CVS 2009 Annual Report Download - page 6

Dear Fellow Shareholder,
Health care delivery in the United States is slowly evolving to a new
model, and we believe that companies best positioned to promote better
outcomes and lower costs will be among the winners. That thinking guided
the 2007 merger of CVS and Caremark. Today we’re the largest pharmacy
health care company in the United States, and our strengths across the
spectrum of pharmacy care are helping us deliver savings and improve the
plan member experience for PBM clients.
I’ll have more to say about the success of our differentiated
approach as well as the core strengths of our PBM and
retail businesses. First, let me provide a quick review
of our solid financial performance in 2009. In the midst
of a challenging economic environment, CVS Caremark
reported record revenue and earnings. Total revenue rose
13 percent to $98.7 billion, with income from continuing
operations up 11 percent to $3.7 billion. We generated
approximately $3 billion in free cash flow, deploying part
of it to complete a $2 billion share repurchase program.
Furthermore, the board of directors authorized an addi-
tional $2 billion share repurchase program, which we
began in 2009 and intend to complete in the first half of
2010. Our strong free cash flow also allowed us to raise
the dividend by 15 percent for 2010. This marks our
seventh consecutive annual dividend increase. Over
this period, our dividend has risen at an 18 percent
compound annual growth rate.
CVS Caremark shares produced a total return of 13 percent
for 2009, although we trailed the broad market averages
due largely to some concerns over our PBM’s near-term
growth outlook. However, over the past five years,
CVS Caremark delivered a total return to shareholders
of 48 percent, while the S&P 500 and the Dow Jones
Industrial Average returned 2 percent and 10 percent,
respectively, over the same period.
OUR INTEGRATED MODEL BUILDS ON EXISTING
PBM STRENGTHS
Building on Caremark’s long-standing reputation for
customer service, clinical excellence, and an ability to
control payor costs, our integrated approach to phar-
macy care is yielding substantial benefits. Our more than
26,000 pharmacists, nurse practitioners, and physician
assistants drive our efforts every day. Based on internal
surveys, colleague engagement stands at an all-time high.
Their commitment is clearly reflected in our outstanding
performance across a number of measures.
I’m pleased to report that we have done an outstanding
job of controlling costs for our PBM clients. We’ve done
this by driving generic utilization through unique plan
designs, by controlling specialty pharmacy trend through
our specialty guideline management programs, and by
improving adherence to prescribed medications through
our multiple points of contact with plan members. For
many people, a face-to-face interaction with their phar-
macist results in a significantly higher adherence rate.
We have a broad research effort underway to learn more
about why patients do not take prescriptions that are
prescribed or drop medications in the middle of therapy.
The research includes continuing internal analysis of
CVS Caremark client utilization and an external partner-
ship with Harvard and Brigham and Women’s Hospital.
Separately, a recent study by the New England Healthcare
CVS Caremark
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