CVS 2013 Annual Report Download - page 32

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Management’s Discussion and Analysis
of Financial Condition and Results of Operations
30
CVS Caremark
Pharmacy Services Segment
The following table summarizes our Pharmacy Services Segment’s performance for the respective periods:
YEAR ENDED DECEMBER 31,
In millions
2013 2012 2011
Net revenues
$ 76,208
$ 73,444 $ 58,874
Gross profit
$ 4,237
$ 3,808 $ 3,279
Gross profit % of net revenues
5.6 %
5.2 % 5.6 %
Operating expenses
$ 1,151
$ 1,129 $ 1,059
Operating expenses % of net revenues
1.5 %
1.5 % 1.8 %
Operating profit
$ 3,086
$ 2,679 $ 2,220
Operating profit % of net revenues
4.1 %
3.6 % 3.8 %
Net revenues (1):
Mail choice (2)
$ 24,791
$ 22,843 $ 18,616
Pharmacy network (3)
$ 51,211
$ 50,411 $ 40,040
Other
$ 206
$ 190 $ 218
Pharmacy claims processed (1):
Total
902.1
880.5 774.6
Mail choice (2)
83.3
81.7 70.6
Pharmacy network (3)
818.8
798.8 704.0
Generic dispensing rate (1):
Total
80.8 %
78.5 % 74.1 %
Mail choice (2)
76.0 %
72.0 % 64.9 %
Pharmacy network (3)
81.3 %
79.1 % 75.0 %
Mail choice penetration rate
22.6 %
22.7 % 22.3 %
(1) Pharmacy network net revenues, claims processed and generic dispensing rates do not include Maintenance Choice, which are included within the
mail choice category.
(2) Mail choice is defined as claims filled at a Pharmacy Services mail facility, which includes specialty mail claims, as well as 90-day claims filled at our
retail stores under the Maintenance Choice program.
(3) Pharmacy network is defined as claims filled at retail pharmacies, including our retail drugstores, but excluding Maintenance Choice activity.
Medicare Part D Update –
The Company participates in the Medicare Part D program by (1) providing Medicare
Part D-related PBM services to our health plan and other clients that have qualified as Medicare Part D plans,
and (2) offering Medicare Part D pharmacy benefits through the Company’s own SilverScript Prescription Drug Plan
(“PDP”), which offers benefits to individual members and through employer group waiver plans (“EGWPs”). At the
beginning of the 2013 Medicare Part D plan year, the Company implemented an enrollment systems conversion
process and other actions to consolidate its Medicare Part D PDPs into the Company’s SilverScript PDP. These
consolidation efforts impacted certain enrollment and coverage determination services the Company provided to
SilverScript enrollees following commencement of the 2013 plan year. Effective January 15, 2013, Centers for
Medicare and Medicaid Services (“CMS”) imposed intermediate sanctions on the SilverScript PDP, consisting of
immediate suspension of further plan enrollment and marketing activities. On December 20, 2013, the Company
announced that CMS completed its review of the corrective actions taken to address the coverage determination
issues resulting from the Company’s plan consolidation efforts and the sanctions were removed.