CVS reports strong Q1 earnings, will exit Aetna’s ACA plans

CVS Health Corp. reported a strong start to 2025, with first-quarter revenue climbing 7% to $94.6 billion, driven by growth across all business segments. Adjusted earnings per share rose sharply to $2.25 from $1.31 a year ago, beating the Wall Street consensus estimate by $0.58 per share. The company said its results were buoyed by significant gains in the Health Care Benefits segment and a favorable comparison to litigation charges last year. The Woonsocket, Rhode Island-based healthcare giant also raised its full-year adjusted EPS guidance and operating cash flow expectations, despite revising down its GAAP EPS forecast.

The company said it will exit the individual ACA Healthcare Exchange business, also known as Obamacare, in 2026, citing a strategic focus on other health benefits offerings. The company recorded a $448 million premium deficiency reserve this quarter related to expected 2025 losses from that segment.

CVS Caremark is set to improve access to the popular weight loss drug Wegovy starting July 1 as part of a partnership with its maker, Danish-based Novo Nordisk. It plans to list Wegovy as a preferred GLP-1 drug on top formularies at that time. CVS also introduced new digital and clinical solutions under its Aetna and Caremark units aimed at improving care transitions and prior authorization workflows.

Quarterly Snapshot:

- Revenue rose 7% year-over-year to $94.6 billion.

- GAAP diluted EPS was $1.41; Adjusted EPS was $2.25.

- Operating income rose 49% to $3.37 billion; Adjusted operating income jumped 55% to $4.58 billion.

- Cash flow from operations reached $4.6 billion.

- Health Care Benefits revenue up 8% to $34.8 billion; adjusted operating income up 172% to $2.0 billion.

- Pharmacy & Consumer Wellness revenue up 11% to $31.9 billion; adjusted operating income up 11.6%.

- Health Services segment revenue up 7.9% to $43.5 billion; adjusted operating income up 17.6%.

Management Perspective:

CEO David Joyner credited CVS’s integrated model for its performance, noting gains across all segments. He emphasized the company’s focus on personalized digital support and value-based health care delivery. Despite macroeconomic uncertainties and cost pressures, CVS raised its adjusted EPS guidance to a range of $6.00 to $6.20, up from the earlier range of $5.75 to $6.00, and operating cash flow expectations to approximately $7 billion.

“We have the best-run pharmacy businesses in the country,” Joyner said in a call with analysts on Thursday. “We have been investing in our colleagues, strengthening our technology, and we continue to build on our market-leading cost of goods sold. We have been focused on simplifying and improving the prior authorization process for many years with the goal of getting patients their critical medications as quickly as possible. We eliminated requirements, accelerated decisions, created transparency, as well as provided proactive support to improve their experience. We took what we know matters most to our customers and applied it to what we do every day across each of our businesses.”

Joyner touted the company’s partnership with Novo Nordisk.

“We are the first retail pharmacy in the NovoCare pharmacy network,” he said. “This will enable us to provide convenient, safe, and affordable access to Wegovy for eligible patients at our 9,000 community health locations across the country.

Joyner said he was disappointed by the continued underperformance of its individual exchange products, which prompted the decision to exit the states in which Aetna independently runs ACA plans.

“This was not a decision we made lightly as we recognize the importance of this product to millions of members,” he said. “Despite our multi-year efforts, we must recognize what is and what is not working, and we’ll focus on the areas where we have a clear right to win.”

By The Numbers:

- Total Revenues: $94.6 billion (up 7% YoY)

- GAAP Net Income: $1.78 billion

- Adjusted EPS: $2.25 (vs. $1.31 in Q1 2024)

- Cash Flow from Operations: $4.6 billion

- Health Care Benefits MBR: 87.3% (improved from 90.4%)

- Prescriptions Filled: 435.5 million (up 4.3%)

- Medical Membership: 27.1 million

- Stock: Up 6% in mid-day trading Thursday, to $70.90 per share, up 58% year-to-date.

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at doug.bailey@innfeedback.com.