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Delaware
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05-0494040
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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One CVS Drive,
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Woonsocket,
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Rhode Island
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02895
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
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(401)
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765-1500
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
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Yes
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No
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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Yes
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No
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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Yes
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
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Yes
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No
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Page
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Part I
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Item 1:
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Item 1A:
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Item 1B:
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Item 2:
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Item 3:
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Item 4:
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Part II
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Item 5:
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Item 6:
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Item 7:
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Item 7A:
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Item 8:
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Item 9:
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Item 9A:
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Item 9B:
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Part III
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Item 10:
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Item 11:
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Item 12:
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Item 13:
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Item 14:
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Part IV
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Item 15:
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Item 16:
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·
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Anticipates
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·
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Believes
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·
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Can
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Continue
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·
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Could
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·
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Estimates
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·
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Evaluate
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·
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Expects
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·
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Explore
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·
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Forecast
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·
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Guidance
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·
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Intends
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·
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Likely
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·
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May
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·
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Might
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·
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Outlook
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·
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Plans
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Potential
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Predict
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Probable
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·
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Projects
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·
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Seeks
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·
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Should
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·
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View
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·
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Will
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Percentage of Revenues
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|||||||
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2019
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2018
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2017
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Pharmacy (1)
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76.7
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%
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76.4
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%
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75.0
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%
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Front store and other (2)
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23.3
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%
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23.6
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%
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25.0
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%
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100.0
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%
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100.0
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%
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100.0
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%
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(1)
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Pharmacy includes LTC sales and sales in pharmacies within Target Corporation stores.
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(2)
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“Other” represents less than 5% of the “Front store and other” revenue category.
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•
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Commercial Medical: The Health Care Benefits segment offers point-of-service (“POS”), preferred provider organization (“PPO”), health maintenance organization (“HMO”) and indemnity benefit (“Indemnity”) plans. Commercial medical products also include health savings accounts (“HSAs”) and consumer-directed health plans that combine traditional POS or PPO and/or dental coverage, subject to a deductible, with an accumulating benefit account (which may be funded by the plan sponsor and/or the member in the case of HSAs). Principal products and services are targeted specifically to large multi-site national, mid-sized and small employers, individual insureds and expatriates. The Company offers medical stop loss insurance coverage for certain employers who elect to self-insure their health benefits. Under medical stop loss insurance products, the Company assumes risk for costs associated with large individual claims and/or aggregate loss experience within an employer’s plan above a pre-set annual threshold.
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Government Medical: In select geographies, the Health Care Benefits segment offers Medicare Advantage plans, Medicare Supplement plans and prescription drug coverage for Medicare beneficiaries; participates in Medicaid and subsidized Children’s Health Insurance Programs (“CHIP”); and participates in demonstration projects for members who are eligible for both Medicare and Medicaid (“Duals”). These Government Medical products are further described below:
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Medicare Advantage: Through annual contracts with the U.S. Centers for Medicare & Medicaid Services (“CMS”), the Company offers HMO and PPO products for eligible individuals in certain geographic areas through the Medicare Advantage program. Members typically receive enhanced benefits over traditional fee-for-service Medicare coverage (“Original Medicare”), including reduced cost-sharing for preventive care, vision and other services. The Company offered network-based HMO and/or PPO plans in 1,416 counties in 45 states and Washington, D.C. in 2019. The Company has expanded to 1,680 counties in 45 states and Washington, D.C. for 2020. For certain qualifying employer groups, the Company offers Medicare PPO products nationally. When combined with the Company’s PDP product, these national PPO plans form an integrated national Insured Medicare product for employers that provides medical and pharmacy benefits.
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Medicare PDP: The Company is a national provider of drug benefits under the Medicare Part D prescription drug program. All Medicare eligible individuals are eligible to participate in this voluntary prescription drug plan. Members typically receive coverage for certain prescription drugs, usually subject to a deductible, co-insurance and/or co-payment. On November 30, 2018, the Company completed the sale of Aetna’s standalone PDPs to WellCare effective December 31, 2018. The Company provided administrative services to, and retained the financial results of, the divested plans through 2019. Subsequent to 2019, the Company will no longer retain the financial results of the divested plans.
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Medicare Supplement: For certain Medicare eligible members, the Company offers supplemental coverage for certain health care costs not covered by Original Medicare. The products included in the Medicare Supplement portfolio help to cover some of the gaps in Original Medicare, and include coverage for Medicare deductibles and
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Medicaid and CHIP: The Company offers health care management services to individuals eligible for Medicaid and CHIP under multi-year contracts with government agencies in various states that are subject to annual appropriations. CHIP are state-subsidized insurance programs that provide benefits for families with uninsured children. The Company offered these services on an Insured or ASC basis in 16 states in 2019.
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Duals: The Company provides health coverage to beneficiaries who are dually eligible for both Medicare and Medicaid coverage. These members must meet certain income and resource requirements in order to qualify for this coverage. The Company coordinates 100% of the care for these members and may provide them with additional services in order to manage their health care costs.
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Specialty: The Health Care Benefits segment has a portfolio of additional health products and services that complement its medical products such as dental plans, behavioral health and employee assistance products, provider network access and vision products and workers’ compensation administrative services.
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Transformative Products and Services: The Company has a portfolio of transformative products and services aimed at creating a holistic and integrated approach to individual health and wellness. These products and services complement the Commercial Medical and Government Medical products and aim to provide innovative solutions, create integrated experience offerings and enable enhanced care delivery to customers.
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Management and administrative expenses to support the overall operations of the Company, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments, expenses associated with the Company’s investments in its transformation and Enterprise modernization programs and acquisition-related transaction and integration costs; and
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Products for which the Company no longer solicits or accepts new customers such as large case pensions and long-term care insurance products.
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The repeal of the annual non-tax deductible industry-wide HIF for calendar years after 2020. The HIF was $14.3 billion for 2018 and suspended for 2019. As currently enacted, the HIF will be $15.5 billion for 2020.
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The repeal of the non-tax deductible 40% excise tax on employer-sponsored health care benefits above a certain threshold that was scheduled to begin in 2022.
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Reduced funding for Medicaid expansion, which began in 2017.
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Under the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012 significant, automatic across-the-board budget cuts (known as sequestration) began in March 2013, including Medicare spending cuts of not more than 2% of total program costs per year through 2024. Significant uncertainty remains as to whether and how the U.S. Congress will proceed with actions that create additional federal revenue and/or with entitlement reform. The Company cannot predict future federal Medicare or federal or state Medicaid funding levels or the impact that future federal or state budget actions or entitlement program reform, if it occurs, will have on the Company’s businesses, operations or operating results, but the effects could be materially adverse, particularly on the Company’s Medicare and/or Medicaid revenues, MBRs and operating results.
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The European Union’s (“EU’s”) General Data Protection Regulation (“GDPR”) began to apply across the EU during 2018.
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Other significant legislative and/or regulatory measures which are or recently have been under consideration include the following:
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Elimination of the payment of manufacturer’s rebates on prescription drugs to PBMs, PDPs and Managed Medicaid organizations in connection with federally funded health care programs.
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Imposing requirements and restrictions on the design and/or administration of pharmacy benefit plans offered by the Company’s and its clients’ health plans and/or its PBM clients and/or the services the Company provides to those clients, including prohibiting “differential” or “spread” pricing in PBM contracts; restricting or eliminating the use of formularies for prescription drugs; restricting the Company’s ability to require members to obtain drugs through a home delivery or specialty pharmacy; restricting the Company’s ability to place certain specialty or other drugs in the higher cost tiers of its pharmacy formularies; restricting the Company’s ability to make changes to drug formularies and/or clinical programs; limiting or eliminating rebates on pharmaceuticals; requiring the use of up front purchase price discounts on pharmaceuticals in lieu of rebates; restricting the Company’s ability to configure its health plan and retail pharmacy provider networks; and restricting or eliminating the use of certain drug pricing methodologies.
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Increased federal or state government regulation of, or involvement in, the pricing and/or purchasing of drugs.
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Restricting the Company’s ability to limit providers’ participation in its networks and/or remove providers from its networks by imposing network adequacy requirements or otherwise (including in its Medicare and Commercial Health Care Benefits products).
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Imposing assessments on (or to be collected by) health plans or health carriers that may or may not be passed through to their customers. These assessments may include assessments for insolvency, the uninsured, uncompensated care, Medicaid funding or defraying health care provider medical malpractice insurance costs.
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Mandating coverage by the Company’s and its clients’ health plans for additional conditions and/or specified procedures, drugs or devices (for example, high cost pharmaceuticals, experimental pharmaceuticals and oral chemotherapy regimens).
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Regulating electronic connectivity.
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Mandating or regulating the disclosure of provider fee schedules, manufacturer’s rebates and other data about the Company’s payments to providers and/or payments the Company receives from pharmaceutical manufacturers.
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Mandating or regulating disclosure of provider outcome and/or efficiency information.
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Prescribing or limiting members’ financial responsibility for health care or other covered services they utilize, including restricting “surprise” bills by providers and by specifying procedures for resolving “surprise” bills.
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Prescribing payment levels for health care and other covered services rendered to the Company’s members by providers who do not have contracts with the Company.
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Assessing the medical device status of HIT products and/or solutions, mobile consumer wellness tools and clinical decision support tools, which may require compliance with FDA requirements in relation to some of these products, solutions and/or tools.
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Restricting the ability of employers and/or health plans to establish or impose member financial responsibility.
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Amending or supplementing ERISA to impose greater requirements on PBMs or the administration of employer-funded benefit plans or limit the scope of current ERISA pre-emption, which would among other things expose the Company and other health plans to expanded liability for punitive and other extra-contractual damages and additional state regulation.
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Grant, suspend and revoke the Company’s licenses to transact business;
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Suspend or exclude the Company from participation in government programs;
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Suspend or limit the Company’s authority to market products;
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Regulate many aspects of the products and services the Company offers, including the pricing and underwriting of many of its products and services;
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Assess damages, fines and/or penalties;
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Terminate the Company’s contract with the government agency and/or withhold payments from the government agency to the Company;
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Impose retroactive adjustments to premiums and require the Company to pay refunds to the government, customers and/or members;
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Restrict the Company’s ability to conduct acquisitions or dispositions;
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Require the Company to maintain minimum capital levels in its subsidiaries and monitor its solvency and reserve adequacy;
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Regulate the Company’s investment activities on the basis of quality, diversification and other quantitative criteria; and/or
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Exclude the Company’s plans from participating in Public Exchanges if they are deemed to have a history of “unreasonable” premium rate increases or fail to meet other criteria set by HHS or the applicable state.
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As competition increases in the geographies in which we operate, including competition from new entrants, a significant increase in price compression and/or reimbursement pressures could occur, and this could require us to reevaluate our pricing structures to remain competitive.
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The competitive success of our Pharmacy Services segment is dependent on our ability to establish and maintain contractual relationships with network pharmacies as PBM clients evaluate adopting narrow or restricted retail pharmacy networks.
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The competitive success of our Retail/LTC segment and our specialty pharmacy operations is dependent on our ability to establish and maintain contractual relationships with PBMs and other payors on acceptable terms as the payors’ clients evaluate adopting narrow or restricted retail pharmacy networks.
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In our PBM business, we maintain contractual relationships with brand name drug manufacturers that provide for purchase discounts and/or rebates on drugs dispensed by pharmacies in our retail network and by our specialty and mail order pharmacies (all or a portion of which may be passed on to clients). Manufacturer’s rebates often depend on a PBM’s ability to meet contractual requirements, including the placement of a manufacturer’s products on the PBM’s formularies. If we lose our relationship with one or more drug manufacturers, or if the discounts or rebates provided by drug manufacturers decline, our operating results, cash flows and/or prospects could be adversely affected.
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The PBM industry has been experiencing price compression as a result of competitive pressures and increased client demands for lower prices, increased revenue sharing, including sharing in a larger portion of rebates received from drug manufacturers, enhanced service offerings and/or higher service levels. Marketplace dynamics and regulatory changes also have adversely affected our ability to offer plan sponsors pricing that includes the use of retail “differential” or “spread,” which could adversely affect our future profitability, and we expect these trends to continue.
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Our retail pharmacy, specialty pharmacy and LTC pharmacy operations have been affected by reimbursement pressure caused by competition, including client demands for lower prices, generic drug pricing, earlier than expected generic drug introductions and network reimbursement pressure. If we are unable to increase our prices to reflect, or otherwise mitigate the impact of, increasing costs, our profitability will be adversely affected. If we are unable to limit our price increases, we may lose customers to competitors with more favorable pricing, adversely affecting our revenues and operating results.
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A shift in the mix of our pharmacy prescription volume towards programs offering lower reimbursement rates as a result of competition or otherwise could adversely affect our margins, including the ongoing shift in pharmacy mix towards 90-day prescriptions at retail and the ongoing shift in pharmacy mix towards Medicare Part D prescriptions.
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PBM client contracts often are for a period of approximately three years. However, PBM clients may require early or periodic re-negotiation of pricing prior to contract expiration. PBM clients are generally well informed, can move between us and our competitors and often seek competing bids prior to expiration of their contracts. We are therefore under pressure
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The operating results and margins of our LTC business are further affected by the increased efforts of health care payors to negotiate reduced or capitated pricing arrangements and by the financial health of, and purchases and sales of, our LTC customers.
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In our Health Care Benefits segment we are seeking to substantially grow our Medicaid, dual eligible and dual eligible special needs plan membership over the next several years. In many instances, to acquire and retain our government customers’ business, we must bid against our competitors in a highly competitive environment. Winning bids often are challenged successfully by unsuccessful bidders.
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Customer contracts in our Health Care Benefits segment are generally for a period of one year, and our customers have considerable flexibility in moving between us and our competitors. One of the key factors on which we compete for customers, especially in uncertain economic environments, is overall cost. We are therefore under pressure to contain premium price increases despite being faced with increasing health care and other benefit costs and increasing operating costs. If we are unable to increase our prices to reflect, or otherwise mitigate the impact of, increasing costs, our profitability will be adversely affected. If we are unable to limit our price increases, we may lose members to competitors with more favorable pricing, adversely affecting our revenues and operating results. In response to rising prices, our customers may elect to self-insure or to reduce benefits in order to limit increases in their benefit costs. Alternatively, our customers may purchase different types of products from us that are less profitable. Such elections may result in reduced membership in our more profitable Insured products and/or lower premiums for our Insured products, which may adversely affect our revenues and operating results, although such elections also may reduce our health care and other benefit costs. In addition, our Medicare, Medicaid and CHIP products are subject to termination without cause, periodic re-bid, rate adjustment and program redesign, as customers seek to contain their benefit costs, particularly in an uncertain economy, and our exposure to this risk is increasing as we grow our Government products membership. These actions may adversely affect our membership, revenues and operating results.
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We requested significant increases in our premium rates in our Commercial Health Care Benefits business for 2020 (including as a result of the reinstatement for 2020 of the Health Insurer Fee (the “HIF”) imposed by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”) following the temporary suspension of the HIF for 2019) and expect to continue to request increases in those rates for 2021 and beyond in order to adequately price for projected medical cost trends, required expansions of coverage and rating limits, and significant assessments, fees and taxes imposed by the federal and state governments, including as a result of the ACA. Our rates also must be adequate to reflect the risk that our products will be selected by people with a higher risk profile or utilization rate than the pool of participants we anticipated when we established pricing for the applicable products (also known as “adverse selection”), particularly in small group Commercial products, which we expect to continue and potentially worsen in 2020. These rate increases may be significant and thus heighten the risks of adverse publicity, adverse regulatory action and adverse selection and the likelihood that our requested premium rate increases will be denied, reduced or delayed, which could lead to operating margin compression.
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adversely affecting our brand and reputation;
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adversely affecting our ability to market and sell our products and/or services and/or retain our existing customers and members;
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requiring us to change our products and/or services;
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reducing or restricting the revenue we can receive for our products and/or services; and/or
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increasing or significantly changing the regulatory and legislative requirements with which we must comply.
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increased safety risk profiles or regulatory restrictions;
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manufacturing or other supply issues;
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certain products being withdrawn by their manufacturers or transitioned to over-the-counter products;
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future FDA rulings restricting the supply or increasing the cost of products;
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the introduction of new and successful prescription drugs or lower-priced generic alternatives to existing brand name products; or
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inflation in the price of brand name drugs.
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the clinical quality, patient safety and other risks inherent in the dispensing, packaging and distribution of drugs and other health care products and services, including claims related to purported dispensing and other operational errors (any failure by our Pharmacy Services and/or Retail/LTC operations to adhere to the laws and regulations applicable to the dispensing of drugs could subject us to civil and criminal penalties);
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federal and state anti-kickback and other laws that govern our relationship with drug manufacturers, customers and consumers;
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compliance requirements under the Employee Retirement Income Security Act of 1974 (“ERISA”), including fiduciary obligations in connection with the development and implementation of items such as drug formularies and preferred drug listings; and
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federal and state legislative proposals and/or regulatory activity that could adversely affect pharmacy benefit industry practices.
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In April 2019, CMS issued a final notice detailing final Medicare Advantage benchmark payment rates for 2020 (the “Final Notice”). Overall, we project the benchmark rates in the Final Notice will increase funding for our Medicare Advantage business, excluding the impact of the HIF, by approximately 2.0 percent in 2020 compared to 2019. This 2020 rate increase only partially offsets the challenge we face from the impact of the increasing cost of medical care (including prescription medications) and CMS local and national coverage decisions that require us to pay for services and supplies that are not factored into our bids and creates continued pressure on our Medicare Advantage operating results. We cannot predict future Medicare funding levels, the impact of future federal budget actions or ensure that such changes or actions will not have an adverse effect on our Medicare operating results.
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The organic expansion of our Medicare Advantage and Medicare Part D service area is subject to the ability of CMS to process our requests for service area expansions and our ability to build cost competitive provider networks in the expanded service areas that meet applicable network adequacy requirements. CMS’ decisions on our requests for service area expansions also may be affected adversely by compliance issues that arise each year in our Medicare operations.
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CMS regularly audits our performance to determine our compliance with CMS’s regulations and our contracts with CMS and to assess the quality of the services we provide to our Medicare members. As a result of these audits, we may be subject to significant or material retroactive adjustments to and/or withholding of certain premiums and fees, fines, criminal liability, civil monetary penalties, CMS imposed sanctions (including suspension or exclusion from participation in government programs) or other restrictions on our Medicare, Medicaid and other businesses, including suspension or loss of licensure.
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“Star ratings” from CMS for our Medicare Advantage plans will continue to have a significant effect on our plans’ operating results. Since 2015, only Medicare Advantage plans with a star rating of four or higher (out of five) are eligible for a quality bonus in their basic premium rates. CMS continues to change its rating system to make achieving and maintaining a four or higher star rating more difficult. Our star ratings and past performance scores are adversely affected by the compliance issues that arise each year in our Medicare operations. If our star ratings fall below 4 for a significant portion of our Medicare Advantage membership or do not match the performance of our competitors or the star rating quality bonuses are reduced or eliminated, our revenues, operating results and cash flows may be significantly adversely affected.
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Payments we receive from CMS for our Medicare Advantage and Part D businesses also are subject to risk adjustment based on the health status of the individuals we enroll. Elements of that risk adjustment mechanism continue to be challenged by the DOJ, the OIG and CMS itself. Substantial changes in the risk adjustment mechanism, including changes that result from enforcement or audit actions, could materially affect the amount of our Medicare reimbursement, require us to raise prices or reduce the benefits we offer to Medicare beneficiaries, and potentially limit our (and the industry’s) participation in the Medicare program.
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Medicare Part D has resulted in increased utilization of prescription medications and puts pressure on our pharmacy gross margin rates due to regulatory and competitive pressures. Further, as a result of the ACA and changes to the retiree drug subsidy rules, clients of our PBM business could decide to discontinue providing prescription drug benefits to their Medicare-eligible members. To the extent this phenomenon occurs, the adverse effects of increasing customer migration into Medicare Part D may outweigh the benefits we realize from growth of our Medicare Part D products.
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Our Medicare Part D operating results and our ability to expand our Medicare Part D business could be adversely affected if: the cost and complexity of Medicare Part D exceed management’s expectations or prevent effective program implementation or administration; changes to the regulations regarding how drug costs are reported for Medicare Part D are implemented in a manner that adversely affects the profitability of our Medicare Part D business; changes to the applicable regulations impact our ability to retain fees from third parties including network pharmacies; the government alters Medicare Part D program requirements or reduces funding because of the higher-than-anticipated cost to taxpayers of Medicare Part D or for other reasons; the government mandates the use of point-of-sale manufacturer’s rebates or up front drug pricing discounts, makes drug manufacturer’s rebates illegal, or makes changes to how pharmacy pay-for-performance is calculated; or reinsurance thresholds are reduced below their current levels.
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We have experienced challenges in obtaining complete and accurate encounter data for our Medicaid products due to difficulties with providers and third-party vendors submitting claims in a timely fashion in the proper format, and with state agencies in coordinating such submissions. As states increase their reliance on encounter data, these difficulties could affect the Medicaid premium rates we receive and how Medicaid membership is assigned to us, which could have a material adverse effect on our Medicaid operating results and cash flows and/or our ability to bid for, and continue to participate in, certain Medicaid programs.
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Federal funding for expanded Medicaid coverage began to decrease in 2017. This reduction is causing states to re-evaluate funding for their Medicaid expansions. That re-evaluation may adversely affect Medicaid payment rates, our Medicaid membership in those states, our revenues, our MLRs and our operating results.
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If we fail to report and correct errors discovered through our own auditing procedures or during a CMS audit or otherwise fail to comply with the applicable laws and regulations, we could be subject to fines, civil monetary penalties or other sanctions, including fines and penalties under the False Claims Act, which could have a material adverse effect on our ability to participate in Medicare Advantage, Part D or other government programs, and on our operating results, cash flows and financial condition.
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In the second quarter of 2014, CMS issued a final rule implementing ACA requirements that Medicare Advantage and PDP plans report and refund to CMS overpayments that those plans receive from CMS. However, CMS’s statements in formalized guidance regarding “overpayments” to Medicare Advantage plans appear to be inconsistent with CMS’s prior risk adjustment data validation (“RADV”) audit guidance. These statements appear to equate each Medicare Advantage risk adjustment data error with an “overpayment” without reconciliation to the principles underlying the fee for service adjustment comparison contemplated by CMS’s RADV audit methodology. The precise interpretation, impact and legality of the final rule are not clear and are subject to pending litigation. If Medicare Advantage plans were not paid based on payment model principles that align with the requirements of the Social Security Act or such payments were not implemented correctly, it could have a material adverse effect on our operating results, cash flows and/or financial condition.
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Certain of our Medicaid contracts require the submission of complete and correct encounter data. The accurate and timely reporting of encounter data is increasingly important to the success of our Medicaid programs because more states are using encounter data to determine compliance with performance standards and, in part, to set premium rates. We have expended and may continue to expend additional effort and incur significant additional costs to collect accurate, or to
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Our businesses that dispense drugs also face challenges in the Medicaid space. The ACA made several significant changes to Medicaid rebates and to reimbursement rates. One of these changes was to revise the definition of the Average Manufacturer Price, a pricing element common to most payment formulas, and the reimbursement formula for generic drugs. This change has adversely affected the reimbursements we receive when we dispense prescription drugs to Medicaid recipients.
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Integrating personnel, operations and systems (including internal control environments and compliance policies), while maintaining focus on producing and delivering consistent, high quality products and services;
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Coordinating geographically dispersed organizations;
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Disrupting management’s attention from our ongoing business operations;
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Retaining existing customers and attracting new customers; and
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Managing inefficiencies associated with integrating our operations.
