CVS 2014 Annual Report Download - page 50

Management’s Discussion and Analysis
of Financial Condition and Results of Operations
48
CVS Health
The forward-looking statements are and will be based upon management’s then-current views and assumptions
regarding future events and operating performance, and are applicable only as of the dates of such statements. The
Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
By their nature, all forward-looking statements involve risks and uncertainties. Actual results may differ materially from
those contemplated by the forward-looking statements for a number of reasons as described in our SEC filings,
including those set forth in the Risk Factors section within the 2014 Form 10-K, and including, but not limited to:
• Risks relating to the health of the economy in general and in the markets we serve, which could impact consumer
purchasing power, preferences and/or spending patterns, drug utilization trends, the financial health of our PBM
clients or other payors doing business with the Company and our ability to secure necessary financing, suitable
store locations and sale-leaseback transactions on acceptable terms.
• Efforts to reduce reimbursement levels and alter health care financing practices, including pressure to reduce
reimbursement levels for generic drugs.
• The possibility of PBM client loss and/or the failure to win new PBM business, including as a result of failure to win
renewal of expiring contracts, contract termination rights that may permit clients to terminate a contract prior to
expiration and early or periodic renegotiation of pricing by clients prior to expiration of a contract.
• The possibility of loss of Medicare Part D business and/or failure to obtain new Medicare Part D business, whether
as a result of the annual Medicare Part D competitive bidding process or otherwise.
• Risks related to the frequency and rate of the introduction of generic drugs and brand name prescription products.
• Risks of declining gross margins in the PBM industry attributable to increased competitive pressures, increased
client demand for lower prices, enhanced service offerings and/or higher service levels and market dynamics and
regulatory changes that impact our ability to offer plan sponsors pricing that includes the use of retail “differential”
or “spread.”
• Regulatory changes, business changes and compliance requirements and restrictions that may be imposed by
Centers for Medicare and Medicaid Services (“CMS”), Office of Inspector General or other government agencies
relating to the Company’s participation in Medicare, Medicaid and other federal and state government-funded
programs, including sanctions and remedial actions that may be imposed by CMS on its Medicare Part D business.
• Risks and uncertainties related to the timing and scope of reimbursement from Medicare, Medicaid and other
government-funded programs, including the impact of sequestration, the impact of other federal budget, debt and
deficit negotiations and legislation that could delay or reduce reimbursement from such programs and the impact
of any closure, suspension or other changes affecting federal or state government funding or operations.
• Possible changes in industry pricing benchmarks used to establish pricing in many of our PBM client contracts,
pharmaceutical purchasing arrangements, retail network contracts, specialty payor agreements and other third
party payor contracts.
• A highly competitive business environment, including the uncertain impact of increased consolidation in the PBM
industry, uncertainty concerning the ability of our retail pharmacy business to secure and maintain contractual
relationships with PBMs and other payors on acceptable terms, uncertainty concerning the ability of our PBM
business to secure and maintain competitive access, pricing and other contract terms from retail network pharma-
cies in an environment where some PBM clients are willing to consider adopting narrow or more restricted retail
pharmacy networks.