CVS 2015 Annual Report Download - page 30

Download and view the complete annual report

Please find page 30 of the 2015 CVS annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 104

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104

Management’s Discussion and Analysis
of Financial Condition and Results of Operations
28 CVS Health
Pharmacy Services Segment
The following table summarizes our Pharmacy Services Segment’s performance for the respective periods:
YEAR ENDED DECEMBER 31,
IN MILLIONS 2015 2014 2013
Net revenues $ 100,363 $ 88,440 $ 76,208
Gross profit $ 5,227 $ 4,771 $ 4,237
Gross profit % of net revenues 5.2 % 5.4 % 5.6 %
Operating expenses $ 1,238 $ 1,257 $ 1,151
Operating expenses % of net revenues 1.2 % 1.4 % 1.5 %
Operating profit $ 3,989 $ 3,514 $ 3,086
Operating profit % of net revenues 4.0 % 4.0 % 4.1 %
Net revenues:
Mail choice (1) $ 37,828 $ 31,081 $ 24,791
Pharmacy network (2) $ 62,240 $ 57,122 $ 51,211
Other $ 295 $ 237 $ 206
Pharmacy claims processed:
Total 1,011.9 932.0 902.1
Mail choice (1) 85.7 82.4 83.3
Pharmacy network (2) 926.2 849.6 818.8
Generic dispensing rate:
Total 83.7 % 82.2 % 80.5 %
Mail choice (1) 76.4 % 74.6 % 72.6 %
Pharmacy network (2) 84.4 % 83.0 % 81.3 %
Mail choice penetration rate 20.6 % 21.4 % 22.6 %
(1) Mail choice is defined as claims filled at a Pharmacy Services mail facility, which includes specialty mail claims inclusive of Specialty Connect
claims filled at retail, as well as prescriptions filled at retail under the Maintenance Choice program.
(2) Pharmacy network net revenues, claims processed and generic dispensing rates do not include Maintenance Choice, which are included within the
mail choice category. Pharmacy network is defined as claims filled at retail and specialty pharmacies, including our retail drugstores and long-term
care pharmacies, but excluding Maintenance Choice activity.
Net revenues
in our Pharmacy Services Segment increased $11.9 billion, or 13.5%, to $100.4 billion for the year
ended December 31, 2015, as compared to the prior year. The increase is primarily due to growth in specialty
pharmacy, driven by new clients, increased volume from new products and the addition of the specialty pharmacy
operations of Omnicare, as well as inflation and increased pharmacy network claims. Conversely, the increase in our
generic dispensing rate had a negative impact on our revenue in 2015, as it did in 2014.
Net revenues increased $12.2 billion, or 16.1%, to $88.4 billion for the year ended December 31, 2014, as compared
to the prior year. The increase in 2014 was primarily due to growth in specialty pharmacy, including the acquisition of
Coram and the impact of Specialty Connect, and increased pharmacy network volume. Conversely, the increase in
our generic dispensing rate had a negative impact on our revenue in 2014, as it did in 2013.
As you review our Pharmacy Services Segment’s revenue performance, we believe you should also consider the
following important information:
• Our mail choice claims processed increased 4.0% to 85.7 million claims in the year ended December 31, 2015,
compared to 82.4 million claims in the prior year. The increase in mail choice claims was driven by net new
business, specialty and continuing adoption of our Maintenance Choice offerings. During 2014, our mail choice