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we frequently compete with other firms, some of which may have greater financial and other resources and a greater tolerance for risk, to acquire attractive companies;
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the acquired, alliance and/or joint venture businesses may not perform as projected;
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•
|
the goodwill or other intangible assets established as a result of our acquisitions may be incorrectly valued or may become impaired; for example, in 2018 we took $6.1 billion of goodwill impairment charges related to our LTC reporting unit within the Retail/LTC segment;
|
•
|
we may assume unanticipated liabilities, including those that were not disclosed to us or which we underestimated;
|
•
|
the acquired businesses, or the pursuit of other inorganic growth strategies, could disrupt or compete with our existing businesses, distract management, result in the loss of key employees, divert resources, result in tax costs or inefficiencies and make it difficult to maintain our current business standards, controls, information technology systems, policies, procedures and performance;
|
•
|
as we did in the Aetna Acquisition, we may finance future acquisitions and other inorganic growth strategies by issuing common stock for some or all of the purchase price, which would dilute the ownership interests of our stockholders;
|
•
|
as we did in the Aetna Acquisition, we may incur significant debt in connection with acquisitions (whether to finance acquisitions or by assuming debt from the businesses we acquire);
|
•
|
we may not have the expertise to manage and profitably grow the businesses we acquire, and we may need to rely on the retention of key personnel and other suppliers of businesses we acquire, which may be difficult or impossible to accomplish;
|
•
|
we may enter into merger or purchase agreements but, due to reasons within or outside our control, fail to complete the related transactions, which could result in termination fees or other penalties that could be material, cause material disruptions to our businesses and operations and adversely affect our brand and reputation;
|
•
|
in order to complete a proposed acquisition, we may be required to divest certain portions of our business, for which we may not be able to obtain favorable pricing;
|
•
|
as is the case with the Aetna Acquisition and our acquisition of Omnicare, Inc., we may be involved in litigation related to mergers or acquisitions, including for matters that occurred prior to the applicable closing, which may be costly to defend and may result in adverse rulings against us that could be material; and
|
•
|
the integration into our businesses of the businesses and entities we acquire may affect the way in which existing laws and regulations apply to us, including subjecting us to laws and regulations that did not previously apply to us.
|
•
|
significantly reducing the value and/or liquidity of the debt securities we hold in our investment portfolio and creating realized capital losses that reduce our operating results and/or unrealized capital losses that reduce our shareholders’ equity;
|
•
|
keeping interest rates low on high-quality short-term or medium-term debt securities (such as we have experienced during recent years) and thereby materially reducing our net investment income and operating results as the proceeds from securities in our investment portfolio that mature or are otherwise disposed of continue to be reinvested in lower yielding securities;
|
•
|
reducing the fair values of our investments if interest rates rise;
|
•
|
causing non-performance of or defaults on their obligations to us by third parties, including customers, issuers of securities in our investment portfolio, mortgage borrowers and/or reinsurance and/or derivatives counterparties;
|
•
|
making it more difficult to value certain of our investment securities, for example if trading becomes less frequent, which could lead to significant period-to-period changes in our estimates of the fair values of those securities and cause period-to-period volatility in our net income and shareholders’ equity;
|
•
|
reducing our ability to issue short-term debt securities at attractive interest rates, thereby increasing our interest expense and decreasing our operating results; and
|
•
|
reducing our ability to issue other securities.
|
•
|
Approximately 8,170 retail stores, of which approximately 5% were owned. Net selling space for retail stores was approximately 80.3 million square feet as of December 31, 2019. Approximately 45% of the store base was opened or significantly remodeled within the last five years;
|
•
|
Approximately 1,725 retail pharmacies and approximately 80 clinics in Target stores;
|
•
|
Owned distribution centers and leased distribution facilities throughout the U.S. totaling approximately 10.5 million square feet; and
|
•
|
Owned and leased LTC pharmacies throughout the U.S. and an owned LTC repackaging facility.
|
In billions
|
|
|
Remaining as of
|
||||
Authorization Date
|
Authorized
|
|
December 31, 2019
|
||||
November 2, 2016 (“2016 Repurchase Program”)
|
$
|
15.0
|
|
|
$
|
13.9
|
|
December 15, 2014 (“2014 Repurchase Program”)
|
10.0
|
|
|
—
|
|
|
December 31,
|
||||||||||||||||||||||
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
||||||||||||
CVS Health Corporation
|
$
|
100
|
|
|
$
|
103
|
|
|
$
|
85
|
|
|
$
|
80
|
|
|
$
|
74
|
|
|
$
|
87
|
|
S&P 500 (1)
|
100
|
|
|
101
|
|
|
113
|
|
|
138
|
|
|
132
|
|
|
174
|
|
||||||
S&P 500 Food & Staples Retail Group Index (2)
|
100
|
|
|
98
|
|
|
98
|
|
|
111
|
|
|
112
|
|
|
143
|
|
||||||
S&P 500 Health Care Group Index (1) (3)
|
100
|
|
|
107
|
|
|
104
|
|
|
127
|
|
|
135
|
|
|
163
|
|
(1)
|
Includes CVS Health.
|
(2)
|
Includes 5 companies (COST, KR, SYY, WBA, WMT).
|
(3)
|
Includes 61 companies.
|
In millions, except per share amounts
|
2019
|
|
2018 (1)
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
Statement of operations data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total revenues
|
$
|
256,776
|
|
|
$
|
194,579
|
|
|
$
|
184,786
|
|
|
$
|
177,546
|
|
|
$
|
153,311
|
|
Operating income
|
11,987
|
|
|
4,021
|
|
|
9,538
|
|
|
10,386
|
|
|
9,496
|
|
|||||
Income (loss) from continuing operations
|
6,631
|
|
|
(596
|
)
|
|
6,631
|
|
|
5,320
|
|
|
5,230
|
|
|||||
Net income (loss) attributable to CVS Health
|
6,634
|
|
|
(594
|
)
|
|
6,622
|
|
|
5,317
|
|
|
5,237
|
|
|||||
Per common share data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Income (loss) from continuing operations attributable to CVS Health
|
$
|
5.10
|
|
|
$
|
(0.57
|
)
|
|
$
|
6.48
|
|
|
$
|
4.93
|
|
|
$
|
4.65
|
|
Income (loss) from discontinued operations attributable to CVS Health
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
$
|
0.01
|
|
Net income (loss) attributable to CVS Health
|
$
|
5.10
|
|
|
$
|
(0.57
|
)
|
|
$
|
6.47
|
|
|
$
|
4.93
|
|
|
$
|
4.66
|
|
Diluted earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Income (loss) from continuing operations attributable to CVS Health
|
$
|
5.08
|
|
|
$
|
(0.57
|
)
|
|
$
|
6.45
|
|
|
$
|
4.91
|
|
|
$
|
4.62
|
|
Income (loss) from discontinued operations attributable to CVS Health
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
$
|
0.01
|
|
Net income (loss) attributable to CVS Health
|
$
|
5.08
|
|
|
$
|
(0.57
|
)
|
|
$
|
6.44
|
|
|
$
|
4.90
|
|
|
$
|
4.63
|
|
Dividends per common share
|
$
|
2.00
|
|
|
$
|
2.00
|
|
|
$
|
2.00
|
|
|
$
|
1.70
|
|
|
$
|
1.40
|
|
Balance sheet and other data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets
|
$
|
222,449
|
|
|
$
|
196,456
|
|
|
$
|
95,131
|
|
|
$
|
94,462
|
|
|
$
|
92,437
|
|
Long-term debt, less current portion
|
$
|
64,699
|
|
|
$
|
71,444
|
|
|
$
|
22,181
|
|
|
$
|
25,615
|
|
|
$
|
26,267
|
|
Total shareholders’ equity
|
$
|
64,170
|
|
|
$
|
58,543
|
|
|
$
|
37,695
|
|
|
$
|
36,834
|
|
|
$
|
37,203
|
|
Number of stores (at end of year)
|
9,941
|
|
|
9,967
|
|
|
9,846
|
|
|
9,750
|
|
|
9,681
|
|
(1)
|
On November 28, 2018, the Company acquired Aetna. Aetna’s operations are included in the Company’s consolidated financial statements subsequent to the Aetna Acquisition Date. See Note 2 ‘‘Acquisitions and Divestitures’’ included in Item 8 of this 10-K for additional information.
|
•
|
Management and administrative expenses to support the overall operations of the Company, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments, expenses associated with the Company’s investments in its transformation and Enterprise modernization programs and acquisition-related transaction and integration costs; and
|
•
|
Products for which the Company no longer solicits or accepts new customers such as large case pensions and long-term care insurance products.
|
|
|
|
|
|
|
|
Change
|
||||||||||||||||||
|
Year Ended December 31,
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||||||||||||||||
In millions
|
2019
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Products
|
$
|
185,236
|
|
|
$
|
183,910
|
|
|
$
|
180,063
|
|
|
$
|
1,326
|
|
|
0.7
|
%
|
|
$
|
3,847
|
|
|
2.1
|
%
|
Premiums
|
63,122
|
|
|
8,184
|
|
|
3,558
|
|
|
54,938
|
|
|
671.3
|
%
|
|
4,626
|
|
|
130.0
|
%
|
|||||
Services
|
7,407
|
|
|
1,825
|
|
|
1,144
|
|
|
5,582
|
|
|
305.9
|
%
|
|
681
|
|
|
59.5
|
%
|
|||||
Net investment income
|
1,011
|
|
|
660
|
|
|
21
|
|
|
351
|
|
|
53.2
|
%
|
|
639
|
|
|
3,042.9
|
%
|
|||||
Total revenues
|
256,776
|
|
|
194,579
|
|
|
184,786
|
|
|
62,197
|
|
|
32.0
|
%
|
|
9,793
|
|
|
5.3
|
%
|
|||||
Operating costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of products sold
|
158,719
|
|
|
156,447
|
|
|
153,448
|
|
|
2,272
|
|
|
1.5
|
%
|
|
2,999
|
|
|
2.0
|
%
|
|||||
Benefit costs
|
52,529
|
|
|
6,594
|
|
|
2,810
|
|
|
45,935
|
|
|
696.6
|
%
|
|
3,784
|
|
|
134.7
|
%
|
|||||
Goodwill impairments
|
—
|
|
|
6,149
|
|
|
181
|
|
|
(6,149
|
)
|
|
(100.0
|
)%
|
|
5,968
|
|
|
3,297.2
|
%
|
|||||
Operating expenses
|
33,541
|
|
|
21,368
|
|
|
18,809
|
|
|
12,173
|
|
|
57.0
|
%
|
|
2,559
|
|
|
13.6
|
%
|
|||||
Total operating costs
|
244,789
|
|
|
190,558
|
|
|
175,248
|
|
|
54,231
|
|
|
28.5
|
%
|
|
15,310
|
|
|
8.7
|
%
|
|||||
Operating income
|
11,987
|
|
|
4,021
|
|
|
9,538
|
|
|
7,966
|
|
|
198.1
|
%
|
|
(5,517
|
)
|
|
(57.8
|
)%
|
|||||
Interest expense
|
3,035
|
|
|
2,619
|
|
|
1,062
|
|
|
416
|
|
|
15.9
|
%
|
|
1,557
|
|
|
146.6
|
%
|
|||||
Loss on early extinguishment of debt
|
79
|
|
|
—
|
|
|
—
|
|
|
79
|
|
|
100.0
|
%
|
|
—
|
|
|
—
|
%
|
|||||
Other expense (income)
|
(124
|
)
|
|
(4
|
)
|
|
208
|
|
|
(120
|
)
|
|
(3,000.0
|
)%
|
|
(212
|
)
|
|
(101.9
|
)%
|
|||||
Income before income tax provision
|
8,997
|
|
|
1,406
|
|
|
8,268
|
|
|
7,591
|
|
|
539.9
|
%
|
|
(6,862
|
)
|
|
(83.0
|
)%
|
|||||
Income tax provision
|
2,366
|
|
|
2,002
|
|
|
1,637
|
|
|
364
|
|
|
18.2
|
%
|
|
365
|
|
|
22.3
|
%
|
|||||
Income (loss) from continuing operations
|
6,631
|
|
|
(596
|
)
|
|
6,631
|
|
|
7,227
|
|
|
1,212.6
|
%
|
|
(7,227
|
)
|
|
(109.0
|
)%
|
|||||
Loss from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
%
|
|
8
|
|
|
100.0
|
%
|
|||||
Net income (loss)
|
6,631
|
|
|
(596
|
)
|
|
6,623
|
|
|
7,227
|
|
|
1,212.6
|
%
|
|
(7,219
|
)
|
|
(109.0
|
)%
|
|||||
Net (income) loss attributable to noncontrolling interests
|
3
|
|
|
2
|
|
|
(1
|
)
|
|
1
|
|
|
50.0
|
%
|
|
3
|
|
|
300.0
|
%
|
|||||
Net income (loss) attributable to CVS Health
|
$
|
6,634
|
|
|
$
|
(594
|
)
|
|
$
|
6,622
|
|
|
$
|
7,228
|
|
|
1,216.8
|
%
|
|
$
|
(7,216
|
)
|
|
(109.0
|
)%
|
•
|
Total revenues increased $62.2 billion or 32.0% in 2019 compared to 2018. The increase in total revenues was primarily due to the impact of the Aetna Acquisition (primarily reflected in the Health Care Benefits segment) which occurred in November 2018, a 5.0% increase in Pharmacy Services segment revenue and a 3.1% increase in Retail/LTC segment revenue.
|
•
|
Please see “Segment Analysis” later in this MD&A for additional information about the revenues of the Company’s segments.
|
•
|
Operating expenses increased $12.2 billion or 57.0% in 2019 compared to 2018. Operating expenses as a percentage of total revenues were 13.1% in 2019, an increase of 210 basis points compared to 2018. The increase in operating expenses was primarily due to the impact of the Aetna Acquisition (including intangible asset amortization) and higher operating
|
•
|
Please see “Segment Analysis” later in this MD&A for additional information about the operating expenses of the Company’s segments.
|
•
|
Operating income increased $8.0 billion in 2019 compared to 2018. The increase was primarily due to (i) the absence of the $6.1 billion of pre-tax goodwill impairment charges related to the LTC reporting unit recorded within the Retail/LTC segment in 2018, (ii) the impact of the Aetna Acquisition and (iii) increased prescription volume and improved purchasing economics in the Pharmacy Services and Retail/LTC segments. The increase was partially offset by:
|
•
|
Higher operating expenses in the Retail/LTC segment, including $231 million of store rationalization charges and the $205 million pre-tax loss on the sale of Onofre; and
|
•
|
The absence of $536 million in interest income on the proceeds from the financing for the Aetna Acquisition recorded in the year ended December 31, 2018.
|
•
|
Please see “Segment Analysis” later in this MD&A for additional information about the operating income of the Company’s segments.
|
•
|
Interest expense increased $416 million in 2019 compared to 2018, primarily due to financing activity associated with the Aetna Acquisition and the assumption of Aetna’s debt as of the Aetna Acquisition Date. See Note 8 ‘‘Borrowings and Credit Agreements’’ included in Item 8 of this 10-K for additional information.
|
•
|
During 2019, the loss on early extinguishment of debt relates to the Company’s repayment of $4.0 billion of its outstanding senior notes pursuant to its tender offers for such senior notes in August 2019, which resulted in a loss on early extinguishment of debt of $79 million. See Note 8 ‘‘Borrowings and Credit Agreements’’ included in Item 8 of this 10-K for additional information.
|
•
|
Other income increased $120 million in 2019 compared to 2018. Other income represents pension plan asset returns in excess of interest cost on pension plan obligations. The increase in other income in 2019 was primarily due to 2019 including a full year of income associated with the Aetna pension plan, as compared to 2018 which only included the Aetna pension plan income for the period subsequent to the Aetna Acquisition Date.
|
•
|
The Company’s effective income tax rate was 26.3% in 2019 compared to 142.4% in 2018. The decrease in the effective income tax rate was primarily due to the absence of the $6.1 billion of pre-tax goodwill impairment charges recorded during 2018, the majority of which were not deductible for income tax purposes.
|
•
|
In connection with certain business dispositions completed between 1995 and 1997, the Company retained guarantees on store lease obligations for a number of former subsidiaries, including Linens ‘n Things, which filed for bankruptcy in 2008, and Bob’s Stores, which filed for bankruptcy in 2016. The Company’s loss from discontinued operations primarily includes lease-related costs required to satisfy its Linens ‘n Things and Bob’s Stores lease guarantees.
|
•
|
See “Discontinued Operations” in Note 1 ‘‘Significant Accounting Policies’’ and “Lease Guarantees” in Note 16 ‘‘Commitments and Contingencies’’ included in Item 8 of this 10-K for additional information about the Company’s discontinued operations and the Company’s lease guarantees, respectively.
|
•
|
The Pharmacy Services segment is expected to benefit from continued improvements in purchasing economics and Enterprise modernization, partially offset by net selling season losses during 2020 and continued price compression.
|
•
|
The Retail/LTC segment is expected to benefit from projected adjusted script growth driven by the continued successful execution of patient care programs, partially offset by continued reimbursement pressure.
|
•
|
The Health Care Benefits segment is expected to benefit from Government Services membership growth including projected above-industry growth in its Medicare Advantage products and new Medicaid contract wins, as well as integration synergies that will continue to disproportionately benefit the Health Care Benefits segment.
|
•
|
The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”) imposes a significant industry-wide fee known as the Health Insurer Fee (the “HIF”). The HIF is non-deductible for federal income tax purposes and is allocated to insurers based on the ratio of the amount of an insurer’s net premium revenues written during the preceding calendar year to the amount of health insurance premium for all U.S. health risk for certain lines of business during the preceding calendar year. The HIF was suspended for 2019, will be $15.5 billion for 2020 and has been repealed for calendar years after 2020. While the Company expects the reintroduction of the HIF to result in a lower medical benefit ratio (“MBR”) in 2020 compared to 2019, all else being equal, the Company expects its 2020 consolidated net income will be negatively impacted due to an increase in its effective income tax rate in 2020 compared to 2019 as a result of the non-deductibility of the HIF.
|
•
|
The Company believes that it is on track to achieve its 2020 target of $800-900 million of synergies from the Aetna Acquisition.
|
•
|
The Company expects changes to its business environment to continue for the next several years as elected and other government officials at the national and state levels continue to propose and enact significant modifications to public policy and existing laws and regulations that govern the Company’s businesses.
|
In millions
|
Pharmacy
Services (1)
|
|
Retail/
LTC
|
|
Health Care
Benefits
|
|
Corporate/
Other
|
|
Intersegment
Eliminations (2)
|
|
Consolidated
Totals
|
||||||||||||
2019
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total revenues
|
$
|
141,491
|
|
|
$
|
86,608
|
|
|
$
|
69,604
|
|
|
$
|
512
|
|
|
$
|
(41,439
|
)
|
|
$
|
256,776
|
|
Adjusted operating income (loss)
|
5,129
|
|
|
6,705
|
|
|
5,202
|
|
|
(1,000
|
)
|
|
(697
|
)
|
|
15,339
|
|
||||||
2018
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total revenues
|
134,736
|
|
|
83,989
|
|
|
8,962
|
|
|
606
|
|
|
(33,714
|
)
|
|
194,579
|
|
||||||
Adjusted operating income (loss)
|
4,955
|
|
|
7,403
|
|
|
528
|
|
|
(856
|
)
|
|
(769
|
)
|
|
11,261
|
|
||||||
2017
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total revenues
|
130,822
|
|
|
79,398
|
|
|
3,587
|
|
|
16
|
|
|
(29,037
|
)
|
|
184,786
|
|
||||||
Adjusted operating income (loss)
|
4,628
|
|
|
7,475
|
|
|
359
|
|
|
(896
|
)
|
|
(741
|
)
|
|
10,825
|
|
(1)
|
Total revenues of the Pharmacy Services segment include approximately $11.5 billion, $11.4 billion and $10.8 billion of retail co-payments for 2019, 2018 and 2017, respectively. See Note 1 ‘‘Significant Accounting Policies’’ included in Item 8 of this 10-K for additional information about retail co-payments.
|
(2)
|
Intersegment eliminations relate to intersegment revenue generating activities that occur between the Pharmacy Services segment, the Retail/LTC segment and/or the Health Care Benefits segment.
|
|
Year Ended December 31, 2019
|
||||||||||||||||||||||
In millions
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Health Care
Benefits
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
||||||||||||
Operating income (loss) (GAAP measure)
|
$
|
4,735
|
|
|
$
|
5,793
|
|
|
$
|
3,639
|
|
|
$
|
(1,483
|
)
|
|
$
|
(697
|
)
|
|
$
|
11,987
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Amortization of intangible assets (1)
|
394
|
|
|
476
|
|
|
1,563
|
|
|
3
|
|
|
—
|
|
|
2,436
|
|
||||||
Acquisition-related integration costs (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
480
|
|
|
—
|
|
|
480
|
|
||||||
Store rationalization charges (3)
|
—
|
|
|
231
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
231
|
|
||||||
Loss on divestiture of subsidiary (4)
|
—
|
|
|
205
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
205
|
|
||||||
Adjusted operating income (loss)
|
$
|
5,129
|
|
|
$
|
6,705
|
|
|
$
|
5,202
|
|
|
$
|
(1,000
|
)
|
|
$
|
(697
|
)
|
|
$
|
15,339
|
|
|
Year Ended December 31, 2018
|
||||||||||||||||||||||
In millions
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Health Care
Benefits
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
||||||||||||
Operating income (loss) (GAAP measure)
|
$
|
4,607
|
|
|
$
|
620
|
|
|
$
|
368
|
|
|
$
|
(805
|
)
|
|
$
|
(769
|
)
|
|
$
|
4,021
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Amortization of intangible assets (1)
|
348
|
|
|
498
|
|
|
160
|
|
|
—
|
|
|
—
|
|
|
1,006
|
|
||||||
Acquisition-related transaction and integration costs (2)
|
—
|
|
|
7
|
|
|
—
|
|
|
485
|
|
|
—
|
|
|
492
|
|
||||||
Loss on divestiture of subsidiary (4)
|
—
|
|
|
86
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
86
|
|
||||||
Goodwill impairments (5)
|
—
|
|
|
6,149
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,149
|
|
||||||
Impairment of long-lived assets (6)
|
—
|
|
|
43
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43
|
|
||||||
Interest income on financing for the Aetna Acquisition (7)
|
—
|
|
|
—
|
|
|
—
|
|
|
(536
|
)
|
|
—
|
|
|
(536
|
)
|
||||||
Adjusted operating income (loss)
|
$
|
4,955
|
|
|
$
|
7,403
|
|
|
$
|
528
|
|
|
$
|
(856
|
)
|
|
$
|
(769
|
)
|
|
$
|
11,261
|
|
|
Year Ended December 31, 2017
|
||||||||||||||||||||||
In millions
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Health Care
Benefits
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
||||||||||||
Operating income (loss) (GAAP measure)
|
$
|
4,300
|
|
|
$
|
6,558
|
|
|
$
|
357
|
|
|
$
|
(936
|
)
|
|
$
|
(741
|
)
|
|
$
|
9,538
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Amortization of intangible assets (1)
|
328
|
|
|
487
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
817
|
|
||||||
Acquisition-related transaction and integration costs (2)
|
—
|
|
|
34
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
65
|
|
||||||
Store rationalization charges (3)
|
—
|
|
|
215
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
215
|
|
||||||
Loss on divestiture of subsidiary (4)
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
9
|
|
||||||
Goodwill impairments (5)
|
—
|
|
|
181
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
181
|
|
||||||
Adjusted operating income (loss)
|
$
|
4,628
|
|
|
$
|
7,475
|
|
|
$
|
359
|
|
|
$
|
(896
|
)
|
|
$
|
(741
|
)
|
|
$
|
10,825
|
|
(1)
|
The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the Company’s statements of operations in operating expenses within each segment. Although intangible assets contribute to the Company’s revenue generation, the amortization of intangible assets does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of the Company’s acquisition activity. Accordingly, the Company believes excluding the amortization of intangible assets enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within the Company’s GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.
|
(2)
|
In 2019, 2018 and 2017, acquisition-related transaction and integration costs relate to the Aetna Acquisition. In 2018 and 2017, acquisition-related transaction and integration costs also relate to the acquisition of Omnicare, Inc. (“Omnicare”). The acquisition-related transaction and integration costs are reflected in the Company’s consolidated statements of operations in operating expenses within the Corporate/Other segment and the Retail/LTC segment.
|
(3)
|
In 2019, the store rationalization charges relate to the planned closure of 46 underperforming retail pharmacy stores during the second quarter of 2019 and the planned closure of 22 underperforming retail pharmacy stores during the first quarter of 2020. In 2019, the store rationalization charges primarily relate to operating lease right-of-use asset impairment charges and are reflected in the Company’s consolidated statements of operations in operating expenses within the Retail/LTC segment. In 2017, the store rationalization charges related to the Company’s enterprise streamlining initiative and are reflected in the Company’s consolidated statements of operations in operating expenses within the Retail/LTC segment.
|
(4)
|
In 2019, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of Onofre, which occurred on July 1, 2019. The loss on divestiture primarily relates to the elimination of the cumulative translation adjustment from accumulated other comprehensive income. In 2018, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of the Company’s RxCrossroads subsidiary for $725 million on January 2, 2018. In 2017, the loss on divestiture of subsidiary represents transaction costs associated with the sale of RxCrossroads. The loss on divestiture of subsidiary costs are reflected in the Company’s consolidated statements of operations in operating expenses within the Retail/LTC segment and Corporate/Other segment.
|
(5)
|
In 2018, the goodwill impairments relate to the LTC reporting unit within the Retail/LTC segment. In 2017, the goodwill impairments relate to the RxCrossroads reporting unit within the Retail/LTC segment.
|
(6)
|
In 2018, impairment of long-lived assets primarily relates to the impairment of property and equipment within the Retail/LTC segment and is reflected in operating expenses in the Company’s consolidated statements of operations.
|
(7)
|
In 2018, the Company recorded interest income of $536 million on the proceeds of the $40 billion of unsecured senior notes it issued in March 2018 to partially fund the Aetna Acquisition. All amounts are for the periods prior to the close of the Aetna Acquisition, which occurred on November 28, 2018, and were recorded within the Corporate/Other segment.
|
|
|
|
|
|
|
|
Change
|
||||||||||||||||||
|
Year Ended December 31,
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||||||||||||||||
In millions, except percentages
|
2019
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Products
|
$
|
140,946
|
|
|
$
|
134,285
|
|
|
$
|
130,578
|
|
|
$
|
6,661
|
|
|
5.0
|
%
|
|
$
|
3,707
|
|
|
2.8
|
%
|
Services
|
545
|
|
|
451
|
|
|
244
|
|
|
94
|
|
|
20.8
|
%
|
|
207
|
|
|
84.8
|
%
|
|||||
Total revenues
|
141,491
|
|
|
134,736
|
|
|
130,822
|
|
|
6,755
|
|
|
5.0
|
%
|
|
3,914
|
|
|
3.0
|
%
|
|||||
Cost of products sold
|
135,245
|
|
|
128,777
|
|
|
125,273
|
|
|
6,468
|
|
|
5.0
|
%
|
|
3,504
|
|
|
2.8
|
%
|
|||||
Operating expenses
|
1,511
|
|
|
1,352
|
|
|
1,249
|
|
|
159
|
|
|
11.8
|
%
|
|
103
|
|
|
8.2
|
%
|
|||||
Operating expenses as a % of total revenues
|
1.1
|
%
|
|
1.0
|
%
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Operating income
|
$
|
4,735
|
|
|
$
|
4,607
|
|
|
$
|
4,300
|
|
|
$
|
128
|
|
|
2.8
|
%
|
|
$
|
307
|
|
|
7.1
|
%
|
Operating income as a % of total revenues
|
3.3
|
%
|
|
3.4
|
%
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Adjusted operating income (1)
|
$
|
5,129
|
|
|
$
|
4,955
|
|
|
$
|
4,628
|
|
|
$
|
174
|
|
|
3.5
|
%
|
|
$
|
327
|
|
|
7.1
|
%
|
Adjusted operating income as a % of total revenues
|
3.6
|
%
|
|
3.7
|
%
|
|
3.5
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Revenues (by distribution channel):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pharmacy network (2) (3)
|
$
|
88,755
|
|
|
$
|
87,167
|
|
|
$
|
84,677
|
|
|
$
|
1,588
|
|
|
1.8
|
%
|
|
$
|
2,490
|
|
|
2.9
|
%
|
Mail choice (3) (4)
|
52,141
|
|
|
47,049
|
|
|
45,731
|
|
|
5,092
|
|
|
10.8
|
%
|
|
1,318
|
|
|
2.9
|
%
|
|||||
Other
|
595
|
|
|
520
|
|
|
414
|
|
|
75
|
|
|
14.4
|
%
|
|
106
|
|
|
25.6
|
%
|
|||||
Pharmacy claims processed: (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total
|
2,014.2
|
|
|
1,889.8
|
|
|
1,781.9
|
|
|
124.4
|
|
|
6.6
|
%
|
|
107.9
|
|
|
6.1
|
%
|
|||||
Pharmacy network (2)
|
1,704.0
|
|
|
1,601.4
|
|
|
1,516.7
|
|
|
102.6
|
|
|
6.4
|
%
|
|
84.7
|
|
|
5.6
|
%
|
|||||
Mail choice (4)
|
310.2
|
|
|
288.4
|
|
|
265.2
|
|
|
21.8
|
|
|
7.6
|
%
|
|
23.2
|
|
|
8.7
|
%
|
|||||
Generic dispensing rate: (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total
|
88.2
|
%
|
|
87.3
|
%
|
|
87.0
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Pharmacy network (2)
|
88.7
|
%
|
|
87.9
|
%
|
|
87.7
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Mail choice (4)
|
85.1
|
%
|
|
83.9
|
%
|
|
83.1
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Mail choice penetration rate (4) (5)
|
15.4
|
%
|
|
15.3
|
%
|
|
14.9
|
%
|
|
|
|
|
|
|
|
|
(1)
|
See “Segment Analysis” above in this MD&A for a reconciliation of operating income (GAAP measure) to adjusted operating income for the Pharmacy Services segment.
|
(2)
|
Pharmacy network revenues, pharmacy claims processed and generic dispensing rate do not include Maintenance Choice® activity, which is included within the mail choice category. Pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and LTC pharmacies, but excluding Maintenance Choice activity, which is included within the mail choice category. Maintenance choice permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS pharmacy retail store for the same price as mail order.
|
(3)
|
Certain prior year amounts have been reclassified for consistency with the current period presentation.
|
(4)
|
Mail choice is defined as claims filled at a Pharmacy Services mail order facility, which includes specialty mail claims inclusive of Specialty Connect® claims picked up at a retail pharmacy, as well as prescriptions filled at the Company’s retail pharmacies under the Maintenance Choice program.
|
(5)
|
Includes an adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription.
|
•
|
Total revenues increased $6.8 billion, or 5.0%, to $141.5 billion in 2019 compared to 2018. The increase was primarily due to brand inflation as well as increased total pharmacy claims volume, partially offset by continued price compression and an increased generic dispensing rate.
|
•
|
As you review the Pharmacy Services segment’s performance in this area, you should consider the following important information about the business:
|
•
|
The Company’s mail choice claims processed, on a 30-day equivalent basis, increased 7.6% to 310.2 million claims in 2019 compared to 288.4 million claims in 2018. The increase in mail choice claims was primarily driven by the continued adoption of Maintenance Choice offerings.
