 3 Greater focus on cost and quality 4 ! Evolving pharmacy economics 35
Slide 36: Traditional Sources Of PBM Growth Slowing
4 Traditional Sources Of PBM Growth Slowing … Generic Conversions Continue, Limited Use Of Traditional Mail Plan But At A Slowing Rate Designs In High-growth Areas 137 126 Cumulative Generic Launches (brand market sales, $ billions) 5-year Mail 108 Growth Dispensing Segment (Lives) Rate 90 75 Commer
Slide 37: But Prescription Demand Is Growing
4 … But Prescription Demand Is Growing U.S. Prescription Drug Expenditures ($ billion) 6% 455 CAGR 426 398 373 331 351 295 312 262 276 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E Greatest opportunity is in winning lives and gaining share Source: Centers for Medicare & Medicaid Servic
Slide 38: Our Advantage: Caremark Book Of Business Is Growing
4 Our Advantage: Caremark Book Of Business Is Growing PBM Total Adjusted Claims (millions) 1,055+ 1,030 +42% 906 777 742 701 2008 2009 2010 2011 2012 2013E 38
Slide 39: Our Advantage: Unmatched Ability To Gain Share Of Growing Pharmacy Spend
4 Our Advantage: Unmatched Ability To Gain Share Of Growing Pharmacy Spend 30% 21% 19% 18% 2008 2013E CVS/pharmacy share of Caremark retail network claims CVS/pharmacy share of U.S. retail market Notes: 1. 2013 figures reflect all Caremark retail network claims, including Aetna and CCRx. 2. View sho
Slide 40: Our Advantage: Overall Enterprise Share Of PBM Business Is Growing
4 Our Advantage: Overall Enterprise Share Of PBM Business Is Growing PBM Adjusted Claims Filled In CVS Caremark Channels (millions) 425+ 416 +55% 361 309 308 276 2008 2009 2010 2011 2012 2013E 40
Slide 41: Our Advantage: Substantial Size And Scale Across Pharmacy And Health Care
4 Our Advantage: Substantial Size And Scale Across Pharmacy And Health Care Spectrum Retail Pharmacy Mail $200 billion market Specialty Pharmacy 21% share Pharmacy $40 billion market $100 billion market 22% share 21% share MinuteClinic Front Store (Health / OTC) $20 billion market $15 billion market
Slide 42: Today's Key Takeaways: Winning With Ability & Agility
Today’s Key Takeaways: Winning With Ability & Agility ! Changes in environment create significant opportunities ! Unique model creates sustainable competitive advantages ! Greater focus on total enterprise growth ! Committed to enhancing shareholder value 42