|
•
|
During 2019, the average revenue per mail choice claim, on a 30-day equivalent basis, increased by 3.0% compared to 2018 primarily due to growth in specialty pharmacy claims processed.
|
•
|
The Company’s pharmacy network claims processed, on a 30-day equivalent basis, increased 6.4% to 1.7 billion claims in 2019 compared to 1.6 billion claims in 2018. The increase in the pharmacy network claim volume was primarily due to net new business, including the onboarding of Anthem, Inc.’s (“Anthem’s”) PBM, IngenioRx, during 2019.
|
•
|
During 2019, the average revenue per pharmacy network claim processed, on a 30-day equivalent basis, decreased 4.2% compared to 2018 as a result of continued price compression.
|
•
|
The segment’s total generic dispensing rate increased to 88.2% in 2019 compared to 87.3% in 2018. The continued increase in the segment’s generic dispensing rate was primarily due to the impact of new generic drug introductions and the Company’s ongoing efforts to encourage plan members to use generic drugs when they are available and clinically appropriate. The Company believes its generic dispensing rate will continue to increase in future periods, albeit at a slower pace. This increase will be affected by, among other things, the number of new brand and generic drug introductions and the Company’s success at encouraging plan members to utilize generic drugs when they are available and clinically appropriate.
|
•
|
Operating expenses in the Pharmacy Services segment include selling, general and administrative expenses; depreciation and amortization related to selling, general and administrative activities; and expenses related to specialty retail pharmacies, which include store and administrative payroll, employee benefits and occupancy costs.
|
•
|
Operating expenses increased $159 million, or 11.8%, in 2019 compared to 2018. The increase in operating expenses was primarily due to growth in the business, including operating expenses associated with Aetna’s mail order and specialty pharmacy operations (including intangible asset amortization) and investments related to the Company’s agreement with Anthem’s PBM, IngenioRx, during 2019.
|
•
|
Operating expenses as a percentage of total revenues remained relatively consistent at 1.1% and 1.0% in 2019 and 2018, respectively.
|
•
|
Operating income increased $128 million, or 2.8%, and adjusted operating income increased $174 million, or 3.5%, in 2019 compared to 2018. The increase in both operating income and adjusted operating income was primarily driven by increased claims volume, the addition of Aetna’s mail order and specialty pharmacy operations and improved purchasing economics, partially offset by continued price compression. The increase in operating income also was partially offset by increased intangible asset amortization related to Aetna’s mail order and specialty pharmacy operations.
|
•
|
As you review the Pharmacy Services segment’s performance in this area, you should consider the following important information about the business:
|
•
|
The Company’s efforts to (i) retain existing clients, (ii) obtain new business and (iii) maintain or improve the rebates and/or discounts the Company receives from manufacturers, wholesalers and retail pharmacies continue to have an impact on operating income and adjusted operating income. In particular, competitive pressures in the PBM industry have caused the Company and other PBMs to continue to share with clients a larger portion of rebates and/or discounts received from pharmaceutical manufacturers. In addition, marketplace dynamics and regulatory changes have limited the Company’s ability to offer plan sponsors pricing that includes retail network “differential” or “spread,” and the Company expects these trends to continue. The “differential” or “spread” is any difference between the drug price charged to plan sponsors, including Medicare Part D plan sponsors, by a PBM and the price paid for the drug by the PBM to the dispensing provider.
|
|
|
|
|
|
|
|
Change
|
||||||||||||||||||
|
Year Ended December 31,
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||||||||||||||||
In millions, except percentages
|
2019
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Products
|
$
|
85,729
|
|
|
$
|
83,175
|
|
|
$
|
78,522
|
|
|
$
|
2,554
|
|
|
3.1
|
%
|
|
$
|
4,653
|
|
|
5.9
|
%
|
Services
|
879
|
|
|
814
|
|
|
876
|
|
|
65
|
|
|
8.0
|
%
|
|
(62
|
)
|
|
(7.1
|
)%
|
|||||
Total revenues
|
86,608
|
|
|
83,989
|
|
|
79,398
|
|
|
2,619
|
|
|
3.1
|
%
|
|
4,591
|
|
|
5.8
|
%
|
|||||
Cost of products sold
|
62,688
|
|
|
59,906
|
|
|
56,066
|
|
|
2,782
|
|
|
4.6
|
%
|
|
3,840
|
|
|
6.8
|
%
|
|||||
Goodwill impairments
|
—
|
|
|
6,149
|
|
|
181
|
|
|
(6,149
|
)
|
|
(100.0
|
)%
|
|
5,968
|
|
|
3,297.2
|
%
|
|||||
Operating expenses
|
18,127
|
|
|
17,314
|
|
|
16,593
|
|
|
813
|
|
|
4.7
|
%
|
|
721
|
|
|
4.3
|
%
|
|||||
Operating expenses as a % of total revenues
|
20.9
|
%
|
|
20.6
|
%
|
|
20.9
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Operating income
|
$
|
5,793
|
|
|
$
|
620
|
|
|
$
|
6,558
|
|
|
$
|
5,173
|
|
|
834.4
|
%
|
|
$
|
(5,938
|
)
|
|
(90.5
|
)%
|
Operating income as a % of total revenues
|
6.7
|
%
|
|
0.7
|
%
|
|
8.3
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Adjusted operating income (1)
|
$
|
6,705
|
|
|
$
|
7,403
|
|
|
$
|
7,475
|
|
|
$
|
(698
|
)
|
|
(9.4
|
)%
|
|
$
|
(72
|
)
|
|
(1.0
|
)%
|
Adjusted operating income as a % of total revenues
|
7.7
|
%
|
|
8.8
|
%
|
|
9.4
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Revenues (by major goods/service lines):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pharmacy
|
$
|
66,442
|
|
|
$
|
64,179
|
|
|
$
|
59,528
|
|
|
$
|
2,263
|
|
|
3.5
|
%
|
|
$
|
4,651
|
|
|
7.8
|
%
|
Front Store
|
19,422
|
|
|
19,055
|
|
|
18,769
|
|
|
367
|
|
|
1.9
|
%
|
|
286
|
|
|
1.5
|
%
|
|||||
Other
|
744
|
|
|
755
|
|
|
1,101
|
|
|
(11
|
)
|
|
(1.5
|
)%
|
|
(346
|
)
|
|
(31.4
|
)%
|
|||||
Prescriptions filled (2)
|
1,417.2
|
|
|
1,339.1
|
|
|
1,230.5
|
|
|
78.1
|
|
|
5.8
|
%
|
|
108.6
|
|
|
8.8
|
%
|
|||||
Revenues increase (decrease):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total
|
3.1
|
%
|
|
5.8
|
%
|
|
(2.1
|
)%
|
|
|
|
|
|
|
|
|
|||||||||
Pharmacy
|
3.5
|
%
|
|
7.8
|
%
|
|
(2.2
|
)%
|
|
|
|
|
|
|
|
|
|||||||||
Front Store
|
1.9
|
%
|
|
1.5
|
%
|
|
(1.9
|
)%
|
|
|
|
|
|
|
|
|
|||||||||
Total prescription volume increase (2)
|
5.8
|
%
|
|
8.8
|
%
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Same store sales increase (decrease): (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total
|
3.7
|
%
|
|
6.0
|
%
|
|
(2.6
|
)%
|
|
|
|
|
|
|
|
|
|||||||||
Pharmacy
|
4.5
|
%
|
|
7.9
|
%
|
|
(2.6
|
)%
|
|
|
|
|
|
|
|
|
|||||||||
Front Store
|
1.1
|
%
|
|
0.5
|
%
|
|
(2.6
|
)%
|
|
|
|
|
|
|
|
|
|||||||||
Prescription volume (2)
|
7.2
|
%
|
|
9.1
|
%
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Generic dispensing rate (2)
|
88.3
|
%
|
|
87.5
|
%
|
|
87.3
|
%
|
|
|
|
|
|
|
|
|
(1)
|
See “Segment Analysis” above in this MD&A for a reconciliation of operating income (GAAP measure) to adjusted operating income for the Retail/LTC segment.
|
(2)
|
Includes an adjustment to convert 90‑day prescriptions to the equivalent of three 30‑day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription.
|
(3)
|
Same store sales and prescription volume exclude revenues from MinuteClinic, and revenue and prescriptions from stores in Brazil and LTC operations.
|
•
|
Total revenues increased approximately $2.6 billion, or 3.1%, to $86.6 billion in 2019 compared to 2018. The increase was primarily driven by increased prescription volume and brand inflation, partially offset by continued reimbursement pressure and an increased generic dispensing rate.
|
•
|
As you review the Retail/LTC segment’s performance in this area, you should consider the following important information about the business:
|
•
|
Front store same store sales increased 1.1% in 2019 compared to 2018. The increase in front store sales in 2019 was primarily driven by increases in health and beauty product sales.
|
•
|
Pharmacy same store sales increased 4.5% in 2019 compared to 2018. The increase was primarily driven by the 7.2% increase in pharmacy same store prescription volumes on a 30-day equivalent basis driven mainly by (i) continued adoption of patient care programs, (ii) collaborations with PBMs and (iii) the Company’s preferred status in a number of Medicare Part D networks.
|
•
|
Pharmacy revenue growth continues to be adversely affected by reimbursement pressure. Pharmacy revenue growth also continues to be adversely affected by the conversion of brand name drugs to equivalent generic drugs, which typically have a lower selling price. The segment’s generic dispensing rate grew to 88.3% in 2019 compared to 87.5% in 2018.
|
•
|
Pharmacy revenue growth also continues to be adversely affected by industry challenges in the LTC business, such as continuing lower occupancy rates at skilled nursing facilities, as well as the deteriorating financial health of many skilled nursing facilities.
|
•
|
Pharmacy revenue in 2019 continued to benefit from the Company’s ability to attract and retain managed care customers and the increased use of pharmaceuticals by an aging population as the first line of defense for health care.
|
•
|
Operating expenses in the Retail/LTC segment include store payroll, store employee benefits, store occupancy costs, selling expenses, advertising expenses, depreciation and amortization expense and certain administrative expenses.
|
•
|
Operating expenses increased $813 million, or 4.7%, in 2019 compared to 2018, primarily due to the following:
|
•
|
Store rationalization charges of $231 million recorded in 2019 primarily related to operating lease right-of-use asset impairment charges in connection with the planned closure of underperforming retail pharmacy stores during the second quarter of 2019 and the first quarter of 2020;
|
•
|
The $205 million pre-tax loss on the sale of Onofre, which occurred on July 1, 2019;
|
•
|
The increased prescription volume described above; and
|
•
|
The investment of a portion of the savings from the Tax Cuts and Jobs Act (the “TCJA”) in wages and benefits.
|
•
|
Operating expenses as a percentage of total revenues were 20.9% in 2019 compared to 20.6% in 2018. The increase in operating expenses as a percentage of total revenues was primarily driven by the increases in operating expenses described above.
|
•
|
Operating income increased $5.2 billion in 2019 compared to 2018. The increase in operating income was primarily due to the absence of the $6.1 billion of pre-tax goodwill impairment charges related to the LTC reporting unit recorded in the year ended December 31, 2018, partially offset by the decrease in adjusted operating income described below, as well as the $231 million of store rationalization charges and the $205 million pre-tax loss on the sale of Onofre, both recorded in 2019.
|
•
|
Adjusted operating income decreased $698 million, or 9.4%, in 2019 compared to 2018. The decrease in adjusted operating income was primarily due to continued reimbursement pressure and increased operating expenses primarily driven by the investment of a portion of the savings from the TCJA in wages and benefits. The decrease was partially offset by increased prescription volume, an increased generic dispensing rate and improved purchasing economics.
|
•
|
As you review the Retail/LTC segment’s performance in this area, you should consider the following important information about the business:
|
•
|
The segment’s pharmacy operating income and adjusted operating income has been adversely affected by the efforts of managed care organizations, PBMs and governmental and other third-party payors to reduce their prescription drug costs, including the use of restrictive networks, as well as changes in the mix of business within the pharmacy portion of the Retail/LTC segment. If the reimbursement pressure accelerates, the segment may not be able grow revenues, and its operating income and adjusted operating income could be adversely affected.
|
•
|
The increased use of generic drugs has positively impacted the segment’s operating income and adjusted operating income but has resulted in third-party payors augmenting their efforts to reduce reimbursement payments to retail pharmacies for prescriptions. This trend, which the Company expects to continue, reduces the benefit the segment realizes from brand to generic drug conversions.
|
|
|
|
|
|
|
|
Change
|
||||||||||||||||||
|
Year Ended December 31,
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||||||||||||||||
In millions, except percentages
|
2019
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Products
|
$
|
—
|
|
|
$
|
164
|
|
|
$
|
—
|
|
|
$
|
(164
|
)
|
|
(100.0
|
)%
|
|
$
|
164
|
|
|
100.0
|
%
|
Premiums
|
63,031
|
|
|
8,180
|
|
|
3,558
|
|
|
54,851
|
|
|
670.6
|
%
|
|
4,622
|
|
|
129.9
|
%
|
|||||
Services
|
5,974
|
|
|
560
|
|
|
24
|
|
|
5,414
|
|
|
966.8
|
%
|
|
536
|
|
|
2,233.3
|
%
|
|||||
Net investment income
|
599
|
|
|
58
|
|
|
5
|
|
|
541
|
|
|
932.8
|
%
|
|
53
|
|
|
1,060.0
|
%
|
|||||
Total revenues
|
69,604
|
|
|
8,962
|
|
|
3,587
|
|
|
60,642
|
|
|
676.7
|
%
|
|
5,375
|
|
|
149.8
|
%
|
|||||
Cost of products sold
|
—
|
|
|
147
|
|
|
—
|
|
|
(147
|
)
|
|
(100.0
|
)%
|
|
147
|
|
|
100.0
|
%
|
|||||
Benefit costs
|
53,092
|
|
|
6,678
|
|
|
2,810
|
|
|
46,414
|
|
|
695.0
|
%
|
|
3,868
|
|
|
137.7
|
%
|
|||||
MBR (Benefit costs as a % of premium revenues) (1)
|
84.2
|
%
|
|
NM
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
|||||||||
Operating expenses
|
$
|
12,873
|
|
|
$
|
1,769
|
|
|
$
|
420
|
|
|
$
|
11,104
|
|
|
627.7
|
%
|
|
$
|
1,349
|
|
|
321.2
|
%
|
Operating expenses as a % of total revenues
|
18.5
|
%
|
|
19.7
|
%
|
|
11.7
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Operating income
|
$
|
3,639
|
|
|
$
|
368
|
|
|
$
|
357
|
|
|
$
|
3,271
|
|
|
888.9
|
%
|
|
$
|
11
|
|
|
3.1
|
%
|
Operating income as a % of total revenues
|
5.2
|
%
|
|
4.1
|
%
|
|
10.0
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Adjusted operating income (2)
|
$
|
5,202
|
|
|
$
|
528
|
|
|
$
|
359
|
|
|
$
|
4,674
|
|
|
885.2
|
%
|
|
$
|
169
|
|
|
47.1
|
%
|
Adjusted operating income as a % of total revenues
|
7.5
|
%
|
|
5.9
|
%
|
|
10.0
|
%
|
|
|
|
|
|
|
|
|
(1)
|
For periods prior to the Aetna Acquisition Date, the Health Care Benefits segment was comprised of the Company’s SilverScript PDP business. Accordingly, the MBR for the years ended December 31, 2018 and 2017 are not meaningful (“NM”) and are not directly comparable to the MBRs for the year ended December 31, 2019.
|
(2)
|
See “Segment Analysis” above in this MD&A for a reconciliation of operating income (GAAP measure) to adjusted operating income for the Health Care Benefits segment.
|
•
|
Total revenues increased $60.6 billion in 2019 compared to 2018 primarily due to the Aetna Acquisition.
|
•
|
Operating expenses in the Health Care Benefits segment include selling, general and administrative expenses and depreciation and amortization expenses.
|
•
|
Operating expenses increased $11.1 billion in 2019 compared to 2018 primarily due to the Aetna Acquisition (including the amortization of intangible assets).
|
•
|
Operating income increased $3.3 billion and adjusted operating income increased $4.7 billion in 2019 compared to 2018. The increases were primarily due to the Aetna Acquisition. The increase in operating income was partially offset by increased intangible asset amortization related to the Aetna Acquisition.
|
(1)
|
Represents the Company’s SilverScript PDP membership only. Excludes 2.5 million and 2.3 million members as of December 31, 2019 and 2018, respectively, related to Aetna’s standalone PDPs that were sold effective December 31, 2018. The Company retained the financial results of the divested plans through 2019 through a reinsurance agreement. Subsequent to 2019, the Company will no longer retain the financial results of the divested plans.
|
•
|
Total revenues decreased $94 million in 2019 compared to 2018.
|
•
|
In 2019, revenues relate to products for which the Company no longer solicits or accepts new customers, such as large case pensions and long-term care insurance products, that were acquired in the Aetna Acquisition. Revenues in 2019 include $104 million of net realized capital gains, primarily related to the sale of debt securities and other invested assets that support these insurance products. In 2018, revenues relate to interest income on the proceeds from the financing of the Aetna Acquisition.
|
•
|
Operating expenses within the Corporate/Other segment include certain aspects of costs related to executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments, expenses associated with the Company’s investments in its transformation and Enterprise modernization programs and acquisition-related transaction and integration costs. After the Aetna Acquisition Date, such operating expenses also include operating costs to support the large case pensions and long-term care insurance products acquired in the Aetna Acquisition.
|
•
|
Operating expenses increased $321 million in 2019 compared to 2018. The increase was primarily driven by growth in the business, incremental operating expenses associated with the Company’s investments in transformation and Enterprise modernization, legal costs and a $30 million charitable contribution to the CVS Health Foundation in 2019.
|
|
|
|
|
|
|
|
Change
|
||||||||||||||||||
|
Year Ended December 31,
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||||||||||||||||
In millions
|
2019
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Net cash provided by operating activities
|
$
|
12,848
|
|
|
$
|
8,865
|
|
|
$
|
8,007
|
|
|
$
|
3,983
|
|
|
44.9
|
%
|
|
$
|
858
|
|
|
10.7
|
%
|
Net cash used in investing activities
|
(3,339
|
)
|
|
(43,285
|
)
|
|
(2,877
|
)
|
|
39,946
|
|
|
(92.3
|
)%
|
|
(40,408
|
)
|
|
1,404.5
|
%
|
|||||
Net cash provided by (used in) financing activities
|
(7,850
|
)
|
|
36,819
|
|
|
(6,751
|
)
|
|
(44,669
|
)
|
|
(121.3
|
)%
|
|
43,570
|
|
|
(645.4
|
)%
|
|||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
—
|
|
|
(4
|
)
|
|
1
|
|
|
4
|
|
|
(100.0
|
)%
|
|
(5
|
)
|
|
(500.0
|
)%
|
|||||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
$
|
1,659
|
|
|
$
|
2,395
|
|
|
$
|
(1,620
|
)
|
|
$
|
(736
|
)
|
|
(30.7
|
)%
|
|
$
|
4,015
|
|
|
(247.8
|
)%
|
•
|
Net cash provided by operating activities increased by $4.0 billion in 2019 compared to 2018 due primarily to the Aetna Acquisition as well as improvements in working capital, including the timing of certain payables and receipts.
|
•
|
Net cash used in investing activities decreased by $39.9 billion in 2019 compared to 2018 largely due to the Aetna Acquisition in November 2018. The decrease was partially offset by the absence of the $725 million in proceeds from the sale of RxCrossroads in 2018 and net purchases of investments in 2019 compared to net sales of investments in 2018.
|
•
|
Net cash used in financing activities was $7.9 billion in 2019 compared to net cash provided by financing activities of $36.8 billion in 2018. The decrease in cash provided by financing activities primarily related to long-term borrowings during 2018 to partially fund the Aetna Acquisition, as well as debt repayments during 2019 including (i) the repayment of $4.0 billion of outstanding senior notes pursuant to tender offers for such outstanding senior notes, (ii) the repayment of the remaining $3.0 billion of the term loan used to partially fund the Aetna Acquisition and (iii) the repayment of $1.2 billion aggregate principal amount of senior notes upon maturity. The decrease was partially offset by the issuance of $3.5 billion of senior notes in 2019.
|
|
2019
|
|
2018
|
|
2017
|
|||
Total stores (beginning of year)
|
9,967
|
|
|
9,846
|
|
|
9,750
|
|
New and acquired stores (2)
|
102
|
|
|
148
|
|
|
179
|
|
Closed stores (2)
|
(128
|
)
|
|
(27
|
)
|
|
(83
|
)
|
Total stores (end of year)
|
9,941
|
|
|
9,967
|
|
|
9,846
|
|
Relocated stores (2)
|
23
|
|
|
34
|
|
|
30
|
|
(1)
|
Includes retail drugstores, certain onsite pharmacy stores, retail specialty pharmacy stores and pharmacies within Target stores.
|
(2)
|
Relocated stores are not included in new and acquired stores or closed stores totals.
|
In millions
|
|
||
3.125% senior notes due March 2020
|
$
|
2,000
|
|
Floating rate notes due March 2020
|
1,000
|
|
|
3.35% senior notes due March 2021
|
3,000
|
|
|
Floating rate notes due March 2021
|
1,000
|
|
|
3.7% senior notes due March 2023
|
6,000
|
|
|
4.1% senior notes due March 2025
|
5,000
|
|
|
4.3% senior notes due March 2028
|
9,000
|
|
|
4.78% senior notes due March 2038
|
5,000
|
|
|
5.05% senior notes due March 2048
|
8,000
|
|
|
Total debt principal
|
$
|
40,000
|
|
|
Payments Due by Period
|
||||||||||||||||||
In millions
|
Total
|
|
2020
|
|
2021 to 2022
|
|
2023 to 2024
|
|
Thereafter
|
||||||||||
Operating lease liabilities
|
$
|
27,833
|
|
|
$
|
2,699
|
|
|
$
|
5,042
|
|
|
$
|
4,438
|
|
|
$
|
15,654
|
|
Finance lease liabilities
|
1,454
|
|
|
84
|
|
|
161
|
|
|
153
|
|
|
1,056
|
|
|||||
Contractual lease obligations with Target (1)
|
2,218
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,218
|
|
|||||
Lease obligations for discontinued operations
|
8
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|||||
Long-term debt
|
68,438
|
|
|
3,754
|
|
|
9,557
|
|
|
11,258
|
|
|
43,869
|
|
|||||
Interest payments on long-term debt (2)
|
35,343
|
|
|
2,751
|
|
|
5,076
|
|
|
4,299
|
|
|
23,217
|
|
|||||
Other long-term liabilities on the consolidated balance sheets (3)
|
|
|
|
|
|
|
|
|
|
||||||||||
Future policy benefits (4)
|
6,127
|
|
|
508
|
|
|
937
|
|
|
809
|
|
|
3,873
|
|
|||||
Unpaid claims (4)
|
2,522
|
|
|
705
|
|
|
514
|
|
|
346
|
|
|
957
|
|
|||||
Policyholders’ funds (4) (5)
|
1,156
|
|
|
553
|
|
|
137
|
|
|
85
|
|
|
381
|
|
|||||
Other liabilities
|
1,540
|
|
|
426
|
|
|
801
|
|
|
89
|
|
|
224
|
|
|||||
Total
|
$
|
146,639
|
|
|
$
|
11,484
|
|
|
$
|
22,229
|
|
|
$
|
21,477
|
|
|
$
|
91,449
|
|
(1)
|
The Company leases pharmacy and clinic space from Target Corporation (“Target”). See Note 6 ‘‘Leases’’ included in Item 8 of this 10-K for additional information regarding the lease arrangements with Target. Amounts related to such operating and finance leases are reflected within the operating lease liabilities and finance lease liabilities in the table above. Pharmacy lease amounts due in excess of the remaining estimated economic life of the buildings are reflected in the table above assuming equivalent stores continue to operate through the term of the arrangements.
|
(2)
|
Interest payments on long-term debt are calculated using outstanding balances and interest rates in effect on December 31, 2019.
|
(3)
|
Payments of other long-term liabilities exclude Separate Accounts liabilities of approximately $4.5 billion because these liabilities are supported by assets that are legally segregated and are not subject to claims that arise out of the Company’s business.
|
(4)
|
Total payments of future policy benefits, unpaid claims and policyholders’ funds include $807 million, $2.5 billion and $291 million, respectively, of reserves for contracts subject to reinsurance. The Company expects the assuming reinsurance carrier to fund these obligations and has reflected these amounts as reinsurance recoverable assets on the consolidated balance sheets.
|
(5)
|
Customer funds associated with group life and health contracts of approximately $2.4 billion have been excluded from the table above because such funds may be used primarily at the customer’s discretion to offset future premiums and/or for refunds, and the timing of the related cash flows cannot be determined. Additionally, net unrealized capital gains on debt securities supporting experience-rated products of $83 million, before tax, have been excluded from the table above.
|
•
|
Revenues generated from prescription drugs sold by mail service dispensing pharmacies are recognized when the prescription drug is delivered to the client plan member. At the time of delivery, the Company has performed substantially all of its performance obligations under its client contracts and does not experience a significant level of returns or reshipments.
|
•
|
Revenues generated from prescription drugs sold by third party pharmacies in the Company’s retail pharmacy network and associated administrative fees are recognized at the Company’s point-of-sale, which is when the claim is adjudicated by the Company’s online claims processing system and the Company has transferred control of the prescription drug and performed all of its performance obligations.
|
•
|
ASC fees are received in exchange for performing certain claim processing and member services for ASC members. ASC fee revenue is recognized over the period the service is provided. Some of the Company’s administrative services contracts include guarantees with respect to certain functions, such as customer service response time, claim processing accuracy and claim processing turnaround time, as well as certain guarantees that a plan sponsor’s benefit claim experience will fall within a certain range. With any of these guarantees, the Company is financially at risk if the conditions of the arrangements are not met, although the maximum amount at risk typically is limited to a percentage of the fees otherwise payable to the Company by the customer involved. Each period the Company estimates its obligations under the terms of these guarantees and records its estimate as an offset to services revenues.
|
•
|
Workers’ compensation administrative services consist of fee-based managed care services. Workers’ compensation administrative services revenue is recognized once the service is provided.
|
In millions
|
2019
|
|
2018
|
||||
Experience-rated products
|
$
|
1,100
|
|
|
$
|
1,063
|
|
Remaining products
|
18,587
|
|
|
17,191
|
|
||
Total investments
|
$
|
19,687
|
|
|
$
|
18,254
|
|
•
|
The fair value of long-term debt would decline by approximately $4.5 billion ($5.7 billion pretax). Changes in the fair value of long-term debt do not impact the Company’s operating results or financial condition.
|
•
|
The theoretical reduction in the fair value of investment securities partially offset by the theoretical reduction in the fair value of interest rate sensitive liabilities would result in a net decline in fair value of approximately $420 million ($530 million pretax) related to continuing non-experience-rated products. Reductions in the fair value of investment securities would be reflected as an unrealized loss in equity, as the Company classifies these securities as available for sale. The Company does not record liabilities at fair value.
|
|
Page
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
||||||||||
In millions, except per share amounts
|
2019
|
|
2018
|
|
2017
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Products
|
$
|
185,236
|
|
|
$
|
183,910
|
|
|
$
|
180,063
|
|
Premiums
|
63,122
|
|
|
8,184
|
|
|
3,558
|
|
|||
Services
|
7,407
|
|
|
1,825
|
|
|
1,144
|
|
|||
Net investment income
|
1,011
|
|
|
660
|
|
|
21
|
|
|||
Total revenues
|
256,776
|
|
|
194,579
|
|
|
184,786
|
|
|||
Operating costs:
|
|
|
|
|
|
||||||
Cost of products sold
|
158,719
|
|
|
156,447
|
|
|
153,448
|
|
|||
Benefit costs
|
52,529
|
|
|
6,594
|
|
|
2,810
|
|
|||
Goodwill impairments
|
—
|
|
|
6,149
|
|
|
181
|
|
|||
Operating expenses
|
33,541
|
|
|
21,368
|
|
|
18,809
|
|
|||
Total operating costs
|
244,789
|
|
|
190,558
|
|
|
175,248
|
|
|||
Operating income
|
11,987
|
|
|
4,021
|
|
|
9,538
|
|
|||
Interest expense
|
3,035
|
|
|
2,619
|
|
|
1,062
|
|
|||
Loss on early extinguishment of debt
|
79
|
|
|
—
|
|
|
—
|
|
|||
Other expense (income)
|
(124
|
)
|
|
(4
|
)
|
|
208
|
|
|||
Income before income tax provision
|
8,997
|
|
|
1,406
|
|
|
8,268
|
|
|||
Income tax provision
|
2,366
|
|
|
2,002
|
|
|
1,637
|
|
|||
Income (loss) from continuing operations
|
6,631
|
|
|
(596
|
)
|
|
6,631
|
|
|||
Loss from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
(8
|
)
|
|||
Net income (loss)
|
6,631
|
|
|
(596
|
)
|
|
6,623
|
|
|||
Net (income) loss attributable to noncontrolling interests
|
3
|
|
|
2
|
|
|
(1
|
)
|
|||
Net income (loss) attributable to CVS Health
|
$
|
6,634
|
|
|
$
|
(594
|
)
|
|
$
|
6,622
|
|
|
|
|
|
|
|
||||||
Basic earnings (loss) per share:
|
|
|
|
|
|
||||||
Income (loss) from continuing operations attributable to CVS Health
|
$
|
5.10
|
|
|
$
|
(0.57
|
)
|
|
$
|
6.48
|
|
Loss from discontinued operations attributable to CVS Health
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
Net income (loss) attributable to CVS Health
|
$
|
5.10
|
|
|
$
|
(0.57
|
)
|
|
$
|
6.47
|
|
Weighted average basic shares outstanding
|
1,301
|
|
|
1,044
|
|
|
1,020
|
|
|||
Diluted earnings (loss) per share:
|
|
|
|
|
|
||||||
Income (loss) from continuing operations attributable to CVS Health
|
$
|
5.08
|
|
|
$
|
(0.57
|
)
|
|
$
|
6.45
|
|
Loss from discontinued operations attributable to CVS Health
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
Net income (loss) attributable to CVS Health
|
$
|
5.08
|
|
|
$
|
(0.57
|
)
|
|
$
|
6.44
|
|
Weighted average diluted shares outstanding
|
1,305
|
|
|
1,044
|
|
|
1,024
|
|
|||
Dividends declared per share
|
$
|
2.00
|
|
|
$
|
2.00
|
|
|
$
|
2.00
|
|
|
For the Years Ended December 31,
|
||||||||||
In millions
|
2019
|
|
2018
|
|
2017
|
||||||
Net income (loss)
|
$
|
6,631
|
|
|
$
|
(596
|
)
|
|
$
|
6,623
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
||||||
Net unrealized investment gains
|
677
|
|
|
97
|
|
|
—
|
|
|||
Foreign currency translation adjustments
|
162
|
|
|
(29
|
)
|
|
(2
|
)
|
|||
Net cash flow hedges
|
(33
|
)
|
|
330
|
|
|
(10
|
)
|
|||
Pension and other postretirement benefits
|
111
|
|
|
(124
|
)
|
|
152
|
|
|||
Other comprehensive income
|
917
|
|
|
274
|
|
|
140
|
|
|||
Comprehensive income (loss)
|
7,548
|
|
|
(322
|
)
|
|
6,763
|
|
|||
Comprehensive (income) loss attributable to noncontrolling interests
|
3
|
|
|
2
|
|
|
(1
|
)
|
|||
Comprehensive income (loss) attributable to CVS Health
|
$
|
7,551
|
|
|
$
|
(320
|
)
|
|
$
|
6,762
|
|
|
At December 31,
|
||||||
In millions, except per share amounts
|
2019
|
|
2018
|
||||
Assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
5,683
|
|
|
$
|
4,059
|
|
Investments
|
2,373
|
|
|
2,522
|
|
||
Accounts receivable, net
|
19,617
|
|
|
17,631
|
|
||
Inventories
|
17,516
|
|
|
16,450
|
|
||
Other current assets
|
5,113
|
|
|
4,581
|
|
||
Total current assets
|
50,302
|
|
|
45,243
|
|
||
Long-term investments
|
17,314
|
|
|
15,732
|
|
||
Property and equipment, net
|
12,044
|
|
|
11,349
|
|
||
Operating lease right-of-use assets
|
20,860
|
|
|
—
|
|
||
Goodwill
|
79,749
|
|
|
78,678
|
|
||
Intangible assets, net
|
33,121
|
|
|
36,524
|
|
||
Separate accounts assets
|
4,459
|
|
|
3,884
|
|
||
Other assets
|
4,600
|
|
|
5,046
|
|
||
Total assets
|
$
|
222,449
|
|
|
$
|
196,456
|
|
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
10,492
|
|
|
$
|
8,925
|
|
Pharmacy claims and discounts payable
|
13,601
|
|
|
11,365
|
|
||
Health care costs payable
|
6,879
|
|
|
6,147
|
|
||
Policyholders’ funds
|
2,991
|
|
|
2,939
|
|
||
Accrued expenses
|
12,133
|
|
|
10,711
|
|
||
Other insurance liabilities
|
1,830
|
|
|
1,937
|
|
||
Current portion of operating lease liabilities
|
1,596
|
|
|
—
|
|
||
Short-term debt
|
—
|
|
|
720
|
|
||
Current portion of long-term debt
|
3,781
|
|
|
1,265
|
|
||
Total current liabilities
|
53,303
|
|
|
44,009
|
|
||
Long-term operating lease liabilities
|
18,926
|
|
|
—
|
|
||
Long-term debt
|
64,699
|
|
|
71,444
|
|
||
Deferred income taxes
|
7,294
|
|
|
7,677
|
|
||
Separate accounts liabilities
|
4,459
|
|
|
3,884
|
|
||
Other long-term insurance liabilities
|
7,436
|
|
|
8,119
|
|
||
Other long-term liabilities
|
2,162
|
|
|
2,780
|
|
||
Total liabilities
|
158,279
|
|
|
137,913
|
|
||
Commitments and contingencies (Note 16)
|
|
|
|
|
|
||
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
||||
Preferred stock, par value $0.01: 0.1 shares authorized; none issued or outstanding
|
—
|
|
|
—
|
|
||
Common stock, par value $0.01: 3,200 shares authorized; 1,727 shares issued and 1,302 shares outstanding at December 31, 2019 and 1,720 shares issued and 1,295 shares outstanding at December 31, 2018 and capital surplus
|
45,972
|
|
|
45,440
|
|
||
Treasury stock, at cost: 425 shares at both December 31, 2019 and 2018
|
(28,235
|
)
|
|
(28,228
|
)
|
||
Retained earnings
|
45,108
|
|
|
40,911
|
|
||
Accumulated other comprehensive income
|
1,019
|
|
|
102
|
|
||
Total CVS Health shareholders’ equity
|
63,864
|
|
|
58,225
|
|
||
Noncontrolling interests
|
306
|
|
|
318
|
|
||
Total shareholders’ equity
|
64,170
|
|
|
58,543
|
|
||
Total liabilities and shareholders’ equity
|
$
|
222,449
|
|
|
$
|
196,456
|
|
|
For the Years Ended December 31,
|
||||||||||
In millions
|
2019
|
|
2018
|
|
2017
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Cash receipts from customers
|
$
|
248,393
|
|
|
$
|
186,519
|
|
|
$
|
176,594
|
|
Cash paid for inventory and prescriptions dispensed by retail network pharmacies
|
(149,655
|
)
|
|
(148,981
|
)
|
|
(146,469
|
)
|
|||
Insurance benefits paid
|
(52,242
|
)
|
|
(6,897
|
)
|
|
(2,810
|
)
|
|||
Cash paid to other suppliers and employees
|
(28,932
|
)
|
|
(17,234
|
)
|
|
(15,348
|
)
|
|||
Interest and investment income received
|
955
|
|
|
644
|
|
|
21
|
|
|||
Interest paid
|
(2,954
|
)
|
|
(2,803
|
)
|
|
(1,072
|
)
|
|||
Income taxes paid
|
(2,717
|
)
|
|
(2,383
|
)
|
|
(2,909
|
)
|
|||
Net cash provided by operating activities
|
12,848
|
|
|
8,865
|
|
|
8,007
|
|
|||
|
|
|
|
|
|
||||||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Proceeds from sales and maturities of investments
|
7,049
|
|
|
817
|
|
|
61
|
|
|||
Purchases of investments
|
(7,534
|
)
|
|
(692
|
)
|
|
(137
|
)
|
|||
Purchases of property and equipment
|
(2,457
|
)
|
|
(2,037
|
)
|
|
(1,918
|
)
|
|||
Proceeds from sale-leaseback transactions
|
5
|
|
|
—
|
|
|
265
|
|
|||
Acquisitions (net of cash acquired)
|
(444
|
)
|
|
(42,226
|
)
|
|
(1,181
|
)
|
|||
Proceeds from sale of subsidiary and other assets
|
—
|
|
|
832
|
|
|
—
|
|
|||
Other
|
42
|
|
|
21
|
|
|
33
|
|
|||
Net cash used in investing activities
|
(3,339
|
)
|
|
(43,285
|
)
|
|
(2,877
|
)
|
|||
|
|
|
|
|
|
||||||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Net repayments of short-term debt
|
(720
|
)
|
|
(556
|
)
|
|
(598
|
)
|
|||
Proceeds from issuance of long-term debt
|
3,736
|
|
|
44,343
|
|
|
—
|
|
|||
Repayments of long-term debt
|
(8,336
|
)
|
|
(5,522
|
)
|
|
—
|
|
|||
Derivative settlements
|
(25
|
)
|
|
446
|
|
|
—
|
|
|||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
(4,361
|
)
|
|||
Dividends paid
|
(2,603
|
)
|
|
(2,038
|
)
|
|
(2,049
|
)
|
|||
Proceeds from exercise of stock options
|
210
|
|
|
242
|
|
|
329
|
|
|||
Payments for taxes related to net share settlement of equity awards
|
(112
|
)
|
|
(97
|
)
|
|
(71
|
)
|
|||
Other
|
—
|
|
|
1
|
|
|
(1
|
)
|
|||
Net cash provided by (used in) financing activities
|
(7,850
|
)
|
|
36,819
|
|
|
(6,751
|
)
|
|||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
—
|
|
|
(4
|
)
|
|
1
|
|
|||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
1,659
|
|
|
2,395
|
|
|
(1,620
|
)
|
|||
Cash, cash equivalents and restricted cash at the beginning of the period
|
4,295
|
|
|
1,900
|
|
|
3,520
|
|
|||
Cash, cash equivalents and restricted cash at the end of the period
|
$
|
5,954
|
|
|
$
|
4,295
|
|
|
$
|
1,900
|
|
|
For the Years Ended December 31,
|
||||||||||
In millions
|
2019
|
|
2018
|
|
2017
|
||||||
Reconciliation of net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
6,631
|
|
|
$
|
(596
|
)
|
|
$
|
6,623
|
|
Adjustments required to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
4,371
|
|
|
2,718
|
|
|
2,479
|
|
|||
Goodwill impairments
|
—
|
|
|
6,149
|
|
|
181
|
|
|||
Loss on settlement of defined benefit pension plans
|
—
|
|
|
—
|
|
|
187
|
|
|||
Stock-based compensation
|
453
|
|
|
280
|
|
|
234
|
|
|||
Loss on sale of subsidiary
|
205
|
|
|
86
|
|
|
—
|
|
|||
Loss on early extinguishment of debt
|
79
|
|
|
—
|
|
|
—
|
|
|||
Deferred income taxes
|
(654
|
)
|
|
87
|
|
|
(1,334
|
)
|
|||
Other noncash items
|
264
|
|
|
253
|
|
|
53
|
|
|||
Change in operating assets and liabilities, net of effects from acquisitions:
|
|
|
|
|
|
||||||
Accounts receivable, net
|
(2,158
|
)
|
|
(1,139
|
)
|
|
(941
|
)
|
|||
Inventories
|
(1,075
|
)
|
|
(1,153
|
)
|
|
(514
|
)
|
|||
Other assets
|
(614
|
)
|
|
(3
|
)
|
|
(338
|
)
|
|||
Accounts payable and pharmacy claims and discounts payable
|
3,550
|
|
|
2,329
|
|
|
1,710
|
|
|||
Health care costs payable and other insurance liabilities
|
320
|
|
|
(311
|
)
|
|
—
|
|
|||
Other liabilities
|
1,476
|
|
|
165
|
|
|
(333
|
)
|
|||
Net cash provided by operating activities
|
$
|
12,848
|
|
|
$
|
8,865
|
|
|
$
|
8,007
|
|
|
|
|
Attributable to CVS Health
|
|
|
|||||||||||||||||||||
|
Number of shares outstanding
|
|
Common
Stock and
Capital
Surplus (2)
|
|
|
Accumulated
Other Comprehensive
Income (Loss)
|
Total
CVS Health Shareholders’
Equity
|
|
Total Shareholders’
Equity
|
|||||||||||||||||
In millions
|
Common
Shares
|
Treasury
Shares (1)
|
|
Treasury
Stock (1)
|
Retained
Earnings
|
Noncontrolling
Interests
|
||||||||||||||||||||
Balance at December 31, 2016
|
1,705
|
|
(644
|
)
|
|
$
|
31,635
|
|
$
|
(33,483
|
)
|
$
|
38,983
|
|
$
|
(305
|
)
|
$
|
36,830
|
|
$
|
4
|
|
$
|
36,834
|
|
Net income
|
—
|
|
—
|
|
|
—
|
|
—
|
|
6,622
|
|
—
|
|
6,622
|
|
1
|
|
6,623
|
|
|||||||
Other comprehensive income (Note 13)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
140
|
|
140
|
|
—
|
|
140
|
|
|||||||
Stock option activity, stock awards and other
|
7
|
|
—
|
|
|
461
|
|
—
|
|
—
|
|
—
|
|
461
|
|
—
|
|
461
|
|
|||||||
Purchase of treasury shares, net of ESPP issuances
|
—
|
|
(54
|
)
|
|
—
|
|
(4,313
|
)
|
—
|
|
—
|
|
(4,313
|
)
|
—
|
|
(4,313
|
)
|
|||||||
Common stock dividends
|
—
|
|
—
|
|
|
—
|
|
—
|
|
(2,049
|
)
|
—
|
|
(2,049
|
)
|
—
|
|
(2,049
|
)
|
|||||||
Other decreases in noncontrolling interests
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1
|
)
|
(1
|
)
|
|||||||
Balance at December 31, 2017
|
1,712
|
|
(698
|
)
|
|
32,096
|
|
(37,796
|
)
|
43,556
|
|
(165
|
)
|
37,691
|
|
4
|
|
37,695
|
|
|||||||
Adoption of new accounting standards (3)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
(6
|
)
|
(7
|
)
|
(13
|
)
|
—
|
|
(13
|
)
|
|||||||
Net loss
|
—
|
|
—
|
|
|
—
|
|
—
|
|
(594
|
)
|
—
|
|
(594
|
)
|
(2
|
)
|
(596
|
)
|
|||||||
Other comprehensive income (Note 13)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
274
|
|
274
|
|
—
|
|
274
|
|
|||||||
Common shares issued to acquire Aetna
|
—
|
|
274
|
|
|
12,923
|
|
9,561
|
|
—
|
|
—
|
|
22,484
|
|
—
|
|
22,484
|
|
|||||||
Stock option activity, stock awards and other
|
8
|
|
—
|
|
|
421
|
|
—
|
|
—
|
|
—
|
|
421
|
|
—
|
|
421
|
|
|||||||
Purchase of treasury shares, net of ESPP issuances
|
—
|
|
(1
|
)
|
|
—
|
|
7
|
|
—
|
|
—
|
|
7
|
|
—
|
|
7
|
|
|||||||
Common stock dividends
|
—
|
|
—
|
|
|
—
|
|
—
|
|
(2,045
|
)
|
—
|
|
(2,045
|
)
|
—
|
|
(2,045
|
)
|
|||||||
Acquisition of noncontrolling interests
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
329
|
|
329
|
|
|||||||
Other decreases in noncontrolling interests
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(13
|
)
|
(13
|
)
|
|||||||
Balance at December 31, 2018
|
1,720
|
|
(425
|
)
|
|
45,440
|
|
(28,228
|
)
|
40,911
|
|
102
|
|
58,225
|
|
318
|
|
58,543
|
|
|||||||
Adoption of new accounting standards (Note 1)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
178
|
|
—
|
|
178
|
|
—
|
|
178
|
|
|||||||
Net income (loss)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
6,634
|
|
—
|
|
6,634
|
|
(3
|
)
|
6,631
|
|
|||||||
Other comprehensive income (Note 13)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
917
|
|
917
|
|
—
|
|
917
|
|
|||||||
Stock option activity, stock awards and other
|
7
|
|
2
|
|
|
532
|
|
—
|
|
—
|
|
—
|
|
532
|
|
—
|
|
532
|
|
|||||||
Purchase of treasury shares, net of ESPP issuances
|
—
|
|
(2
|
)
|
|
—
|
|
(7
|
)
|
—
|
|
—
|
|
(7
|
)
|
—
|
|
(7
|
)
|
|||||||
Common stock dividends
|
—
|
|
—
|
|
|
—
|
|
—
|
|
(2,615
|
)
|
—
|
|
(2,615
|
)
|
—
|
|
(2,615
|
)
|
|||||||
Other decreases in noncontrolling interests
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(9
|
)
|
(9
|
)
|
|||||||
Balance at December 31, 2019
|
1,727
|
|
(425
|
)
|
|
$
|
45,972
|
|
$
|
(28,235
|
)
|
$
|
45,108
|
|
$
|
1,019
|
|
$
|
63,864
|
|
$
|
306
|
|
$
|
64,170
|
|
(1)
|
Treasury shares include 1 million shares held in trust for each of the years ended December 31, 2019, 2018 and 2017. Treasury stock includes $29 million related to shares held in trust for each of the years ended December 31, 2019 and 2018 and $31 million related to shares held in trust for the year ended December 31, 2017. See Note 1 ‘‘Significant Accounting Policies’’ for additional information.
|
(2)
|
Common stock and capital surplus includes the par value of common stock of $17 million as of December 31, 2019, 2018 and 2017.
|
(3)
|
Reflects the adoption of Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which resulted in a reduction to retained earnings of $13 million and the adoption of ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which resulted in a reduction to accumulated other comprehensive income of $7 million and an increase to retained earnings of $7 million, each during the year ended December 31, 2018.
|
1.
|
Significant Accounting Policies
|
•
|
Management and administrative expenses to support the overall operations of the Company, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments, expenses associated with the Company’s investments in its transformation and Enterprise modernization programs and acquisition-related transaction and integration costs; and
|
•
|
Products for which the Company no longer solicits or accepts new customers such as its large case pensions and long-term care insurance products.
|
In millions
|
2019
|
|
2018
|
|
2017
|
||||||
Cash and cash equivalents
|
$
|
5,683
|
|
|
$
|
4,059
|
|
|
$
|
1,696
|
|
Restricted cash (included in other current assets)
|
—
|
|
|
6
|
|
|
14
|
|
|||
Restricted cash (included in other assets)
|
271
|
|
|
230
|
|
|
190
|
|
|||
Total cash, cash equivalents and restricted cash at the end of the period in the consolidated statements of cash flows
|
$
|
5,954
|
|
|
$
|
4,295
|
|
|
$
|
1,900
|
|
•
|
Private equity and hedge fund limited partnerships, which are accounted for using the equity method of accounting. Under this method, the carrying value of the investment is based on the value of the Company’s equity ownership of the underlying investment funds provided by the general partner or manager of the investments, the financial statements of which generally are audited. As a result of the timing of the receipt of the valuation information provided by the fund managers, these investments are generally reported on up to a three month lag. The Company reviews investments for impairment at least quarterly and monitors their performance throughout the year through discussions with the administrators, managers and/or general partners. If the Company becomes aware of an impairment of a limited partnership’s investments through its review or prior to receiving the limited partnership’s financial statements at the
|
•
|
Investment real estate, which is carried on the consolidated balance sheets at depreciated cost, including capital additions, net of write-downs for other-than-temporary declines in fair value. Depreciation is calculated using the straight-line method based on the estimated useful life of each asset. If any real estate investment is considered held-for-sale, it is carried at the lower of its carrying value or fair value less estimated selling costs. The Company generally estimates fair value using a discounted future cash flow analysis in conjunction with comparable sales information. At the time of the sale, the difference between the sales price and the carrying value is recorded as a realized capital gain or loss.
|
•
|
Privately-placed equity securities, which are carried on the consolidated balance sheets at cost less impairments, plus or minus subsequent adjustments for observable price changes. Additionally, as a member of the Federal Home Loan Bank of Boston (“FHLBB”), a subsidiary of the Company is required to purchase and hold shares of the FHLBB. These shares are restricted and carried at cost.
|
In millions
|
2019
|
|
2018
|
||||
Trade receivables
|
$
|
6,717
|
|
|
$
|
6,497
|
|
Vendor and manufacturer receivables
|
7,856
|
|
|
7,315
|
|
||
Premium receivables
|
2,663
|
|
|
2,259
|
|
||
Other receivables
|
2,381
|
|
|
1,560
|
|
||
Total accounts receivable, net
|
$
|
19,617
|
|
|
$
|
17,631
|
|
In millions
|
2019
|
|
2018
|
|
2017
|
||||||
Beginning balance
|
$
|
287
|
|
|
$
|
162
|
|
|
$
|
158
|
|
Additions charged to bad debt expense
|
111
|
|
|
162
|
|
|
139
|
|
|||
Write-offs charged to allowance
|
(79
|
)
|
|
(37
|
)
|
|
(135
|
)
|
|||
Ending balance
|
$
|
319
|
|
|
$
|
287
|
|
|
$
|
162
|
|
In millions
|
2019
|
|
2018
|
||||
Land
|
$
|
1,981
|
|
|
$
|
1,872
|
|
Building and improvements
|
4,068
|
|
|
3,785
|
|
||
Fixtures and equipment
|
13,807
|
|
|
13,028
|
|
||
Leasehold improvements
|
5,611
|
|
|
5,384
|
|
||
Software
|
3,467
|
|
|
2,800
|
|
||
Total property and equipment
|
28,934
|
|
|
26,869
|
|
||
Accumulated depreciation and amortization
|
(16,890
|
)
|
|
(15,520
|
)
|
||
Property and equipment, net
|
$
|
12,044
|
|
|
$
|
11,349
|
|
•
|
Revenues generated from prescription drugs sold by mail service dispensing pharmacies are recognized when the prescription drug is delivered to the client plan member. At the time of delivery, the Company has performed substantially all of its performance obligations under its client contracts and does not experience a significant level of returns or reshipments.
|
•
|
Revenues generated from prescription drugs sold by third party pharmacies in the Company’s retail pharmacy network and associated administrative fees are recognized at the Company’s point-of-sale, which is when the claim is adjudicated by the Company’s online claims processing system and the Company has transferred control of the prescription drug and performed all of its performance obligations.
|
•
|
ASC fees are received in exchange for performing certain claim processing and member services for ASC members. ASC fee revenue is recognized over the period the service is provided. Some of the Company’s administrative services contracts include guarantees with respect to certain functions, such as customer service response time, claim processing accuracy and claim processing turnaround time, as well as certain guarantees that a plan sponsor’s benefit claim experience will fall within a certain range. With any of these guarantees, the Company is financially at risk if the conditions of the arrangements are not met, although the maximum amount at risk typically is limited to a percentage of the fees otherwise payable to the Company by the customer involved. Each period the Company estimates its obligations under the terms of these guarantees and records its estimate as an offset to services revenues.
|
•
|
Workers’ compensation administrative services consist of fee-based managed care services. Workers’ compensation administrative services revenue is recognized once the service is provided.
|
In millions
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Health Care
Benefits
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
||||||||||||
2019
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Major goods/services lines:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pharmacy
|
$
|
140,896
|
|
|
$
|
66,442
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(41,439
|
)
|
|
$
|
165,899
|
|
Front Store
|
—
|
|
|
19,422
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,422
|
|
||||||
Premiums
|
—
|
|
|
—
|
|
|
63,031
|
|
|
91
|
|
|
—
|
|
|
63,122
|
|
||||||
Net investment income
|
—
|
|
|
—
|
|
|
599
|
|
|
412
|
|
|
—
|
|
|
1,011
|
|
||||||
Other
|
595
|
|
|
744
|
|
|
5,974
|
|
|
9
|
|
|
—
|
|
|
7,322
|
|
||||||
Total
|
$
|
141,491
|
|
|
$
|
86,608
|
|
|
$
|
69,604
|
|
|
$
|
512
|
|
|
$
|
(41,439
|
)
|
|
$
|
256,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pharmacy Services distribution channel:
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Pharmacy network (1)
|
$
|
88,755
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Mail choice (2)
|
52,141
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other
|
595
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total
|
$
|
141,491
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2018
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Major goods/services lines:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pharmacy
|
$
|
134,216
|
|
|
$
|
64,179
|
|
|
$
|
164
|
|
|
$
|
—
|
|
|
$
|
(33,714
|
)
|
|
$
|
164,845
|
|
Front Store
|
—
|
|
|
19,055
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,055
|
|
||||||
Premiums
|
—
|
|
|
—
|
|
|
8,180
|
|
|
4
|
|
|
—
|
|
|
8,184
|
|
||||||
Net investment income
|
—
|
|
|
—
|
|
|
58
|
|
|
602
|
|
|
—
|
|
|
660
|
|
||||||
Other
|
520
|
|
|
755
|
|
|
560
|
|
|
—
|
|
|
—
|
|
|
1,835
|
|
||||||
Total
|
$
|
134,736
|
|
|
$
|
83,989
|
|
|
$
|
8,962
|
|
|
$
|
606
|
|
|
$
|
(33,714
|
)
|
|
$
|
194,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pharmacy Services distribution channel:
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Pharmacy network (1) (3)
|
$
|
87,167
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Mail choice (2) (3)
|
47,049
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other
|
520
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total
|
$
|
134,736
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Pharmacy Services pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and LTC pharmacies, but excluding Maintenance Choice® activity, which is included within the mail choice category. Maintenance choice permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS pharmacy retail store for the same price as mail order.
|
(2)
|
Pharmacy Services mail choice is defined as claims filled at a Pharmacy Services mail order facility, which includes specialty mail claims inclusive of Specialty Connect® claims picked up at a retail pharmacy, as well as prescriptions filled at the Company’s retail pharmacies under the Maintenance Choice program.
|
(3)
|
Certain prior year amounts have been reclassified for consistency with the current period presentation.
|
In millions
|
2019
|
|
2018
|
||||
Trade receivables (included in accounts receivable, net)
|
$
|
6,717
|
|
|
$
|
6,497
|
|
Contract liabilities (included in accrued expenses)
|
73
|
|
|
67
|
|
In millions
|
2019
|
|
2018
|
||||
Balance at December 31, 2018
|
$
|
67
|
|
|
$
|
53
|
|
Adoption of ASU 2014-09
|
—
|
|
|
17
|
|
||
Rewards earnings and gift card issuances
|
365
|
|
|
332
|
|
||
Redemption and breakage
|
(359
|
)
|
|
(335
|
)
|
||
Balance at December 31, 2019
|
$
|
73
|
|
|
$
|
67
|
|
•
|
Hedge fund and private equity investments - The Company invests in hedge fund and private equity investments in order to generate investment returns for its investment portfolio supporting its insurance businesses.
|
•
|
Real estate partnerships - The Company invests in various real estate partnerships, including those that construct, own and manage low-income housing developments. For the low income housing development investments, substantially all of the projected benefits to the Company are from tax credits and other tax benefits.
|
In millions
|
2019
|
|
2018
|
||||
Hedge fund investments
|
$
|
271
|
|
|
$
|
270
|
|
Private equity investments
|
538
|
|
|
524
|
|
||
Real estate partnerships
|
212
|
|
|
275
|
|
||
Total
|
$
|
1,021
|
|
|
$
|
1,069
|
|
In millions
|
2017
|
||
Loss from discontinued operations
|
$
|
(13
|
)
|
Income tax benefit
|
5
|
|
|
Loss from discontinued operations, net of tax
|
$
|
(8
|
)
|
|
Impact of Change in Accounting Policy
|
||||||||||
In millions
|
As Reported
December 31, 2018
|
|
Adjustments
|
|
As Adjusted
January 1, 2019
|
||||||
Consolidated Balance Sheets:
|
|
|
|
|
|
||||||
Other current assets
|
$
|
4,581
|
|
|
$
|
(48
|
)
|
|
$
|
4,533
|
|
Total current assets
|
45,243
|
|
|
(48
|
)
|
|
45,195
|
|
|||
Property and equipment, net
|
11,349
|
|
|
11
|
|
|
11,360
|
|
|||
Operating lease right-of-use assets
|
—
|
|
|
20,987
|
|
|
20,987
|
|
|||
Intangible assets, net
|
36,524
|
|
|
(217
|
)
|
|
36,307
|
|
|||
Other assets
|
5,046
|
|
|
(521
|
)
|
|
4,525
|
|
|||
Total assets
|
196,456
|
|
|
20,212
|
|
|
216,668
|
|
|||
Accrued expenses
|
10,711
|
|
|
(52
|
)
|
|
10,659
|
|
|||
Current portion of operating lease liabilities
|
—
|
|
|
1,803
|
|
|
1,803
|
|
|||
Current portion of long-term debt
|
1,265
|
|
|
2
|
|
|
1,267
|
|
|||
Total current liabilities
|
44,009
|
|
|
1,753
|
|
|
45,762
|
|
|||
Long-term operating lease liabilities
|
—
|
|
|
18,832
|
|
|
18,832
|
|
|||
Long-term debt
|
71,444
|
|
|
(96
|
)
|
|
71,348
|
|
|||
Deferred income taxes
|
7,677
|
|
|
63
|
|
|
7,740
|
|
|||
Other long-term liabilities
|
2,780
|
|
|
(518
|
)
|
|
2,262
|
|
|||
Total liabilities
|
137,913
|
|
|
20,034
|
|
|
157,947
|
|
|||
Retained earnings
|
40,911
|
|
|
178
|
|
|
41,089
|
|
|||
Total CVS Health shareholders’ equity
|
58,225
|
|
|
178
|
|
|
58,403
|
|
|||
Total shareholders’ equity
|
58,543
|
|
|
178
|
|
|
58,721
|
|
2.
|
Acquisitions and Divestitures
|
In millions
|
|
||
Cash and cash equivalents
|
$
|
6,565
|
|
Accounts receivable
|
4,094
|
|
|
Other current assets
|
3,894
|
|
|
Investments (current and long-term)
|
17,984
|
|
|
Goodwill
|
47,755
|
|
|
Intangible assets
|
22,571
|
|
|
Other assets
|
8,249
|
|
|
Total assets acquired
|
111,112
|
|
|
Health care costs payable
|
5,302
|
|
|
Other current liabilities
|
9,940
|
|
|
Debt (current and long-term)
|
8,098
|
|
|
Deferred income taxes
|
4,608
|
|
|
Other long-term liabilities
|
13,078
|
|
|
Total liabilities assumed
|
41,026
|
|
|
Noncontrolling interests
|
320
|
|
|
Total consideration transferred
|
$
|
69,766
|
|
|
Year Ended December 31,
|
||||||
In millions, except per share data
|
2018
|
|
2017
|
||||
Total revenues
|
$
|
243,232
|
|
|
$
|
236,000
|
|
Income from continuing operations
|
1,152
|
|
|
6,813
|
|
||
Basic earnings per share from continuing operations attributable to CVS Health
|
$
|
0.89
|
|
|
$
|
5.25
|
|
Diluted earnings per share from continuing operations attributable to CVS Health
|
$
|
0.88
|
|
|
$
|
5.21
|
|
•
|
Elimination of intercompany transactions between CVS Health and Aetna;
|
•
|
Elimination of estimated foregone interest income associated with (i) cash assumed to have been used to partially fund the Aetna Acquisition and (ii) adjusting the amortized cost of Aetna’s investment portfolio to fair value as of the completion of the Aetna Acquisition;
|
•
|
Elimination of historical intangible asset, deferred acquisition cost and capitalized software amortization expense and addition of amortization expense based on the values of identified intangible assets;
|
•
|
Additional interest expense from (i) the long-term debt issued to partially fund the Aetna Acquisition and (ii) the amortization of the fair value adjustment to assumed long-term debt.
|
•
|
Additional depreciation expense related to the adjustment of Aetna’s property and equipment to fair value;
|
•
|
Adjustments to align CVS Health’s and Aetna’s accounting policies;
|
•
|
Elimination of transaction related costs; and
|
•
|
Tax effects of the adjustments noted above.
|
3.
|
Investments
|
|
2019
|
|
2018
|
||||||||||||||||||||
In millions
|
Current
|
|
Long-term
|
|
Total
|
|
Current
|
|
Long-term
|
|
Total
|
||||||||||||
Debt securities available for sale
|
$
|
2,251
|
|
|
$
|
14,671
|
|
|
$
|
16,922
|
|
|
$
|
2,359
|
|
|
$
|
12,896
|
|
|
$
|
15,255
|
|
Mortgage loans
|
122
|
|
|
1,091
|
|
|
1,213
|
|
|
145
|
|
|
1,216
|
|
|
1,361
|
|
||||||
Other investments
|
—
|
|
|
1,552
|
|
|
1,552
|
|
|
18
|
|
|
1,620
|
|
|
1,638
|
|
||||||
Total investments
|
$
|
2,373
|
|
|
$
|
17,314
|
|
|
$
|
19,687
|
|
|
$
|
2,522
|
|
|
$
|
15,732
|
|
|
$
|
18,254
|
|
In millions
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
||||||||
December 31, 2019
|
|
|
|
|
|
|
|
||||||||
Debt securities:
|
|
|
|
|
|
|
|
||||||||
U.S. government securities
|
$
|
1,791
|
|
|
$
|
62
|
|
|
$
|
(1
|
)
|
|
$
|
1,852
|
|
States, municipalities and political subdivisions
|
2,202
|
|
|
108
|
|
|
(1
|
)
|
|
2,309
|
|
||||
U.S. corporate securities
|
7,167
|
|
|
573
|
|
|
(3
|
)
|
|
7,737
|
|
||||
Foreign securities
|
2,149
|
|
|
200
|
|
|
(1
|
)
|
|
2,348
|
|
||||
Residential mortgage-backed securities
|
508
|
|
|
25
|
|
|
—
|
|
|
533
|
|
||||
Commercial mortgage-backed securities
|
654
|
|
|
46
|
|
|
—
|
|
|
700
|
|
||||
Other asset-backed securities
|
1,397
|
|
|
13
|
|
|
(5
|
)
|
|
1,405
|
|
||||
Redeemable preferred securities
|
30
|
|
|
8
|
|
|
—
|
|
|
38
|
|
||||
Total debt securities (1)
|
$
|
15,898
|
|
|
$
|
1,035
|
|
|
$
|
(11
|
)
|
|
$
|
16,922
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2018
|
|
|
|
|
|
|
|
||||||||
Debt securities:
|
|
|
|
|
|
|
|
||||||||
U.S. government securities
|
$
|
1,662
|
|
|
$
|
26
|
|
|
$
|
—
|
|
|
$
|
1,688
|
|
States, municipalities and political subdivisions
|
2,370
|
|
|
30
|
|
|
(1
|
)
|
|
2,399
|
|
||||
U.S. corporate securities
|
6,444
|
|
|
61
|
|
|
(16
|
)
|
|
6,489
|
|
||||
Foreign securities
|
2,355
|
|
|
31
|
|
|
(3
|
)
|
|
2,383
|
|
||||
Residential mortgage-backed securities
|
567
|
|
|
10
|
|
|
—
|
|
|
577
|
|
||||
Commercial mortgage-backed securities
|
594
|
|
|
11
|
|
|
—
|
|
|
605
|
|
||||
Other asset-backed securities
|
1,097
|
|
|
3
|
|
|
(15
|
)
|
|
1,085
|
|
||||
Redeemable preferred securities
|
30
|
|
|
—
|
|
|
(1
|
)
|
|
29
|
|
||||
Total debt securities (1)
|
$
|
15,119
|
|
|
$
|
172
|
|
|
$
|
(36
|
)
|
|
$
|
15,255
|
|
(1)
|
Investment risks associated with the Company’s experience-rated products generally do not impact the Company’s consolidated operating results. At December 31, 2019, debt securities with a fair value of $965 million, gross unrealized capital gains of $83 million and no gross unrealized capital losses, and at December 31, 2018, debt securities with a fair value of $916 million, gross unrealized capital gains of $12 million and gross unrealized capital losses of $2 million were included in total debt securities, but support experience-rated products. Changes in net unrealized capital gains (losses) on these securities are not reflected in accumulated other comprehensive income.
|
In millions
|
Amortized Cost
|
|
Fair
Value
|
||||
Due to mature:
|
|
|
|
||||
Less than one year
|
$
|
1,028
|
|
|
$
|
1,034
|
|
One year through five years
|
5,507
|
|
|
5,702
|
|
||
After five years through ten years
|
3,081
|
|
|
3,296
|
|
||
Greater than ten years
|
3,723
|
|
|
4,252
|
|
||
Residential mortgage-backed securities
|
508
|
|
|
533
|
|
||
Commercial mortgage-backed securities
|
654
|
|
|
700
|
|
||
Other asset-backed securities
|
1,397
|
|
|
1,405
|
|
||
Total
|
$
|
15,898
|
|
|
$
|
16,922
|
|
|
Less than 12 months
|
|
Greater than 12 months
|
|
Total
|
|||||||||||||||||||||||||||
In millions, except number of securities
|
Number of Securities
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Number of Securities
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Number of Securities
|
|
Fair
Value
|
|
Unrealized
Losses
|
|||||||||||||||
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
U.S. government securities
|
52
|
|
|
$
|
168
|
|
|
$
|
1
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
52
|
|
|
$
|
168
|
|
|
$
|
1
|
|
States, municipalities and political subdivisions
|
66
|
|
|
115
|
|
|
1
|
|
|
2
|
|
|
5
|
|
|
—
|
|
|
68
|
|
|
120
|
|
|
1
|
|
||||||
U.S. corporate securities
|
181
|
|
|
305
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
1
|
|
|
183
|
|
|
305
|
|
|
3
|
|
||||||
Foreign securities
|
39
|
|
|
75
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
75
|
|
|
1
|
|
||||||
Residential mortgage-backed securities
|
30
|
|
|
16
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
16
|
|
|
—
|
|
||||||
Commercial mortgage-backed securities
|
16
|
|
|
49
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
49
|
|
|
—
|
|
||||||
Other asset-backed securities
|
138
|
|
|
254
|
|
|
1
|
|
|
187
|
|
|
182
|
|
|
4
|
|
|
325
|
|
|
436
|
|
|
5
|
|
||||||
Total debt securities
|
522
|
|
|
$
|
982
|
|
|
$
|
6
|
|
|
200
|
|
|
$
|
187
|
|
|
$
|
5
|
|
|
722
|
|
|
$
|
1,169
|
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
U.S. government securities
|
8
|
|
|
$
|
26
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
8
|
|
|
$
|
26
|
|
|
$
|
—
|
|
States, municipalities and political subdivisions
|
54
|
|
|
86
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54
|
|
|
86
|
|
|
1
|
|
||||||
U.S. corporate securities
|
1,399
|
|
|
1,431
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,399
|
|
|
1,431
|
|
|
16
|
|
||||||
Foreign securities
|
243
|
|
|
314
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
243
|
|
|
314
|
|
|
3
|
|
||||||
Residential mortgage-backed securities
|
45
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
1
|
|
|
—
|
|
||||||
Other asset-backed securities
|
516
|
|
|
528
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
516
|
|
|
528
|
|
|
15
|
|
||||||
Redeemable preferred securities
|
14
|
|
|
23
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
23
|
|
|
1
|
|
||||||
Total debt securities
|
2,279
|
|
|
$
|
2,409
|
|
|
$
|
36
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
2,279
|
|
|
$
|
2,409
|
|
|
$
|
36
|
|
|
Supporting experience-rated products
|
|
Supporting remaining
products
|
|
Total
|
||||||||||||||||||
In millions
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
||||||||||||
Due to mature:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Less than one year
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
—
|
|
One year through five years
|
3
|
|
|
—
|
|
|
285
|
|
|
1
|
|
|
288
|
|
|
1
|
|
||||||
After five years through ten years
|
9
|
|
|
—
|
|
|
151
|
|
|
2
|
|
|
160
|
|
|
2
|
|
||||||
Greater than ten years
|
11
|
|
|
—
|
|
|
197
|
|
|
3
|
|
|
208
|
|
|
3
|
|
||||||
Residential mortgage-backed securities
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
16
|
|
|
—
|
|
||||||
Commercial mortgage-backed securities
|
—
|
|
|
—
|
|
|
49
|
|
|
—
|
|
|
49
|
|
|
—
|
|
||||||
Other asset-backed securities
|
10
|
|
|
—
|
|
|
426
|
|
|
5
|
|
|
436
|
|
|
5
|
|
||||||
Total
|
$
|
33
|
|
|
$
|
—
|
|
|
$
|
1,136
|
|
|
$
|
11
|
|
|
$
|
1,169
|
|
|
$
|
11
|
|
In millions
|
2019
|
|
2018
|
||||
New mortgage loans
|
$
|
131
|
|
|
$
|
4
|
|
Mortgage loans fully-repaid
|
234
|
|
|
27
|
|
||
Mortgage loans foreclosed
|
—
|
|
|
—
|
|
•
|
Category 1 - Represents loans of superior quality.
|
•
|
Categories 2 to 4 - Represent loans where credit risk is minimal to acceptable; however, these loans may display some susceptibility to economic changes.
|
•
|
Categories 5 and 6 - Represent loans where credit risk is not substantial, but these loans warrant management’s close attention.
|
•
|
Category 7 - Represents loans where collections are potentially at risk; if necessary, an impairment is recorded.
|
In millions, except credit ratings indicator
|
2019
|
|
2018
|
||||
1
|
$
|
58
|
|
|
$
|
42
|
|
2 to 4
|
1,143
|
|
|
1,301
|
|
||
5 and 6
|
12
|
|
|
18
|
|
||
7
|
—
|
|
|
—
|
|
||
Total
|
$
|
1,213
|
|
|
$
|
1,361
|
|
In millions
|
|
||
2020
|
$
|
122
|
|
2021
|
235
|
|
|
2022
|
200
|
|
|
2023
|
81
|
|
|
2024
|
193
|
|
|
Thereafter
|
382
|
|
|
Total
|
$
|
1,213
|
|
In millions
|
2019
|
|
2018
|
||||
Debt securities
|
$
|
589
|
|
|
$
|
61
|
|
Mortgage loans
|
71
|
|
|
6
|
|
||
Other investments
|
194
|
|
|
593
|
|
||
Gross investment income
|
854
|
|
|
660
|
|
||
Investment expenses
|
(42
|
)
|
|
(3
|
)
|
||
Net investment income (excluding net realized capital gains or losses)
|
812
|
|
|
657
|
|
||
Net realized capital gains (1)
|
199
|
|
|
3
|
|
||
Net investment income (2)
|
$
|
1,011
|
|
|
$
|
660
|
|
(1)
|
Net realized capital gains are net of other-than-temporary impairment (“OTTI”) losses on debt securities recognized in the consolidated statements of operations of $24 million for the year ended December 31, 2019. There were no material OTTI losses on debt securities for the year ended December 31, 2018.
|
(2)
|
Net investment income includes $44 million and $4 million for 2019 and 2018, respectively, related to investments supporting experience-rated products.
|
In millions
|
2019
|
|
2018
|
||||
Proceeds from sales
|
$
|
4,773
|
|
|
$
|
389
|
|
Gross realized capital gains
|
146
|
|
|
2
|
|
||
Gross realized capital losses
|
(17
|
)
|
|
(2
|
)
|
4.
|
Fair Value
|
•
|
Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets.
|
•
|
Level 2 – Valuation inputs other than Level 1 that are based on observable market data. These include: quoted prices for similar assets in active markets, quoted prices for identical assets in inactive markets, valuation inputs that are observable that are not prices (such as interest rates and credit risks) and valuation inputs that are derived from or corroborated by observable markets.
|
•
|
Level 3 – Developed from unobservable data, reflecting the Company’s assumptions.
|
In millions
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
December 31, 2019
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
3,397
|
|
|
$
|
2,286
|
|
|
$
|
—
|
|
|
$
|
5,683
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government securities
|
1,785
|
|
|
67
|
|
|
—
|
|
|
1,852
|
|
||||
States, municipalities and political subdivisions
|
—
|
|
|
2,309
|
|
|
—
|
|
|
2,309
|
|
||||
U.S. corporate securities
|
—
|
|
|
7,700
|
|
|
37
|
|
|
7,737
|
|
||||
Foreign securities
|
—
|
|
|
2,348
|
|
|
—
|
|
|
2,348
|
|
||||
Residential mortgage-backed securities
|
—
|
|
|
533
|
|
|
—
|
|
|
533
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
700
|
|
|
—
|
|
|
700
|
|
||||
Other asset-backed securities
|
—
|
|
|
1,405
|
|
|
—
|
|
|
1,405
|
|
||||
Redeemable preferred securities
|
—
|
|
|
26
|
|
|
12
|
|
|
38
|
|
||||
Total debt securities
|
1,785
|
|
|
15,088
|
|
|
49
|
|
|
16,922
|
|
||||
Equity securities
|
34
|
|
|
—
|
|
|
39
|
|
|
73
|
|
||||
Total
|
$
|
5,216
|
|
|
$
|
17,374
|
|
|
$
|
88
|
|
|
$
|
22,678
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
$
|
2,619
|
|
|
$
|
1,440
|
|
|
$
|
—
|
|
|
$
|
4,059
|
|
Debt securities:
|
|
|
|
|
|
|
|
||||||||
U.S. government securities
|
1,597
|
|
|
91
|
|
|
—
|
|
|
1,688
|
|
||||
States, municipalities and political subdivisions
|
—
|
|
|
2,399
|
|
|
—
|
|
|
2,399
|
|
||||
U.S. corporate securities
|
—
|
|
|
6,422
|
|
|
67
|
|
|
6,489
|
|
||||
Foreign securities
|
—
|
|
|
2,380
|
|
|
3
|
|
|
2,383
|
|
||||
Residential mortgage-backed securities
|
—
|
|
|
577
|
|
|
—
|
|
|
577
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
605
|
|
|
—
|
|
|
605
|
|
||||
Other asset-backed securities
|
—
|
|
|
1,085
|
|
|
—
|
|
|
1,085
|
|
||||
Redeemable preferred securities
|
—
|
|
|
22
|
|
|
7
|
|
|
29
|
|
||||
Total debt securities
|
1,597
|
|
|
13,581
|
|
|
77
|
|
|
15,255
|
|
||||
Equity securities
|
19
|
|
|
—
|
|
|
54
|
|
|
73
|
|
||||
Total
|
$
|
4,235
|
|
|
$
|
15,021
|
|
|
$
|
131
|
|
|
$
|
19,387
|
|
In millions
|
Foreign
securities
|
|
U.S.
corporate
securities
|
|
Equity
securities
|
|
Redeemable
preferred
securities
|
|
Total
|
||||||||||
Beginning balance
|
$
|
3
|
|
|
$
|
67
|
|
|
$
|
54
|
|
|
$
|
7
|
|
|
$
|
131
|
|
Net realized and unrealized capital gains (losses):
|
|
|
|
|
|
|
|
|
|
||||||||||
Included in earnings
|
—
|
|
|
(33
|
)
|
|
13
|
|
|
—
|
|
|
(20
|
)
|
|||||
Included in other comprehensive income
|
—
|
|
|
18
|
|
|
—
|
|
|
5
|
|
|
23
|
|
|||||
Purchases
|
2
|
|
|
3
|
|
|
13
|
|
|
—
|
|
|
18
|
|
|||||
Sales
|
—
|
|
|
(6
|
)
|
|
(41
|
)
|
|
—
|
|
|
(47
|
)
|
|||||
Settlements
|
(1
|
)
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|||||
Transfers out of Level 3, net
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|||||
Ending balance
|
$
|
—
|
|
|
$
|
37
|
|
|
$
|
39
|
|
|
$
|
12
|
|
|
$
|
88
|
|
In millions
|
|
||
Gross transfers into Level 3
|
$
|
—
|
|
Gross transfers out of Level 3
|
(4
|
)
|
|
Net transfers out of Level 3
|
$
|
(4
|
)
|
|
Carrying
Value
|
|
Estimated Fair Value
|
||||||||||||||||
In millions
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|||||||||||
December 31, 2019
|
|
|
|
|
|
|
|
|
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage loans
|
$
|
1,213
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,239
|
|
|
$
|
1,239
|
|
Equity securities (1)
|
149
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Investment contract liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
With a fixed maturity
|
5
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
5
|
|
|||||
Without a fixed maturity
|
372
|
|
|
—
|
|
|
—
|
|
|
392
|
|
|
392
|
|
|||||
Long-term debt
|
68,480
|
|
|
74,306
|
|
|
—
|
|
|
—
|
|
|
74,306
|
|
|
Carrying
Value
|
|
Estimated Fair Value
|
||||||||||||||||
In millions
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|||||||||||
December 31, 2018
|
|
|
|
|
|
|
|
|
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage loans
|
$
|
1,361
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,366
|
|
|
$
|
1,366
|
|
Equity securities (1)
|
140
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Investment contract liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
With a fixed maturity
|
5
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
5
|
|
|||||
Without a fixed maturity
|
382
|
|
|
—
|
|
|
—
|
|
|
357
|
|
|
357
|
|
|||||
Long-term debt
|
72,709
|
|
|
71,252
|
|
|
—
|
|
|
—
|
|
|
71,252
|
|
(1)
|
It was not practical to estimate the fair value of these cost-method investments as it represents shares of unlisted companies. See Note 1 ‘‘Significant Accounting Policies’’ for additional information regarding the valuation of cost method investments.
|
|
December 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||||||||||
In millions
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
Cash and cash equivalents
|
$
|
2
|
|
|
$
|
143
|
|
|
$
|
—
|
|
|
$
|
145
|
|
|
$
|
2
|
|
|
$
|
189
|
|
|
$
|
—
|
|
|
$
|
191
|
|
Debt securities
|
1,224
|
|
|
2,589
|
|
|
—
|
|
|
3,813
|
|
|
782
|
|
|
2,500
|
|
|
4
|
|
|
3,286
|
|
||||||||
Equity securities
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
||||||||
Common/collective trusts
|
—
|
|
|
499
|
|
|
—
|
|
|
499
|
|
|
—
|
|
|
404
|
|
|
—
|
|
|
404
|
|
||||||||
Total
|
$
|
1,226
|
|
|
$
|
3,233
|
|
|
$
|
—
|
|
|
$
|
4,459
|
|
|
$
|
784
|
|
|
$
|
3,096
|
|
|
$
|
4
|
|
|
$
|
3,884
|
|
5.
|
Goodwill and Other Intangibles
|
In millions
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Health Care
Benefits
|
|
Total
|
||||||||
Balance at December 31, 2017
|
$
|
21,819
|
|
|
$
|
16,632
|
|
|
$
|
—
|
|
|
$
|
38,451
|
|
Acquisitions
|
1,569
|
|
|
735
|
|
|
44,484
|
|
|
46,788
|
|
||||
Foreign currency translation adjustments
|
—
|
|
|
(14
|
)
|
|
—
|
|
|
(14
|
)
|
||||
Divestiture of RxCrossroads subsidiary
|
—
|
|
|
(398
|
)
|
|
—
|
|
|
(398
|
)
|
||||
Impairments
|
—
|
|
|
(6,149
|
)
|
|
—
|
|
|
(6,149
|
)
|
||||
Balance at December 31, 2018
|
23,388
|
|
|
10,806
|
|
|
44,484
|
|
|
78,678
|
|
||||
Segment realignment
|
194
|
|
|
—
|
|
|
(194
|
)
|
|
—
|
|
||||
Purchase accounting adjustments
|
—
|
|
|
—
|
|
|
1,071
|
|
|
1,071
|
|
||||
Other
|
(1
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
||||
Balance at December 31, 2019
|
$
|
23,581
|
|
|
$
|
10,807
|
|
|
$
|
45,361
|
|
|
$
|
79,749
|
|
In millions, except weighted average life
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Weighted
Average
Life (years)
|
||||||
2019
|
|
|
|
|
|
|
|
||||||
Trademarks (indefinite-lived)
|
$
|
10,498
|
|
|
$
|
—
|
|
|
$
|
10,498
|
|
|
N/A
|
Customer contracts/relationships and covenants not to compete
|
25,447
|
|
|
(8,128
|
)
|
|
17,319
|
|
|
14.8
|
|||
Technology
|
1,060
|
|
|
(386
|
)
|
|
674
|
|
|
3.0
|
|||
Provider networks
|
4,200
|
|
|
(229
|
)
|
|
3,971
|
|
|
20.0
|
|||
Value of Business Acquired
|
590
|
|
|
(63
|
)
|
|
527
|
|
|
20.0
|
|||
Other
|
364
|
|
|
(232
|
)
|
|
132
|
|
|
8.1
|
|||
Total
|
$
|
42,159
|
|
|
$
|
(9,038
|
)
|
|
$
|
33,121
|
|
|
15.1
|
|
|
|
|
|
|
|
|
||||||
2018
|
|
|
|
|
|
|
|
||||||
Trademarks (indefinite-lived)
|
$
|
10,498
|
|
|
$
|
—
|
|
|
$
|
10,498
|
|
|
N/A
|
Customer contracts/relationships and covenants not to compete
|
26,213
|
|
|
(6,349
|
)
|
|
19,864
|
|
|
14.8
|
|||
Technology
|
1,060
|
|
|
(31
|
)
|
|
1,029
|
|
|
3.0
|
|||
Provider networks
|
4,200
|
|
|
(19
|
)
|
|
4,181
|
|
|
20.0
|
|||
Value of Business Acquired
|
590
|
|
|
(7
|
)
|
|
583
|
|
|
20.0
|
|||
Favorable leases and other (1)
|
1,177
|
|
|
(808
|
)
|
|
369
|
|
|
17.1
|
|||
Total
|
$
|
43,738
|
|
|
$
|
(7,214
|
)
|
|
$
|
36,524
|
|
|
15.3
|
(1)
|
Upon adoption of ASU 2016-02, Leases, the Company’s favorable leases were reclassified from an intangible asset to a reduction of the right-of-use asset. Refer to Note 1 ‘‘Significant Accounting Policies’’ for additional information on the adoption of ASU 2016-02, Leases.
|
6.
|
Leases
|
In millions
|
2019
|
||
Operating lease cost
|
$
|
2,720
|
|
Finance lease cost:
|
|
||
Amortization of right-of-use assets
|
38
|
|
|
Interest on lease liabilities
|
44
|
|
|
Total finance lease costs
|
82
|
|
|
Short-term lease costs
|
24
|
|
|
Variable lease costs
|
581
|
|
|
Less: sublease income
|
50
|
|
|
Net lease cost
|
$
|
3,357
|
|
In millions
|
2019
|
||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
||
Operating cash flows paid for operating leases
|
$
|
2,701
|
|
Operating cash flows paid for interest portion of finance leases
|
44
|
|
|
Financing cash flows paid for principal portion of finance leases
|
26
|
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
||
Operating leases
|
1,824
|
|
|
Finance leases
|
283
|
|
(1)
|
Finance lease right-of-use assets are included within property and equipment, net and the respective finance lease liabilities are included in current portion of long-term debt and long-term debt on the consolidated balance sheets.
|
(2)
|
In accordance with ASC 842, upon adoption the net carrying value of the prior capital leases became the initial basis of the Company’s finance leases. As a result, upon adoption there was no accumulated amortization associated with such finance leases.
|
In millions
|
Finance
Leases |
|
Operating
Leases (1) |
|
Total
|
||||||
2020
|
$
|
84
|
|
|
$
|
2,699
|
|
|
$
|
2,783
|
|
2021
|
82
|
|
|
2,598
|
|
|
2,680
|
|
|||
2022
|
79
|
|
|
2,444
|
|
|
2,523
|
|
|||
2023
|
77
|
|
|
2,335
|
|
|
2,412
|
|
|||
2024
|
76
|
|
|
2,103
|
|
|
2,179
|
|
|||
Thereafter
|
1,056
|
|
|
15,654
|
|
|
16,710
|
|
|||
Total lease payments (2)
|
1,454
|
|
|
27,833
|
|
|
29,287
|
|
|||
Less: imputed interest
|
(646
|
)
|
|
(7,311
|
)
|
|
(7,957
|
)
|
|||
Total lease liabilities
|
$
|
808
|
|
|
$
|
20,522
|
|
|
$
|
21,330
|
|
(1)
|
Future operating lease payments have not been reduced by minimum sublease rentals of $315 million due in the future under noncancelable subleases.
|
(2)
|
The Company leases pharmacy and clinic space from Target Corporation. Amounts related to such finance and operating leases are reflected above. Pharmacy lease amounts due in excess of the remaining estimated economic life of the buildings of approximately $2.2 billion are not reflected in this table since the estimated economic life of the buildings is shorter than the contractual term of the pharmacy lease arrangement.
|
In millions
|
2018
|
|
2017
|
||||
Minimum rentals
|
$
|
2,528
|
|
|
$
|
2,455
|
|
Contingent rentals
|
28
|
|
|
29
|
|
||
Rental expense
|
2,556
|
|
|
2,484
|
|
||
Less: sublease income
|
(21
|
)
|
|
(24
|
)
|
||
Total rental expense, net
|
$
|
2,535
|
|
|
$
|
2,460
|
|
In millions
|
2018
|
||
Property and equipment under capital leases
|
$
|
582
|
|
Accumulated amortization of property and equipment under capital leases
|
(163
|
)
|
|
Property and equipment under capital leases, net
|
$
|
419
|
|
7.
|
Health Care Costs Payable
|
In millions
|
December 31, 2019
|
||
Short-duration health care costs payable, net of reinsurance
|
$
|
6,743
|
|
Reinsurance recoverables
|
5
|
|
|
Premium deficiency reserve
|
4
|
|
|
Insurance lines other than short duration
|
127
|
|
|
Total health care costs payable
|
$
|
6,879
|
|
In millions
|
2019
|
|
2018
|
||||
Health care costs payable, beginning of the period
|
$
|
6,147
|
|
|
$
|
5
|
|
Less: Reinsurance recoverables
|
4
|
|
|
—
|
|
||
Health care costs payable, beginning of the period, net
|
6,143
|
|
|
5
|
|
||
Acquisitions, net
|
—
|
|
|
5,357
|
|
||
Reclassification from pharmacy claims and discounts payable (1)
|
—
|
|
|
776
|
|
||
Add: Components of incurred health care costs
|
|
|
|
||||
Current year
|
52,723
|
|
|
6,594
|
|
||
Prior years
|
(524
|
)
|
|
(42
|
)
|
||
Total incurred health care costs (2)
|
52,199
|
|
|
6,552
|
|
||
Less: Claims paid
|
|
|
|
||||
Current year
|
46,158
|
|
|
6,303
|
|
||
Prior years
|
5,314
|
|
|
260
|
|
||
Total claims paid
|
51,472
|
|
|
6,563
|
|
||
Add: Premium deficiency reserve
|
4
|
|
|
16
|
|
||
Health care costs payable, end of period, net
|
6,874
|
|
|
6,143
|
|
||
Add: Reinsurance recoverables
|
5
|
|
|
4
|
|
||
Health care costs payable, end of period
|
$
|
6,879
|
|
|
$
|
6,147
|
|
(1)
|
As of the Aetna Acquisition Date, the Company reclassified $776 million of the Pharmacy Services segment’s unpaid retail pharmacy claims to third parties from pharmacy claims and discounts payable to health care costs payable as the third party liability was incurred to support the Health Care Benefits segment’s insured members.
|
(2)
|
Total incurred health care costs for the year ended December 31, 2019 and 2018 in the table above exclude (i) $4 million and $16 million, respectively, related to a premium deficiency reserve related to the Company’s Medicaid products, (ii) $41 million and $4 million, respectively, of benefit costs recorded in the Health Care Benefits segment that are included in other insurance liabilities on the consolidated balance sheets and (iii) $285 million and $22 million, respectively, of benefit costs recorded in the Corporate/Other segment that are included in other insurance liabilities on the consolidated balance sheets.
|
8.
|
Borrowings and Credit Agreements
|
In millions
|
2019
|
|
2018
|
||||
Short-term debt
|
|
|
|
||||
Commercial paper
|
$
|
—
|
|
|
$
|
720
|
|
|
|
|
|
||||
Long-term debt
|
|
|
|
||||
2.2% senior notes due March 2019
|
—
|
|
|
375
|
|
||
2.25% senior notes due August 2019
|
—
|
|
|
850
|
|
||
3.125% senior notes due March 2020
|
723
|
|
|
2,000
|
|
||
Floating rate notes due March 2020 (2.515% and 3.397% at December 31, 2019 and 2018)
|
277
|
|
|
1,000
|
|
||
2.8% senior notes due July 2020
|
2,750
|
|
|
2,750
|
|
||
3.35% senior notes due March 2021
|
2,038
|
|
|
3,000
|
|
||
Floating rate notes due March 2021 (2.605% and 3.487% at December 31, 2019 and 2018)
|
1,000
|
|
|
1,000
|
|
||
4.125% senior notes due May 2021
|
222
|
|
|
550
|
|
||
2.125% senior notes due June 2021
|
1,750
|
|
|
1,750
|
|
||
4.125% senior notes due June 2021
|
203
|
|
|
500
|
|
||
5.45% senior notes due June 2021
|
187
|
|
|
600
|
|
||
3-year tranche term loan due November 2021
|
—
|
|
|
3,000
|
|
||
3.5% senior notes due July 2022
|
1,500
|
|
|
1,500
|
|
||
2.75% senior notes due November 2022
|
1,000
|
|
|
1,000
|
|
||
2.75% senior notes due December 2022
|
1,250
|
|
|
1,250
|
|
||
4.75% senior notes due December 2022
|
399
|
|
|
399
|
|
||
3.7% senior notes due March 2023
|
6,000
|
|
|
6,000
|
|
||
2.8% senior notes due June 2023
|
1,300
|
|
|
1,300
|
|
||
4% senior notes due December 2023
|
1,250
|
|
|
1,250
|
|
||
2.625% senior notes due August 2024
|
1,000
|
|
|
—
|
|
||
3.375% senior notes due August 2024
|
650
|
|
|
650
|
|
||
3.5% senior notes due November 2024
|
750
|
|
|
750
|
|
||
5% senior notes due December 2024
|
299
|
|
|
299
|
|
||
4.1% senior notes due March 2025
|
5,000
|
|
|
5,000
|
|
||
3.875% senior notes due July 2025
|
2,828
|
|
|
2,828
|
|
||
2.875% senior notes due June 2026
|
1,750
|
|
|
1,750
|
|
||
3% senior notes due August 2026
|
750
|
|
|
—
|
|
||
6.25% senior notes due June 2027
|
372
|
|
|
372
|
|
||
4.3% senior notes due March 2028
|
9,000
|
|
|
9,000
|
|
||
3.25% senior notes due August 2029
|
1,750
|
|
|
—
|
|
||
4.875% senior notes due July 2035
|
652
|
|
|
652
|
|
||
6.625% senior notes due June 2036
|
771
|
|
|
771
|
|
||
6.75% senior notes due December 2037
|
533
|
|
|
533
|
|
||
4.78% senior notes due March 2038
|
5,000
|
|
|
5,000
|
|
||
6.125% senior notes due September 2039
|
447
|
|
|
447
|
|
||
5.75% senior notes due May 2041
|
133
|
|
|
133
|
|
||
4.5% senior notes due May 2042
|
500
|
|
|
500
|
|
||
4.125% senior notes due November 2042
|
500
|
|
|
500
|
|
||
5.3% senior notes due December 2043
|
750
|
|
|
750
|
|
||
4.75% senior notes due March 2044
|
375
|
|
|
375
|
|
||
5.125% senior notes due July 2045
|
3,500
|
|
|
3,500
|
|
||
3.875% senior notes due August 2047
|
1,000
|
|
|
1,000
|
|
||
5.05% senior notes due March 2048
|
8,000
|
|
|
8,000
|
|
||
Finance lease liabilities
|
808
|
|
|
642
|
|
||
Other
|
279
|
|
|
19
|
|
||
Total debt principal
|
69,246
|
|
|
74,265
|
|
||
Debt premiums
|
262
|
|
|
302
|
|
||
Debt discounts and deferred financing costs
|
(1,028
|
)
|
|
(1,138
|
)
|
||
|
68,480
|
|
|
73,429
|
|
||
Less:
|
|
|
|
||||
Short-term debt (commercial paper)
|
—
|
|
|
(720
|
)
|
||
Current portion of long-term debt
|
(3,781
|
)
|
|
(1,265
|
)
|
||
Long-term debt
|
$
|
64,699
|
|
|
$
|
71,444
|
|
In millions
|
|
||
2020
|
$
|
3,754
|
|
2021
|
5,404
|
|
|
2022
|
4,153
|
|
|
2023
|
8,554
|
|
|
2024
|
2,704
|
|
|
Thereafter
|
43,869
|
|
|
Total
|
68,438
|
|
|
Finance lease liabilities (1)
|
808
|
|
|
Total debt principal
|
$
|
69,246
|
|
(1)
|
See Note 6 ‘‘Leases’’ for a summary of maturities of the Company’s finance lease liabilities.
|
In millions
|
|
||
3.125% senior notes due March 2020
|
$
|
2,000
|
|
Floating rate notes due March 2020
|
1,000
|
|
|
3.35% senior notes due March 2021
|
3,000
|
|
|
Floating rate notes due March 2021
|
1,000
|
|
|
3.7% senior notes due March 2023
|
6,000
|
|
|
4.1% senior notes due March 2025
|
5,000
|
|
|
4.3% senior notes due March 2028
|
9,000
|
|
|
4.78% senior notes due March 2038
|
5,000
|
|
|
5.05% senior notes due March 2048
|
8,000
|
|
|
Total debt principal
|
$
|
40,000
|
|
9.
|
Pension Plans and Other Postretirement Benefits
|
In millions
|
2019
|
|
2018
|
||||
Change in benefit obligation:
|
|
|
|
||||
Benefit obligation, beginning of year
|
$
|
5,841
|
|
|
$
|
131
|
|
Acquired benefit obligations
|
—
|
|
|
5,685
|
|
||
Interest cost
|
225
|
|
|
25
|
|
||
Actuarial loss
|
530
|
|
|
41
|
|
||
Benefit payments
|
(357
|
)
|
|
(41
|
)
|
||
Benefit obligation, end of year
|
6,239
|
|
|
5,841
|
|
||
|
|
|
|
||||
Change in plan assets:
|
|
|
|
||||
Fair value of plan assets, beginning of year
|
5,663
|
|
|
—
|
|
||
Fair value of plan assets acquired
|
—
|
|
|
5,709
|
|
||
Actual return on plan assets
|
1,064
|
|
|
(17
|
)
|
||
Employer contributions
|
25
|
|
|
12
|
|
||
Benefit payments
|
(357
|
)
|
|
(41
|
)
|
||
Fair value of plan assets, end of year
|
6,395
|
|
|
5,663
|
|
||
|
|
|
|
||||
Funded status
|
$
|
156
|
|
|
$
|
(178
|
)
|
In millions
|
2019
|
|
2018
|
||||
Non-current assets reflected in other assets
|
$
|
494
|
|
|
$
|
147
|
|
Current liabilities reflected in accrued expenses
|
(25
|
)
|
|
(25
|
)
|
||
Non-current liabilities reflected in other long-term liabilities
|
(313
|
)
|
|
(300
|
)
|
||
Net assets (liabilities)
|
$
|
156
|
|
|
$
|
(178
|
)
|
In millions
|
2019
|
|
2018
|
|
2017
|
||||||
Components of net periodic benefit cost (income):
|
|
|
|
|
|
||||||
Interest cost
|
$
|
225
|
|
|
$
|
25
|
|
|
$
|
20
|
|
Expected return on plan assets
|
(357
|
)
|
|
(33
|
)
|
|
(20
|
)
|
|||
Amortization of net actuarial loss
|
1
|
|
|
2
|
|
|
21
|
|
|||
Settlement losses
|
—
|
|
|
—
|
|
|
187
|
|
|||
Net periodic benefit cost (income)
|
$
|
(131
|
)
|
|
$
|
(6
|
)
|
|
$
|
208
|
|
|
2019
|
|
2018
|
||
Discount rate
|
3.2
|
%
|
|
4.3
|
%
|
|
2019
|
|
2018
|
|
2017
|
|||
Discount rate
|
4.0
|
%
|
|
4.0
|
%
|
|
4.0
|
%
|
Expected long-term rate of return on plan assets
|
6.5
|
%
|
|
6.6
|
%
|
|
5.0
|
%
|
In millions
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Cash and cash equivalents
|
$
|
92
|
|
|
$
|
65
|
|
|
$
|
—
|
|
|
$
|
157
|
|
Debt securities:
|
|
|
|
|
|
|
|
||||||||
U.S. government securities
|
592
|
|
|
31
|
|
|
—
|
|
|
623
|
|
||||
States, municipalities and political subdivisions
|
—
|
|
|
157
|
|
|
—
|
|
|
157
|
|
||||
U.S. corporate securities
|
—
|
|
|
1,849
|
|
|
1
|
|
|
1,850
|
|
||||
Foreign securities
|
—
|
|
|
178
|
|
|
—
|
|
|
178
|
|
||||
Residential mortgage-backed securities
|
—
|
|
|
385
|
|
|
—
|
|
|
385
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
89
|
|
|
—
|
|
|
89
|
|
||||
Other asset-backed securities
|
—
|
|
|
150
|
|
|
—
|
|
|
150
|
|
||||
Redeemable preferred securities
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
||||
Total debt securities
|
592
|
|
|
2,844
|
|
|
1
|
|
|
3,437
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
||||||||
U.S. domestic
|
931
|
|
|
1
|
|
|
—
|
|
|
932
|
|
||||
International
|
481
|
|
|
—
|
|
|
—
|
|
|
481
|
|
||||
Domestic real estate
|
25
|
|
|
—
|
|
|
—
|
|
|
25
|
|
||||
Total equity securities
|
1,437
|
|
|
1
|
|
|
—
|
|
|
1,438
|
|
||||
Other investments:
|
|
|
|
|
|
|
|
||||||||
Real estate
|
—
|
|
|
—
|
|
|
353
|
|
|
353
|
|
||||
Common/collective trusts (1)
|
—
|
|
|
288
|
|
|
—
|
|
|
288
|
|
||||
Derivatives
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
||||
Total other investments
|
—
|
|
|
286
|
|
|
353
|
|
|
639
|
|
||||
Total pension investments (2)
|
$
|
2,121
|
|
|
$
|
3,196
|
|
|
$
|
354
|
|
|
$
|
5,671
|
|
(1)
|
The assets in the underlying funds of common/collective trusts consist of $137 million of equity securities and $151 million of debt securities.
|
(2)
|
Excludes $540 million of private equity limited partnership investments and $184 million of hedge fund limited partnership investments as these amounts are measured at NAV per share or an equivalent and are not subject to leveling within the fair value hierarchy.
|
In millions
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Cash and cash equivalents
|
$
|
68
|
|
|
$
|
30
|
|
|
$
|
—
|
|
|
$
|
98
|
|
Debt securities:
|
|
|
|
|
|
|
|
||||||||
U.S. government securities
|
511
|
|
|
38
|
|
|
—
|
|
|
549
|
|
||||
States, municipalities and political subdivisions
|
—
|
|
|
147
|
|
|
—
|
|
|
147
|
|
||||
U.S. corporate securities
|
—
|
|
|
1,671
|
|
|
5
|
|
|
1,676
|
|
||||
Foreign securities
|
—
|
|
|
177
|
|
|
—
|
|
|
177
|
|
||||
Residential mortgage-backed securities
|
—
|
|
|
339
|
|
|
—
|
|
|
339
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
70
|
|
|
—
|
|
|
70
|
|
||||
Other asset-backed securities
|
—
|
|
|
162
|
|
|
—
|
|
|
162
|
|
||||
Redeemable preferred securities
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
||||
Total debt securities
|
511
|
|
|
2,610
|
|
|
5
|
|
|
3,126
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
||||||||
U.S. domestic
|
744
|
|
|
—
|
|
|
—
|
|
|
744
|
|
||||
International
|
356
|
|
|
—
|
|
|
—
|
|
|
356
|
|
||||
Domestic real estate
|
30
|
|
|
—
|
|
|
—
|
|
|
30
|
|
||||
Total equity securities
|
1,130
|
|
|
—
|
|
|
—
|
|
|
1,130
|
|
||||
Other investments:
|
|
|
|
|
|
|
|
||||||||
Real estate
|
—
|
|
|
—
|
|
|
425
|
|
|
425
|
|
||||
Common/collective trusts (1)
|
—
|
|
|
253
|
|
|
—
|
|
|
253
|
|
||||
Derivatives
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||
Total other investments
|
—
|
|
|
255
|
|
|
425
|
|
|
680
|
|
||||
Total pension investments (2)
|
$
|
1,709
|
|
|
$
|
2,895
|
|
|
$
|
430
|
|
|
$
|
5,034
|
|
(1)
|
The assets in the underlying funds of common/collective trusts consist of $109 million of equity securities and $144 million of debt securities.
|
(2)
|
Excludes $465 million of private equity limited partnership investments and $164 million of hedge fund limited partnership investments as these amounts are measured at NAV per share or an equivalent and are not subject to leveling within the fair value hierarchy.
|
|
2019
|
||||||||||
In millions
|
Real estate
|
|
U.S. corporate
securities
|
|
Total
|
||||||
Beginning balance
|
$
|
425
|
|
|
$
|
5
|
|
|
$
|
430
|
|
Actual return on plan assets
|
5
|
|
|
—
|
|
|
5
|
|
|||
Purchases, sales and settlements
|
(77
|
)
|
|
(5
|
)
|
|
(82
|
)
|
|||
Transfers into (out of) Level 3
|
—
|
|
|
1
|
|
|
1
|
|
|||
Ending balance
|
$
|
353
|
|
|
$
|
1
|
|
|
$
|
354
|
|
In millions
|
|
||
2020
|
$
|
373
|
|
2021
|
415
|
|
|
2022
|
379
|
|
|
2023
|
384
|
|
|
2024
|
380
|
|
|
2025-2029
|
1,851
|
|
In millions
|
|
||
2020
|
$
|
15
|
|
2021
|
15
|
|
|
2022
|
15
|
|
|
2023
|
15
|
|
|
2024
|
15
|
|
|
2025-2029
|
72
|
|
10.
|
Income Taxes
|
In millions
|
2019
|
|
2018
|
|
2017
|
||||||
Current:
|
|
|
|
|
|
||||||
Federal
|
$
|
2,450
|
|
|
$
|
1,480
|
|
|
$
|
2,594
|
|
State
|
565
|
|
|
499
|
|
|
464
|
|
|||
|
3,015
|
|
|
1,979
|
|
|
3,058
|
|
|||
Deferred:
|
|
|
|
|
|
||||||
Federal
|
(535
|
)
|
|
22
|
|
|
(1,435
|
)
|
|||
State
|
(114
|
)
|
|
1
|
|
|
14
|
|
|||
|
(649
|
)
|
|
23
|
|
|
(1,421
|
)
|
|||
Total
|
$
|
2,366
|
|
|
$
|
2,002
|
|
|
$
|
1,637
|
|
|
2019
|
|
2018
|
|
2017
|
|||
Statutory income tax rate
|
21.0
|
%
|
|
21.0
|
%
|
|
35.0
|
%
|
State income taxes, net of federal tax benefit
|
4.0
|
|
|
27.7
|
|
|
4.1
|
|
Effect of the Tax Cuts and Jobs Act
|
—
|
|
|
(7.1
|
)
|
|
(18.3
|
)
|
Health insurer fee
|
—
|
|
|
2.2
|
|
|
—
|
|
Goodwill impairments
|
—
|
|
|
89.5
|
|
|
0.8
|
|
Sale of subsidiary
|
—
|
|
|
5.0
|
|
|
—
|
|
Other
|
1.3
|
|
|
4.1
|
|
|
(1.8
|
)
|
Effective income tax rate
|
26.3
|
%
|
|
142.4
|
%
|
|
19.8
|
%
|
In millions
|
2019
|
|
2018
|
||||
Deferred income tax assets:
|
|
|
|
||||
Lease and rents
|
$
|
267
|
|
|
$
|
277
|
|
Inventory
|
23
|
|
|
28
|
|
||
Employee benefits
|
191
|
|
|
243
|
|
||
Bad debts and other allowances
|
294
|
|
|
243
|
|
||
Retirement benefits
|
47
|
|
|
130
|
|
||
Net operating loss and capital loss carryforwards
|
480
|
|
|
529
|
|
||
Deferred income
|
36
|
|
|
104
|
|
||
Insurance reserves
|
430
|
|
|
467
|
|
||
Investments
|
—
|
|
|
11
|
|
||
Other
|
451
|
|
|
242
|
|
||
Valuation allowance
|
(374
|
)
|
|
(520
|
)
|
||
Total deferred income tax assets
|
1,845
|
|
|
1,754
|
|
||
Deferred income tax liabilities:
|
|
|
|
||||
Investments
|
(289
|
)
|
|
—
|
|
||
Depreciation and amortization
|
(8,850
|
)
|
|
(9,431
|
)
|
||
Total deferred income tax liabilities
|
(9,139
|
)
|
|
(9,431
|
)
|
||
Net deferred income tax liabilities
|
$
|
(7,294
|
)
|
|
$
|
(7,677
|
)
|
In millions
|
2019
|
|
2018
|
|
2017
|
||||||
Beginning balance
|
$
|
661
|
|
|
$
|
344
|
|
|
$
|
307
|
|
Additions based on tax positions related to the current year
|
4
|
|
|
1
|
|
|
62
|
|
|||
Additions based on tax positions related to prior years
|
115
|
|
|
324
|
|
|
32
|
|
|||
Reductions for tax positions of prior years
|
(111
|
)
|
|
(5
|
)
|
|
(28
|
)
|
|||
Expiration of statutes of limitation
|
(7
|
)
|
|
(2
|
)
|
|
(10
|
)
|
|||
Settlements
|
(7
|
)
|
|
(1
|
)
|
|
(19
|
)
|
|||
Ending balance
|
$
|
655
|
|
|
$
|
661
|
|
|
$
|
344
|
|
11.
|
Stock Incentive Plans
|
In millions
|
2019
|
|
2018
|
|
2017
|
||||||
Stock options and stock appreciation rights (“SARs”) (1) (2)
|
$
|
76
|
|
|
$
|
70
|
|
|
$
|
65
|
|
Restricted stock units and performance stock units (2)
|
377
|
|
|
210
|
|
|
169
|
|
|||
Total stock-based compensation
|
$
|
453
|
|
|
$
|
280
|
|
|
$
|
234
|
|
(1)
|
Includes the ESPP.
|
(2)
|
Stock-based compensation for the year ended December 31, 2018 includes $14 million and $27 million associated with accelerated vesting of SARs and restricted stock replacement awards, respectively, issued to Aetna employees who were terminated subsequent to the Aetna Acquisition.
|
|
2019
|
|
2018
|
|
2017
|
||||||
Dividend yield (1)
|
1.70
|
%
|
|
1.45
|
%
|
|
1.24
|
%
|
|||
Expected volatility (2)
|
27.96
|
%
|
|
28.02
|
%
|
|
22.70
|
%
|
|||
Risk-free interest rate (3)
|
2.27
|
%
|
|
1.87
|
%
|
|
0.86
|
%
|
|||
Expected life (in years) (4)
|
0.5
|
|
|
0.5
|
|
|
0.5
|
|
|||
Weighted-average grant date fair value
|
$
|
10.51
|
|
|
$
|
12.26
|
|
|
$
|
13.01
|
|
(1)
|
The dividend yield is calculated based on semi-annual dividends paid and the fair market value of CVS Health stock at the grant date.
|
(2)
|
The expected volatility is estimated based on the historical volatility of CVS Health’s daily stock price over the previous six month period.
|
(3)
|
The risk-free interest rate is selected based on the Treasury constant maturity interest rate whose term is consistent with the expected term of ESPP purchases (i.e., six months).
|
(4)
|
The expected life is based on the semi-annual purchase period.
|
In thousands, except weighted average grant date fair value
|
Units
|
|
Weighted Average
Grant Date
Fair Value
|
|||
Outstanding at beginning of year, nonvested
|
11,005
|
|
|
$
|
76.18
|
|
Granted
|
7,644
|
|
|
$
|
54.34
|
|
Vested
|
(4,216
|
)
|
|
$
|
62.59
|
|
Forfeited
|
(1,308
|
)
|
|
$
|
58.73
|
|
Outstanding at end of year, nonvested
|
13,125
|
|
|
$
|
61.57
|
|
In millions
|
2019
|
|
2018
|
|
2017
|
||||||
Cash received from stock options exercised (including ESPP)
|
$
|
210
|
|
|
$
|
242
|
|
|
$
|
329
|
|
Payments for taxes for net share settlement of equity awards
|
112
|
|
|
97
|
|
|
71
|
|
|||
Intrinsic value of stock options and SARs exercised
|
30
|
|
|
79
|
|
|
176
|
|
|||
Fair value of stock options and SARs vested
|
467
|
|
|
324
|
|
|
341
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Dividend yield (1)
|
3.68
|
%
|
|
2.76
|
%
|
|
2.56
|
%
|
|||
Expected volatility (2)
|
21.76
|
%
|
|
21.27
|
%
|
|
18.39
|
%
|
|||
Risk-free interest rate (3)
|
0.56
|
%
|
|
2.77
|
%
|
|
1.77
|
%
|
|||
Expected life (in years) (4)
|
6.3
|
|
|
4.8
|
|
|
4.1
|
|
|||
Weighted-average grant date fair value
|
$
|
6.27
|
|
|
$
|
24.55
|
|
|
$
|
9.43
|
|
(1)
|
The dividend yield is based on annual dividends paid and the fair market value of CVS Health stock at the grant date.
|
(2)
|
The expected volatility is estimated based on the historical volatility of CVS Health’s daily stock price over a period equal to the expected life of each option or SAR grant after adjustments for infrequent events such as stock splits.
|
(3)
|
The risk-free interest rate is selected based on yields from U.S. Treasury zero-coupon issues with a remaining term equal to the expected term of the options or SARs being valued.
|
(4)
|
The expected life represents the number of years the options or SARs are expected to be outstanding from grant date based on historical option or SAR holder exercise experience.
|
In thousands, except weighted average exercise price and remaining contractual term
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
Outstanding at beginning of year
|
22,909
|
|
|
$
|
71.15
|
|
|
|
|
|
||
Granted
|
6,538
|
|
|
$
|
54.40
|
|
|
|
|
|
||
Exercised
|
(3,667
|
)
|
|
$
|
46.17
|
|
|
|
|
|
||
Forfeited
|
(769
|
)
|
|
$
|
68.12
|
|
|
|
|
|
||
Expired
|
(1,109
|
)
|
|
$
|
82.40
|
|
|
|
|
|
||
Outstanding at end of year
|
23,902
|
|
|
$
|
69.98
|
|
|
4.76
|
|
$
|
274,987
|
|
Exercisable at end of year
|
13,267
|
|
|
$
|
77.48
|
|
|
2.73
|
|
109,765
|
|
|
Vested at end of year and expected to vest in the future
|
23,328
|
|
|
$
|
70.28
|
|
|
4.67
|
|
265,128
|
|
12.
|
Shareholders’ Equity
|
In billions
Authorization Date
|
Authorized
|
|
Remaining as of
December 31, 2019
|
||||
November 2, 2016 (“2016 Repurchase Program”)
|
$
|
15.0
|
|
|
$
|
13.9
|
|
December 15, 2014 (“2014 Repurchase Program”)
|
10.0
|
|
|
—
|
|
In millions
|
|
||
Estimated minimum statutory surplus required by regulators
|
$
|
5,841
|
|
Investments on deposit with regulatory bodies
|
672
|
|
|
Estimated maximum dividend distributions permitted in 2020 without prior regulatory approval
|
366
|
|
13.
|
Other Comprehensive Income
|
|
At December 31,
|
||||||||||
In millions
|
2019
|
|
2018
|
|
2017
|
||||||
Net unrealized investment gains:
|
|
|
|
|
|
||||||
Beginning of year balance
|
$
|
97
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other comprehensive income before reclassifications ($927, $132 and $0 pretax)
|
763
|
|
|
97
|
|
|
—
|
|
|||
Amounts reclassified from accumulated other comprehensive income ($(105), $1 and $0 pretax) (1)
|
(86
|
)
|
|
—
|
|
|
—
|
|
|||
Other comprehensive income
|
677
|
|
|
97
|
|
|
—
|
|
|||
End of year balance
|
774
|
|
|
97
|
|
|
—
|
|
|||
|
|
|
|
|
|
||||||
Foreign currency translation adjustments:
|
|
|
|
|
|
||||||
Beginning of year balance
|
(158
|
)
|
|
(129
|
)
|
|
(127
|
)
|
|||
Other comprehensive income (loss) before reclassifications
|
8
|
|
|
(29
|
)
|
|
(2
|
)
|
|||
Amounts reclassified from accumulated other comprehensive loss (2)
|
154
|
|
|
—
|
|
|
—
|
|
|||
Other comprehensive income (loss)
|
162
|
|
|
(29
|
)
|
|
(2
|
)
|
|||
End of year balance
|
4
|
|
|
(158
|
)
|
|
(129
|
)
|
|||
|
|
|
|
|
|
||||||
Net cash flow hedges:
|
|
|
|
|
|
||||||
Beginning of year balance
|
312
|
|
|
(15
|
)
|
|
(5
|
)
|
|||
Adoption of new accounting standard (3)
|
—
|
|
|
(3
|
)
|
|
—
|
|
|||
Other comprehensive income (loss) before reclassifications ($(25), $465 and $(18) pretax)
|
(18
|
)
|
|
344
|
|
|
(11
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income (loss) ($(20), $(19) and $2 pretax) (4)
|
(15
|
)
|
|
(14
|
)
|
|
1
|
|
|||
Other comprehensive income (loss)
|
(33
|
)
|
|
330
|
|
|
(10
|
)
|
|||
End of year balance
|
279
|
|
|
312
|
|
|
(15
|
)
|
|||
|
|
|
|
|
|
||||||
Pension and other postretirement benefits:
|
|
|
|
|
|
||||||
Beginning of year balance
|
(149
|
)
|
|
(21
|
)
|
|
(173
|
)
|
|||
Adoption of new accounting standard (3)
|
—
|
|
|
(4
|
)
|
|
—
|
|
|||
Other comprehensive income (loss) before reclassifications ($162, $(178) and $0 pretax)
|
120
|
|
|
(132
|
)
|
|
—
|
|
|||
Amounts reclassified from accumulated other comprehensive loss ($(12), $11 and $249 pretax) (5)
|
(9
|
)
|
|
8
|
|
|
152
|
|
|||
Other comprehensive income (loss)
|
111
|
|
|
(124
|
)
|
|
152
|
|
|||
End of year balance
|
(38
|
)
|
|
(149
|
)
|
|
(21
|
)
|
|||
|
|
|
|
|
|
||||||
Total beginning of year accumulated other comprehensive income (loss)
|
102
|
|
|
(165
|
)
|
|
(305
|
)
|
|||
Adoption of new accounting standard (3)
|
—
|
|
|
(7
|
)
|
|
—
|
|
|||
Total other comprehensive income
|
917
|
|
|
274
|
|
|
140
|
|
|||
Total end of year accumulated other comprehensive income (loss)
|
$
|
1,019
|
|
|
$
|
102
|
|
|
$
|
(165
|
)
|
(1)
|
Amounts reclassified from accumulated other comprehensive income for specifically identified debt securities are included in net investment income in the consolidated statements of operations.
|
(2)
|
Amounts reclassified from accumulated other comprehensive loss represent the elimination of the cumulative translation adjustment associated with the sale of Onofre, which was sold on July 1, 2019. The loss on the divestiture of Onofre is reflected in operating expenses in the consolidated statements of operations.
|
(3)
|
Reflects the adoption of ASU 2018-02, Income Statement Reporting Comprehensive Income (Topic 220); Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income during the year ended December 31, 2018.
|
(4)
|
Amounts reclassified from accumulated other comprehensive income (loss) for specifically identified cash flow hedges are included within interest expense in the consolidated statements of operations. The Company expects to reclassify approximately $14 million, net of tax, in net gains associated with its cash flow hedges into net income within the next 12 months.
|
(5)
|
Amounts reclassified from accumulated other comprehensive loss for specifically identified pension and other postretirement benefits are included in other expense (income) in the consolidated statements of operations.
|
14.
|
Earnings (Loss) Per Share
|
In millions, except per share amounts
|
2019
|
|
2018
|
|
2017
|
||||||
Numerator for earnings (loss) per share calculation:
|
|
|
|
|
|
||||||
Income (loss) from continuing operations
|
$
|
6,631
|
|
|
$
|
(596
|
)
|
|
$
|
6,631
|
|
Income allocated to participating securities
|
(5
|
)
|
|
(3
|
)
|
|
(24
|
)
|
|||
Net (income) loss attributable to noncontrolling interests
|
3
|
|
|
2
|
|
|
(1
|
)
|
|||
Income (loss) from continuing operations attributable to CVS Health
|
$
|
6,629
|
|
|
$
|
(597
|
)
|
|
$
|
6,606
|
|
|
|
|
|
|
|
||||||
Denominator for earnings (loss) per share calculation:
|
|
|
|
|
|
||||||
Weighted average shares, basic
|
1,301
|
|
|
1,044
|
|
|
1,020
|
|
|||
Effect of dilutive securities
|
4
|
|
|
—
|
|
|
4
|
|
|||
Weighted average shares, diluted
|
1,305
|
|
|
1,044
|
|
|
1,024
|
|
|||
|
|
|
|
|
|
||||||
Earnings (loss) per share from continuing operations:
|
|
|
|
|
|
||||||
Basic
|
$
|
5.10
|
|
|
$
|
(0.57
|
)
|
|
$
|
6.48
|
|
Diluted
|
$
|
5.08
|
|
|
$
|
(0.57
|
)
|
|
$
|
6.45
|
|
15.
|
Reinsurance
|
In millions
|
2019
|
|
2018
|
||||
Reinsurer
|
|
|
|
||||
Hartford Life and Accident Insurance Company
|
$
|
3,085
|
|
|
$
|
3,470
|
|
Lincoln Life & Annuity Company of New York
|
413
|
|
|
424
|
|
||
WellCare Health Plans
|
355
|
|
|
—
|
|
||
VOYA Retirement Insurance and Annuity Company
|
175
|
|
|
186
|
|
||
All Other
|
103
|
|
|
461
|
|
||
Total
|
$
|
4,131
|
|
|
$
|
4,541
|
|
In millions
|
2019
|
|
2018
|
||||
Direct
|
$
|
62,968
|
|
|
$
|
8,365
|
|
Assumed
|
2,108
|
|
|
38
|
|
||
Ceded
|
(1,954
|
)
|
|
(219
|
)
|
||
Net premiums
|
$
|
63,122
|
|
|
$
|
8,184
|
|
In millions
|
2019
|
|
2018
|
||||
Direct
|
$
|
52,592
|
|
|
$
|
6,773
|
|
Assumed
|
1,562
|
|
|
32
|
|
||
Ceded
|
(1,625
|
)
|
|
(211
|
)
|
||
Net benefit costs
|
$
|
52,529
|
|
|
$
|
6,594
|
|
16.
|
Commitments and Contingencies
|
•
|
ASC Claim Funding Accounts - The Company has arrangements with certain banks for the processing of claim payments for its ASC customers. The banks maintain accounts to fund claims of the Company’s ASC customers. The customer is responsible for funding the amount paid by the bank each day. In these arrangements, the Company guarantees that the banks will not sustain losses if the responsible ASC customer does not properly fund its account. The aggregate maximum exposure under these arrangements is generally limited to $250 million. The Company can limit its exposure to these guarantees by suspending the payment of claims for ASC customers that have not adequately funded the amount paid by the bank.
|
•
|
Separate Accounts Assets - Certain Separate Accounts assets associated with the large case pensions business in the Corporate/Other segment represent funds maintained as a contractual requirement to fund specific pension annuities that the Company has guaranteed. Minimum contractual obligations underlying the guaranteed benefits in these Separate
|
17.
|
Segment Reporting
|
In millions
|
Pharmacy
Services (1) |
|
Retail/
LTC |
|
Health Care
Benefits |
|
Corporate/
Other |
|
Intersegment
Eliminations (2) |
|
Consolidated
Totals |
||||||||||||
2019:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Revenues from customers
|
$
|
141,491
|
|
|
$
|
86,608
|
|
|
$
|
69,005
|
|
|
$
|
100
|
|
|
$
|
(41,439
|
)
|
|
$
|
255,765
|
|
Net investment income
|
—
|
|
|
—
|
|
|
599
|
|
|
412
|
|
|
—
|
|
|
1,011
|
|
||||||
Total revenues
|
141,491
|
|
|
86,608
|
|
|
69,604
|
|
|
512
|
|
|
(41,439
|
)
|
|
256,776
|
|
||||||
Adjusted operating income (loss)
|
5,129
|
|
|
6,705
|
|
|
5,202
|
|
|
(1,000
|
)
|
|
(697
|
)
|
|
15,339
|
|
||||||
Depreciation and amortization
|
766
|
|
|
1,723
|
|
|
1,721
|
|
|
161
|
|
|
—
|
|
|
4,371
|
|
||||||
Additions to property and equipment
|
332
|
|
|
1,212
|
|
|
533
|
|
|
404
|
|
|
—
|
|
|
2,481
|
|
||||||
2018:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Revenues from customers
|
134,736
|
|
|
83,989
|
|
|
8,904
|
|
|
4
|
|
|
(33,714
|
)
|
|
193,919
|
|
||||||
Net investment income
|
—
|
|
|
—
|
|
|
58
|
|
|
602
|
|
|
—
|
|
|
660
|
|
||||||
Total revenues
|
134,736
|
|
|
83,989
|
|
|
8,962
|
|
|
606
|
|
|
(33,714
|
)
|
|
194,579
|
|
||||||
Adjusted operating income (loss)
|
4,955
|
|
|
7,403
|
|
|
528
|
|
|
(856
|
)
|
|
(769
|
)
|
|
11,261
|
|
||||||
Depreciation and amortization
|
710
|
|
|
1,698
|
|
|
172
|
|
|
138
|
|
|
—
|
|
|
2,718
|
|
||||||
Additions to property and equipment
|
326
|
|
|
1,350
|
|
|
46
|
|
|
401
|
|
|
—
|
|
|
2,123
|
|
||||||
2017:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Revenues from customers
|
130,822
|
|
|
79,398
|
|
|
3,582
|
|
|
—
|
|
|
(29,037
|
)
|
|
184,765
|
|
||||||
Net investment income
|
—
|
|
|
—
|
|
|
5
|
|
|
16
|
|
|
—
|
|
|
21
|
|
||||||
Total revenues
|
130,822
|
|
|
79,398
|
|
|
3,587
|
|
|
16
|
|
|
(29,037
|
)
|
|
184,786
|
|
||||||
Adjusted operating income (loss)
|
4,628
|
|
|
7,475
|
|
|
359
|
|
|
(896
|
)
|
|
(741
|
)
|
|
10,825
|
|
||||||
Depreciation and amortization
|
710
|
|
|
1,651
|
|
|
2
|
|
|
116
|
|
|
—
|
|
|
2,479
|
|
||||||
Additions to property and equipment
|
311
|
|
|
1,398
|
|
|
—
|
|
|
340
|
|
|
—
|
|
|
2,049
|
|
(1)
|
Total revenues of the Pharmacy Services segment include approximately $11.5 billion, $11.4 billion and $10.8 billion of retail co-payments for 2019, 2018 and 2017, respectively. See Note 1 ‘‘Significant Accounting Policies’’ for additional information about retail co-payments.
|
(2)
|
Intersegment eliminations relate to intersegment revenue generating activities that occur between the Pharmacy Services segment, the Retail/LTC segment and/or the Health Care Benefits segment.
|
In millions
|
2019
|
|
2018
|
|
2017
|
||||||
Operating income (GAAP measure)
|
$
|
11,987
|
|
|
$
|
4,021
|
|
|
$
|
9,538
|
|
Amortization of intangible assets (1)
|
2,436
|
|
|
1,006
|
|
|
817
|
|
|||
Acquisition-related transaction and integration costs (2)
|
480
|
|
|
492
|
|
|
65
|
|
|||
Store rationalization charges (3)
|
231
|
|
|
—
|
|
|
215
|
|
|||
Loss on divestiture of subsidiary (4)
|
205
|
|
|
86
|
|
|
9
|
|
|||
Goodwill impairments (5)
|
—
|
|
|
6,149
|
|
|
181
|
|
|||
Impairment of long-lived assets (6)
|
—
|
|
|
43
|
|
|
—
|
|
|||
Interest income on financing for the Aetna Acquisition (7)
|
—
|
|
|
(536
|
)
|
|
—
|
|
|||
Adjusted operating income
|
$
|
15,339
|
|
|
$
|
11,261
|
|
|
$
|
10,825
|
|
(1)
|
The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the Company’s statements of operations in operating expenses within each segment. Although intangible assets contribute to the Company’s revenue generation, the amortization of intangible assets does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of the Company’s acquisition activity. Accordingly, the Company believes excluding the amortization of intangible assets enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within the Company’s GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.
|
(2)
|
In 2019, 2018 and 2017, acquisition-related transaction and integration costs relate to the Aetna Acquisition. In 2018 and 2017, acquisition-related transaction and integration costs also relate to the acquisition of Omnicare. The acquisition-related transaction and integration costs are reflected in the Company’s consolidated statements of operations in operating expenses within the Corporate/Other segment and the Retail/LTC segment.
|
(3)
|
In 2019, the store rationalization charges relate to the planned closure of 46 underperforming retail pharmacy stores during the second quarter of 2019 and the planned closure of 22 underperforming retail pharmacy stores during the first quarter of 2020. In 2019, the store rationalization charges primarily relate to operating lease right-of-use asset impairment charges and are reflected in the Company’s consolidated statements of operations in operating expenses within the Retail/LTC segment. In 2017, the store rationalization charges related to the Company’s enterprise streamlining initiative and are reflected in the Company’s consolidated statements of operations in operating expenses within the Retail/LTC segment.
|
(4)
|
In 2019, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of Onofre, which occurred on July 1, 2019. The loss on divestiture primarily relates to the elimination of the cumulative translation adjustment from accumulated other comprehensive income. In 2018, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of the Company’s RxCrossroads subsidiary for $725 million on January 2, 2018. In 2017, the loss on divestiture of subsidiary represents transaction costs associated with the sale of RxCrossroads. The losses on divestiture of subsidiary are reflected in the Company’s consolidated statements of operations in operating expenses within the Retail/LTC segment and Corporate/Other segment.
|
(5)
|
In 2018, the goodwill impairments relate to the LTC reporting unit within the Retail/LTC segment. In 2017, the goodwill impairments relate to the RxCrossroads reporting unit within the Retail/LTC segment.
|
(6)
|
In 2018, impairment of long-lived assets primarily relates to the impairment of property and equipment within the Retail/LTC segment and is reflected in operating expenses in the Company’s consolidated statements of operations.
|
(7)
|
In 2018, the Company recorded interest income of $536 million on the proceeds of the $40 billion of unsecured senior notes it issued in March 2018 to partially fund the Aetna Acquisition. All amounts are for the periods prior to the close of the Aetna Acquisition, which occurred on November 28, 2018, and were recorded within the Corporate/Other segment.
|
|
|
Impairment of goodwill
|
Description of the Matter
|
|
At December 31, 2019, the Company’s goodwill allocated to the Long-term Care (“LTC”) and Commercial Business reporting units was $0.4 billion and $26.8 billion, respectively. As discussed in Note 1 to the consolidated financial statements, goodwill is not amortized, but rather is subject to an annual impairment review, or more frequent reviews, if events and circumstances indicate an impairment exists.
Auditing management's annual goodwill impairment test related to the LTC and Commercial Business reporting units was complex and highly judgmental due to the significant estimation required to determine the fair value of the reporting units. In particular, the fair value estimate was sensitive to significant assumptions, such as changes in the discount rate, projected revenue and projected operating income that are forward-looking and affected by future economic and market conditions.
|
How We Addressed the Matter in Our Audit
|
|
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s annual goodwill impairment review process, including controls over management’s review of the significant assumptions described above.
To test the estimated fair value of the LTC and Commercial Business reporting units, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis. We compared the significant assumptions to the reporting units’ historical results and third-party industry data. We performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the key assumptions. We involved valuation specialists to assist in our assessment of the methodology and significant assumptions (such as discount rates), used by the Company. In addition, we tested management’s reconciliation of the fair value of all reporting units to the market capitalization of the Company.
|
|
|
Valuation of health care costs payable
|
Description of the Matter
|
|
At December 31, 2019, the incurred but not reported (“IBNR”) liabilities represented $5.0 billion of $6.9 billion of health care costs payable. As discussed in Note 1 to the financial statements, the Company’s liability for health care costs payable includes estimated payments for (1) services rendered to members but not yet reported and (2) claims that have been reported but not yet paid, each as of the financial statement date (collectively, “IBNR”). The estimated IBNR liability is developed utilizing actuarial principles and assumptions that include historical and projected claim submission and processing patterns, historical and assumed medical cost trends, historical utilization of medical services, claim inventory levels, changes in membership and product mix, seasonality and other relevant factors to record the actuarial best estimate of health care costs payable. There is significant uncertainty inherent in determining management’s actuarial best estimate of health care costs payable. In particular, the estimate is sensitive to the assumed completion factors and the assumed health care cost trend rates.
Auditing management’s actuarial best estimate of IBNR reserves for health care costs payable for its products and services involved a high degree of subjectivity in evaluating management’s assumptions used in the valuation process.
|
How We Addressed the Matter in Our Audit
|
|
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the process for estimating IBNR reserves. This included, among others, controls over the completeness and accuracy of data used in the actuarial projections, the transfer of data between underlying source systems, and the review and approval processes that management has in place for the actuarial principles and assumptions used in estimating the health care costs payable.
To test IBNR reserves, our audit procedures included, among others, testing the completeness and accuracy of the underlying claim and membership data used in the calculation of IBNR reserves. We involved actuarial specialists to assist with our audit procedures, which included, among others, evaluating the methodologies applied by the Company in determining the actuarially determined liability, evaluating management’s actuarial principles and assumptions used in their analysis based on historical claim experience, and independently calculating a range of reserve estimates for comparison to management’s actuarial best estimate of the liability for health care costs payable. Additionally, we performed a review of the prior period liabilities for incurred but not paid claims to subsequent claims development.
|
In millions, except per share amounts
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Year
|
||||||||||
2019:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total revenues
|
$
|
61,646
|
|
|
$
|
63,431
|
|
|
$
|
64,810
|
|
|
$
|
66,889
|
|
|
$
|
256,776
|
|
Operating income
|
2,690
|
|
|
3,332
|
|
|
2,928
|
|
|
3,037
|
|
|
11,987
|
|
|||||
Income from continuing operations
|
1,427
|
|
|
1,931
|
|
|
1,529
|
|
|
1,744
|
|
|
6,631
|
|
|||||
Net income attributable to CVS Health
|
1,421
|
|
|
1,936
|
|
|
1,530
|
|
|
1,747
|
|
|
6,634
|
|
|||||
Per common share data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations attributable to CVS Health
|
$
|
1.09
|
|
|
$
|
1.49
|
|
|
$
|
1.17
|
|
|
$
|
1.34
|
|
|
$
|
5.10
|
|
Income from discontinued operations attributable to CVS Health
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net income attributable to CVS Health
|
$
|
1.09
|
|
|
$
|
1.49
|
|
|
$
|
1.17
|
|
|
$
|
1.34
|
|
|
$
|
5.10
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations attributable to CVS Health
|
$
|
1.09
|
|
|
$
|
1.49
|
|
|
$
|
1.17
|
|
|
$
|
1.33
|
|
|
$
|
5.08
|
|
Income from discontinued operations attributable to CVS Health
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net income attributable to CVS Health
|
$
|
1.09
|
|
|
$
|
1.49
|
|
|
$
|
1.17
|
|
|
$
|
1.33
|
|
|
$
|
5.08
|
|
Dividends per common share
|
$
|
0.50
|
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
|
$
|
2.00
|
|
In millions, except per share amounts
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Year
|
||||||||||
2018:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total revenues
|
$
|
45,743
|
|
|
$
|
46,922
|
|
|
$
|
47,490
|
|
|
$
|
54,424
|
|
|
$
|
194,579
|
|
Operating income (loss)
|
1,996
|
|
|
(1,373
|
)
|
|
2,574
|
|
|
824
|
|
|
4,021
|
|
|||||
Income (loss) from continuing operations
|
998
|
|
|
(2,562
|
)
|
|
1,390
|
|
|
(422
|
)
|
|
(596
|
)
|
|||||
Net income (loss) attributable to CVS Health
|
998
|
|
|
(2,563
|
)
|
|
1,390
|
|
|
(419
|
)
|
|
(594
|
)
|
|||||
Per common share data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Income (loss) from continuing operations attributable to CVS Health
|
$
|
0.98
|
|
|
$
|
(2.52
|
)
|
|
$
|
1.36
|
|
|
$
|
(0.37
|
)
|
|
$
|
(0.57
|
)
|
Income (loss) from discontinued operations attributable to CVS Health
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net income (loss) attributable to CVS Health
|
$
|
0.98
|
|
|
$
|
(2.52
|
)
|
|
$
|
1.36
|
|
|
$
|
(0.37
|
)
|
|
$
|
(0.57
|
)
|
Diluted earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Income (loss) from continuing operations attributable to CVS Health
|
$
|
0.98
|
|
|
$
|
(2.52
|
)
|
|
$
|
1.36
|
|
|
$
|
(0.37
|
)
|
|
$
|
(0.57
|
)
|
Income (loss) from discontinued operations attributable to CVS Health
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net income (loss) attributable to CVS Health
|
$
|
0.98
|
|
|
$
|
(2.52
|
)
|
|
$
|
1.36
|
|
|
$
|
(0.37
|
)
|
|
$
|
(0.57
|
)
|
Dividends per common share
|
$
|
0.50
|
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
|
$
|
2.00
|
|
|
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights (1) (2)
(a)
|
|
Weighted
average exercise
price of
outstanding
options, warrants
and rights
(b)
|
|
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
first column) (1)
(c)
|
||||
Equity compensation plans approved by stockholders (3)
|
32,237
|
|
|
$
|
73.32
|
|
|
17,152
|
|
Equity compensation plans not approved by stockholders (4) (5)
|
4,518
|
|
|
43.46
|
|
|
26,849
|
|
|
Total
|
36,755
|
|
|
$
|
71.83
|
|
|
44,001
|
|
(1)
|
Shares in thousands.
|
(2)
|
Consists of: (i) 21,184 shares of common stock underlying outstanding options, (ii) 1,110 shares of common stock issuable upon the exercise of outstanding stock appreciation rights (“SARs”) and (iii) 14,461 shares of common stock issuable on the vesting of outstanding restricted stock units, deferred stock units and performance stock units, assuming target level performance in the case of performance stock units. The number of shares included with respect to outstanding SARs is the number of shares of CVS Health common stock that would have been issued had the SARs been exercised based on the closing price per share of CVS Health common stock on December 31, 2019, as reported on the NYSE, which was $74.29.
|
(3)
|
Consists of the CVS Health 2017 Incentive Compensation Plan.
|
(4)
|
Consists of the Amended Aetna Inc. 2010 Stock Incentive Plan (the “Aetna Stock Plan”).
|
(5)
|
Amount in column (c) consists of the maximum number of shares of CVS Health common stock available for future issuance under the Aetna Stock Plan as of December 31, 2019.
|
1.
|
Financial Statements. See “Index to Consolidated Financial Statements” in Item 8 of this 10-K.
|
2.
|
Financial Statement Schedules. All financial statement schedules are omitted because they are not applicable, not required under the instructions, or the information is included in the consolidated financial statements or related notes.
|
3.
|
Exhibits. The exhibits listed in the “Index to Exhibits” in this Item 15 are filed or incorporated by reference as part of this 10-K. Exhibits marked with an asterisk (*) are management contracts or compensatory plans or arrangements. Exhibits other than those listed are omitted because they are not required to be listed or are not applicable. Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Registrant hereby agrees to furnish to the Securities and Exchange Commission a copy of any omitted instrument that is not required to be listed.
|
Exhibit
|
|
Description
|
2
|
|
Plan of acquisition, reorganization, arrangement, liquidation or succession
|
2.1
|
|
|
2.2
|
|
|
2.3
|
|
|
|
|
|
3
|
|
Articles of Incorporation and Bylaws
|
3.1
|
|
|
3.2
|
|
|
|
|
|
4
|
|
Instruments defining the rights of security holders, including indentures
|
4.1
|
|
|
4.2
|
|
|
4.3
|
|
|
4.4
|
|
|
4.5
|
|
|
4.6
|
|
|
4.7
|
|
|
4.8
|
|
|
4.9
|
|
4.10
|
|
|
4.11
|
|
|
4.12
|
|
|
4.13
|
|
|
4.14
|
|
|
4.15
|
|
|
|
|
|
10
|
|
Material Contracts
|
10.1
|
|
|
10.2
|
|
|
10.3
|
|
|
10.4
|
|
|
10.5
|
|
|
10.6
|
|
|
10.7
|
|
|
10.8
|
|
|
10.9*
|
|
|
10.10*
|
|
|
10.11*
|
|
|
10.12*
|
|
|
10.13*
|
|
|
10.14*
|
|
|
10.15*
|
|
|
10.16*
|
|
10.17*
|
|
|
10.18*
|
|
|
10.19*
|
|
|
10.20*
|
|
|
10.21*
|
|
|
10.22*
|
|
|
10.23*
|
|
|
10.24*
|
|
|
10.25*
|
|
|
10.26*
|
|
|
10.27*
|
|
|
10.28*
|
|
|
10.29*
|
|
|
10.30*
|
|
|
10.31*
|
|
|
10.32*
|
|
|
10.33*
|
|
|
10.34*
|
|
|
10.35*
|
|
|
10.36*
|
|
|
10.37*
|
|
|
10.38*
|
|
10.39*
|
|
|
10.40*
|
|
|
10.41*
|
|
|
10.42*
|
|
|
10.43*
|
|
|
10.44*
|
|
|
10.45*
|
|
|
10.46*
|
|
|
10.47*
|
|
|
10.48*
|
|
|
10.49*
|
|
|
10.50*
|
|
|
10.51*
|
|
|
10.52*
|
|
|
10.53*
|
|
|
10.54*
|
|
|
10.55*
|
|
|
10.56*
|
|
|
10.57*
|
|
Descriptions of certain arrangements not embodied in formal documents as described under the heading “Non-Employee Director Compensation” are incorporated herein by reference to the Proxy Statement (when filed).
|
|
|
|
21
|
|
Subsidiaries of the registrant
|
21.1
|
|
|
|
|
|
23
|
|
Consents of experts and counsel
|
23.1
|
|
|
|
|
|
31
|
|
Rule 13a-14(a)/15d-14(a) Certifications
|
31.1
|
|
31.2
|
|
|
|
|
|
32
|
|
Section 1350 Certifications
|
32.1
|
|
|
32.2
|
|
|
|
|
|
101
|
|
Interactive Data File
|
101
|
|
The following materials from the CVS Health Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2019 formatted in Inline XBRL: (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income (Loss), (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders’ Equity and (vi) the related Notes to Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
|
|
|
104
|
|
|
104
|
|
Cover Page Interactive Data File - The cover page from the Company's Annual Report on Form 10-K for the year ended December 31, 2019, formatted in Inline XBRL (included as Exhibit 101).
|
|
|
CVS HEALTH CORPORATION
|
|
Date:
|
February 18, 2020
|
By:
|
/s/ EVA C. BORATTO
|
|
|
|
Eva C. Boratto
|
|
|
|
Executive Vice President and Chief Financial Officer
|
Signature
|
|
Title(s)
|
|
Date
|
|
|
|
|
|
/s/ FERNANDO AGUIRRE
|
|
Director
|
|
February 18, 2020
|
Fernando Aguirre
|
|
|
|
|
|
|
|
|
|
/s/ RICHARD M. BRACKEN
|
|
Director
|
|
February 18, 2020
|
Richard M. Bracken
|
|
|
|
|
|
|
|
|
|
/s/ C. DAVID BROWN II
|
|
Director
|
|
February 18, 2020
|
C. David Brown II
|
|
|
|
|
|
|
|
|
|
/s/ EVA C. BORATTO
|
|
Executive Vice President and Chief Financial
|
|
February 18, 2020
|
Eva C. Boratto
|
|
Officer (Principal Financial Officer)
|
|
|
|
|
|
|
|
/s/ JAMES D. CLARK
|
|
Senior Vice President - Controller and Chief
|
|
February 18, 2020
|
James D. Clark
|
|
Accounting Officer (Principal Accounting Officer)
|
|
|
|
|
|
|
|
/s/ ALECIA A. DECOUDREAUX
|
|
Director
|
|
February 18, 2020
|
Alecia A. DeCoudreaux
|
|
|
|
|
|
|
|
|
|
/s/ NANCY-ANN M. DEPARLE
|
|
Director
|
|
February 18, 2020
|
Nancy-Ann M. DeParle
|
|
|
|
|
|
|
|
|
|
/s/ DAVID W. DORMAN
|
|
Chair of the Board and Director
|
|
February 18, 2020
|
David W. Dorman
|
|
|
|
|
|
|
|
|
|
/s/ ROGER N. FARAH
|
|
Director
|
|
February 18, 2020
|
Roger N. Farah
|
|
|
|
|
|
|
|
|
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/s/ ANNE M. FINUCANE
|
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Director
|
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February 18, 2020
|
Anne M. Finucane
|
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|
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/s/ EDWARD J. LUDWIG
|
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Director
|
|
February 18, 2020
|
Edward J. Ludwig
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|
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/s/ LARRY J. MERLO
|
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President and Chief Executive Officer
|
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February 18, 2020
|
Larry J. Merlo
|
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(Principal Executive Officer) and Director
|
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|
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/s/ JEAN-PIERRE MILLON
|
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Director
|
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February 18, 2020
|
Jean-Pierre Millon
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/s/ MARY L. SCHAPIRO
|
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Director
|
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February 18, 2020
|
Mary L. Schapiro
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/s/ RICHARD J. SWIFT
|
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Director
|
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February 18, 2020
|
Richard J. Swift
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|
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/s/ WILLIAM C. WELDON
|
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Director
|
|
February 18, 2020
|
William C. Weldon
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/s/ TONY L. WHITE
|
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Director
|
|
February 18, 2020
|
Tony L. White
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Page
|
|
ARTICLE I - INTRODUCTION
|
|||
1.1
|
|
Name of Plan
|
|
1.2
|
|
Purpose of Plan
|
|
1.3
|
|
“Top Hat” Pension Benefit Plan
|
|
1.4
|
|
Funding
|
|
1.5
|
|
Effective Date
|
|
1.6
|
|
Administration
|
|
1.7
|
|
Number and Gender
|
|
1.8
|
|
Headings
|
|
ARTICLE II - DEFINITIONS
|
|||
2.1
|
|
Account
|
|
2.2
|
|
Affiliate
|
|
2.3
|
|
Beneficiary
|
|
2.4
|
|
Board
|
|
2.5
|
|
Change in Control
|
|
2.6
|
|
Code
|
|
2.7
|
|
Committee
|
|
2.8
|
|
Deferral Account
|
|
2.9
|
|
Deferred Stock
|
|
2.10
|
|
Deferred Stock Compensation Election
|
|
2.11
|
|
Disability
|
|
2.12
|
|
Distribution Date
|
|
2.13
|
|
Effective Date
|
|
2.14
|
|
Eligible Executive
|
5.3
|
|
Dividend Equivalents
|
|
5.4
|
|
Trusts
|
|
ARTICLE VI - DISTRIBUTION OF ACCOUNT
|
|||
6.1
|
|
Distribution of Elections - Timing of Payment
|
|
6.2
|
|
Disability Distributions
|
|
6.3
|
|
Distributions in the Event of Death
|
|
6.4
|
|
Distributions Upon Termination of Employment Other Than Retirement, Death or Disability
|
|
6.5
|
|
Change in Control
|
|
6.6
|
|
Form of Payment
|
|
6.7
|
|
Change of Distribution Election
|
|
6.8
|
|
Designation of Beneficiary
|
|
6.9
|
|
Unclaimed Account
|
|
6.10
|
|
Forfeited Stock
|
|
6.11
|
|
Hardship Withdrawals
|
|
6.12
|
|
Distribution of Grandfathered Deferral Account
|
|
6.13
|
|
Form of Settlement
|
|
6.14
|
|
Adjustments
|
|
6.15
|
|
Special rules for stock units transferred from the Aetna Deferred Compensation Program
|
|
ARTICLE VII - ADMINISTRATION
|
|||
7.1
|
|
Plan Administrator
|
|
7.2
|
|
General Powers of Administration
|
|
7.3
|
|
Costs of Administration
|
|
7.4
|
|
Indemnification of Plan Administrator
|
|
7.5
|
|
409A Compliance
|
|
7.6
|
|
Sources of Stock: Limitation on Amount of Stock-Denominated Deferrals
|
|
ARTICLE VIII - CLAIMS PROCEDURE
|
|||
8.1
|
|
Claims
|
|
8.2
|
|
Claim Decision
|
|
8.3
|
|
Request for Review/Appeal
|
8.4
|
|
Review of Decision
|
|
8.5
|
|
Time Limit for Bringing Legal Action
|
|
ARTICLE IX - MISCELLANEOUS
|
|||
9.1
|
|
Not Contract of Employment
|
|
9.2
|
|
Non-Assignability of Benefits
|
|
9.3
|
|
Receipt and Release
|
|
9.4
|
|
Withholding and Deduction and Taxes
|
|
9.5
|
|
Amendment and Termination
|
|
9.6
|
|
Compliance with Securities and Other Laws
|
|
9.7
|
|
Provisions Relating to Section 16 of the Exchange Act
|
|
9.8
|
|
No Trust Created
|
|
9.9
|
|
Unsecured General Creditor Status of Employee
|
|
9.10
|
|
Limitation
|
|
9.11
|
|
Payment to Minors and Incompetents
|
|
9.12
|
|
Acceleration of or Delay in Payments
|
|
9.13
|
|
Severability
|
|
9.14
|
|
Governing Laws
|
|
9.15
|
|
Binding Effect
|
|
APPENDIX A - PROVISIONS APPLICABLE TO A PARTICIPANT’S ACCOUNT UNDER THE AETNA DEFERRED COMEPNSATION PROGRAM
|
1.1
|
Name of Plan.
|
1.2
|
Purpose of Plan.
|
1.3
|
“Top Hat” Pension Benefit Plan.
|
1.4
|
Funding.
|
1.5
|
Effective Date.
|
1.6
|
Administration.
|
1.7
|
Number and Gender.
|
1.8
|
Headings.
|
2.1
|
Account.
|
2.2
|
Affiliate.
|
2.3
|
Beneficiary.
|
2.4
|
Board.
|
2.5
|
Change in Control.
|
2.6
|
Code.
|
2.7
|
Committee.
|
2.8
|
Deferral Account.
|
2.9
|
Deferred Stock.
|
2.10
|
Deferred Stock Compensation Election.
|
2.11
|
Disability.
|
2.12
|
Distribution Date.
|
2.13
|
Effective Date.
|
2.14
|
Eligible Executive.
|
2.15
|
Employee.
|
2.16
|
ERISA.
|
2.17
|
Exchange Act.
|
2.18
|
Executive.
|
2.19
|
Grandfathered Deferral Account.
|
2.20
|
Participant.
|
2.21
|
Plan Administrator.
|
2.22
|
Plan Year.
|
2.23
|
Retirement.
|
2.24
|
Specified Employee.
|
2.25
|
Specific Future Year.
|
2.26
|
Stock.
|
2.27
|
Termination of Employment.
|
2.28
|
Trust.
|
2.29
|
Trustee.
|
2.30
|
Trust Agreement.
|
2.31
|
Universal 409A Definition Document.
|
2.32
|
Year of Service.
|
3.1
|
Eligibility.
|
(a)
|
An Employee who is an Executive on October 1st of a calendar year (or such other date in the calendar year as designated by the Committee) shall be eligible to participate in the Plan. The Committee may, in its sole discretion, designate other key employees of the Company or an Affiliate who are members of a select group of management or highly compensated employees as eligible to participate in the Plan.
|
(b)
|
Notwithstanding any Plan provision to the contrary, Employees must also be subject to the income tax laws of the United States in order to be eligible for participation in the Plan.
|
(c)
|
Subject to the provisions of Sections 3.3 and Section 4.1, an Eligible Executive shall remain eligible to continue participation in the Plan for each Plan Year following his or her initial year of participation in the Plan.
|
3.2
|
Commencement of Participation.
|
3.3
|
Termination of Participation.
|
(a)
|
Participation shall cease when the benefits that have been credited to a Participant’s Deferral Account have been distributed to him or her.
|
(b)
|
Subject to the provisions of Section 4.3, a Participant shall only be eligible to make Deferred Stock Compensation Elections under the Plan for as long as he or she remains an Eligible Executive.
|
(c)
|
If a former Participant who has incurred a Termination of Employment with the Company and all Affiliates and whose participation in the Plan ceased under Section 3.3(a) is reemployed as an Executive, the former Participant may again become eligible to participate in accordance with the provisions of Section 3.1.
|
4.1
|
Deferrals.
|
4.2
|
Filing Requirements of Deferred Stock Compensation Elections.
|
4.3
|
Modification or Revocation of Election by Participant.
|
(a)
|
Once a properly completed Deferred Stock Compensation Election form is received by the Company, the elections of the Participant shall be irrevocable: provided however, that subject to the requirements of Section 409A of the Code, the Committee and/or Plan Administrator may, in its discretion, permit a Participant to elect a further deferral of amounts credited to a Deferral Account by filing a later election form in accordance with Section 6.7, below.
|
(b)
|
If a Participant ceases to be an Executive after the date a Deferred Stock Compensation Election becomes effective but continues to be employed by the Company or an Affiliate, he or she shall continue to be a Participant and his or her Deferred Stock Compensation Election currently in effect shall remain in force, but such Participant shall not be eligible to make any further Deferred Stock Compensation Elections until such time as he or she shall once again become an Eligible Executive.
|
(c)
|
A Participant who ceases to be an Executive shall continue to be eligible to participate unless and until such Participant fails to make an annual deferral election under the Plan or the CVS Health Corporation Deferred Compensation Plan
|
5.1
|
Establishment; Crediting of Amounts Deferred.
|
5.2
|
Deferred Stock As Sole Investment Vehicle.
|
5.3
|
Dividend Equivalents.
|
(a)
|
Cash and Non-Stock Dividends. If the Company declares and pays a dividend on Stock in the form of cash or property other than shares of Stock, then a number of additional shares of Deferred Stock shall be credited to a Participant’s Deferral Account as of the payment date for such dividend equal to (A) the number of shares of Deferred Stock credited to the Deferral Account as of the record date for such dividend, multiplied by (B) the amount of cash plus the fair market value of any property other than shares actually paid as a dividend on each share at such payment date, divided by (C) the fair market value of a share of Stock at such payment date.
|
(b)
|
Stock Dividends and Splits. If the Company declares and pays a dividend on Stock in the form of additional shares of Stock, or there occurs a forward split of Stock, then a number of additional shares of Deferred Stock shall be credited to the Participant’s Deferral Account as of the payment date for such dividend or forward Stock split equal to (A) the number of shares of Deferred Stock credited to the Deferral Account as of the record date for such dividend or split, multiplied by (B) the number of additional shares actually paid as a dividend or issued in such split in respect of each share of Stock.
|
5.4
|
Trusts.
|
6.1
|
Distribution Elections - Timing of Payment.
|
(a)
|
Subject to the limitations set forth in this Article VI, each time a Participant makes a Deferred Stock Compensation Election, the Participant shall designate on that applicable Deferred Compensation Election, that the distribution of such deferrals shall be made or commence as the case may be pursuant to Section 6.6 as of (i) the Participant’s Retirement; or (ii) a Specific Future Year not later than the Plan Year in which the Participant attains age seventy-one (71)
|
i.
|
Retirement. The distribution of the portion of a Participant’s Deferral Account (or subaccount(s)) that is deferred to Retirement under this Section shall commence on the first business day in the January next following his or her Retirement, pursuant to the provisions of Section 6.6, provided, however, that with respect to a Participant who is a Specified Employee as of the date of his or her Retirement, payment of any portion of his or her Deferral Account (or any subaccount(s) thereof) that is subject to Section 409A of the Code will be delayed until the first business day of the seventh (7th) month following the date such Retirement occurs.
|
ii.
|
Specific Future Year. In the event a Participant elects to have the distribution of such deferrals made or commence as of a Specific Future Year, subject to rules established by the Plan Administrator, the deferral period must be at least five (5) Plan Years. The distribution of the portion of a Participant’s Deferral Account (or subaccount(s)) that is deferred to a Specific Future Year shall commence on the first business day of January in that specific year pursuant to the provisions of Section 6.6.
|
6.2
|
Disability Distributions.
|
6.3
|
Distributions in the Event of Death.
|
6.4
|
Distributions Upon Termination of Employment Other Than Retirement, Death or Disability.
|
6.5
|
Change in Control.
|
6.6
|
Form of Payment.
|
(a)
|
Installments. Substantially equal annual installments, as elected by the Participant, from two (2) to ten (10) years. The initial installment of an annual payment stream will begin as of the first business day of the January (a) next following the Participant’s date of Retirement or (b) of the Specific Future Year, as the case may be. Subsequent annual payments will be as of the first business day of each subsequent calendar year of the installment period. Each installment will be equal to a fraction of the Account balance (or subaccount(s) thereof) as of the date the installment is paid, with the numerator of the fraction being “1” and the denominator being the number of payments remaining in the payment schedule.
|
(b)
|
Lump sum. A Participant may elect distribution in the form of a single lump sum payment. Except for Specified Employees, distribution shall be made as of the first business day of the January (a) next following the Participant’s date of Retirement or (b) of the Specific Future Year, as the case may be, in accordance with the provisions of set forth in Section 6.1.
|
(c)
|
Distributions to a Participant made pursuant to Section 6.1 will occur pursuant to the Participant’s payment elections at the time he or she submits the applicable Deferred Stock Compensation Election. A Participant may choose different forms of payment with respect to each Deferred Stock Compensation Election. In the absence of an election of the form of payment by a Participant on a Deferred Stock Compensation Election, the portion of the Participant’s Account deferred pursuant to that Deferred Stock Compensation Election, adjusted pursuant to the provisions of Article V, shall be paid in a single lump sum.
|
(d)
|
A Participant shall not change his or her form of payment election, except as otherwise provided in Section 6.7 below.
|
6.7
|
Change of Distribution Election.
|
(a)
|
In accordance with such procedures as the Plan Administrator may prescribe, a Participant may elect to change his or her Specific Future Year election under Section 6.1(a)(ii) with respect to a portion of his or her Deferral Account to a later Specific Future Year by duly completing, executing and filing with the Plan Administrator a new Specific Future Year election applicable to such Deferrals, subject to the following limitations:
|
i.
|
such election must be made at least twelve (12) months prior to the Specific Future Year then in effect with respect to that portion of his or her Deferral or Account (or subaccount(s) thereof), and such election will not become effective until at least twelve (12) months after the date on which the election is made; and
|
ii.
|
the new Specific Future Year shall be a calendar year that is not less than five (5) years from the Specific Future Year then in effect.
|
(b)
|
In accordance with such procedures as the Plan Administrator may prescribe, a Participant may elect to delay the payment of a portion of his or her Deferral Account (or any subaccount(s) thereof) scheduled to be paid at his or her Retirement to his or her Retirement plus five (5) calendar years by duly completing, executing and filing with the Plan Administrator a new Retirement election applicable to such deferrals; provided, however such election must be made at least twelve (12) months prior to Retirement and shall not become effective until at least twelve (12) months after the date on which the election is made.
|
(c)
|
In accordance with such procedures as the Plan Administrator may prescribe, a Participant may elect to change the form of payment election under Section 6.6 applicable to his or her distribution under Section 6.1(a)(i) or (ii) by duly completing, executing and filing with the Plan Administrator a new form of payment election applicable to such deferrals, subject to the following limitations:
|
i.
|
such election must be made at least twelve (12) months prior to the Specific Future Year then in effect with respect to that portion of his or her Deferral Account (or subaccount(s) thereof), and such election will not become effective until at least twelve (12) months after the date on which the election is made; and
|
ii.
|
the distribution of that portion of his or her Deferral Account (or subaccount(s) thereof) shall be deferred for five (5) years from the date such amount would otherwise have been paid absent this election.
|
(d)
|
It is the Company’s intent that the provisions of Sections 6.7(a), (b) and (c) comply with the subsequent election provisions in Section 409A(a)(4)(C) of the Code, related regulations and other applicable guidance, and this Section 6.7 shall be interpreted accordingly. The Plan Administrator may impose additional restrictions or conditions on a Participant’s ability to make an election pursuant to this Section 6.7. For avoidance of doubt, a Participant may not elect to alter the distribution of any portion of his or her Deferral Account (or any subaccount(s) thereof) from Retirement to a Specific Future Year or, except as provided in paragraph (a) above, from a Specific Future Year to Retirement.
|
6.8
|
Designation of Beneficiary.
|
6.9
|
Unclaimed Account.
|
6.10
|
Forfeited Stock.
|
6.11
|
Hardship Withdrawals.
|
6.12
|
Distribution of Grandfathered Deferral Account.
|
6.13
|
Form of Settlement.
|
6.14
|
Adjustments.
|
6.15
|
Special rules for stock units transferred from the Aetna Deferred Compensation Program
|
7.1
|
Plan Administrator.
|
7.2
|
General Powers of Administration.
|
7.3
|
Costs of Administration.
|
7.4
|
Indemnification.
|
7.5
|
409A Compliance.
|
7.6
|
Sources of Stock: Limitation on Amount of Stock-Denominated Deferrals.
|
8.1
|
Claims.
|
8.2
|
Claim Decision.
|
(a)
|
The reason or reasons for such denial;
|
(b)
|
The pertinent provisions of the Plan;
|
(c)
|
Appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; and
|
(d)
|
The time limits for requesting a review under this Section.
|
8.3
|
Request for Review/Appeal.
|
8.4
|
Review of Decision.
|
8.5
|
Time Limit for Bringing Legal Action.
|
9.1
|
Not Contract of Employment.
|
9.2
|
Non-Assignability of Benefits.
|
9.3
|
Receipt and Release.
|
9.4
|
Withholding and Deduction and Taxes.
|
9.5
|
Amendment and Termination.
|
9.6
|
Compliance with Securities and Other Laws.
|
9.7
|
Provisions Relating to Section 16 of the Exchange Act.
|
9.8
|
No Trust Created.
|
9.9
|
Unsecured General Creditor Status of Employee.
|
9.10
|
Limitation.
|
9.11
|
Payment to Minors and Incompetents.
|
9.12
|
Acceleration of or Delay in Payments.
|
9.13
|
Severability.
|
9.14
|
Governing Laws.
|
9.15
|
Binding Effect.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE I - INTRODUCTION
|
|||
1.1
|
|
Name of Plan
|
|
1.2
|
|
Purpose of Plan
|
|
1.3
|
|
“Top Hat” Pension Benefit Plan
|
|
1.4
|
|
Funding
|
|
1.5
|
|
Effective Date
|
|
1.6
|
|
Administration
|
|
1.7
|
|
Number and Gender
|
|
1.8
|
|
Headings
|
|
ARTICLE II - DEFINITIONS
|
|||
2.1
|
|
Account
|
|
2.2
|
|
Affiliate
|
|
2.3
|
|
Annual Cash Incentive
|
|
2.4
|
|
Annual Cash Incentive Deferral
|
|
2.5
|
|
Base Salary
|
|
2.6
|
|
Base Salary Deferral
|
|
2.7
|
|
Beneficiary
|
|
2.8
|
|
Board
|
|
2.9
|
|
Change in Control
|
|
2.10
|
|
Code
|
|
2.11
|
|
Commissions
|
|
2.12
|
|
Commissions Deferral
|
|
2.13
|
|
Committee
|
|
2.14
|
|
Company Account
|
|
2.15
|
|
Company Contribution
|
|
2.16
|
|
CVS Caremark Retention Payment
|
|
2.17
|
|
Deferrals
|
|
2.18
|
|
Deferral Account
|
|
2.19
|
|
Deferred Compensation Election
|
5.2
|
|
Subaccounts
|
|
5.3
|
|
Hypothetical Nature of Accounts
|
|
5.4
|
|
Vesting
|
|
5.5
|
|
Deferral Crediting Options
|
|
5.6
|
|
Hypothetical Gains or Losses
|
|
ARTICLE VI - DISTRIBUTION OF ACCOUNT
|
|||
6.1
|
|
Distribution of Elections - Timing of Payment
|
|
6.2
|
|
Disability Distributions
|
|
6.3
|
|
Distributions in the Event of Death
|
|
6.4
|
|
Distributions Upon Termination of Employment Other Than Retirement, Death or Disability
|
|
6.5
|
|
Change in Control
|
|
6.6
|
|
Form of Payment
|
|
6.7
|
|
Change of Distribution Election
|
|
6.8
|
|
Account Valuation upon a Distribution
|
|
6.9
|
|
Designation of Beneficiary
|
|
6.10
|
|
Unclaimed Account
|
|
6.11
|
|
Hardship Withdrawals
|
|
6.12
|
|
Distribution of Grandfathered Deferral Account and the Grandfathered Company Account
|
|
ARTICLE VII - ADMINISTRATION
|
|||
7.1
|
|
Plan Administrator
|
|
7.2
|
|
General Powers of Administration
|
|
7.3
|
|
Costs of Administration
|
|
7.4
|
|
Indemnification
|
|
7.5
|
|
409A Compliance
|
|
ARTICLE VIII - CLAIMS PROCEDURE
|
|||
8.1
|
|
Claims
|
|
8.2
|
|
Claim Decision
|
|
8.3
|
|
Request for Review/Appeal
|
|
8.4
|
|
Review of Decision
|
|
8.5
|
|
Time Limit for Bringing Legal Action
|
|
ARTICLE IX - MISCELLANEOUS
|
|||
9.1
|
|
Not Contract of Employment
|
|
9.2
|
|
Non-Assignability of Benefits
|
|
9.3
|
|
Withholding and Deduction and Taxes
|
|
9.4
|
|
Amendment and Termination
|
|
9.5
|
|
Compliance with Securities and Other Laws
|
9.6
|
|
No Trust Created
|
|
9.7
|
|
Unsecured General Creditor Status of Employee
|
|
9.8
|
|
Limitation
|
|
9.9
|
|
Payment to Minors and Incompetents
|
|
9.10
|
|
Acceleration of or Delay in Payments
|
|
9.11
|
|
Severability
|
|
9.12
|
|
Governing Laws
|
|
9.13
|
|
Binding Effect
|
|
APPENDIX A - PROVISIONS APPLICABLE TO A PARTICIPANT’S GRANDFATHERED DEFERRAL ACCOUNT AND GRANDFATHERED COMPANY ACCOUNT
|
|||
ARTICLE I - DEFNITIONS
|
|||
ARTICLE IV - DEFERRALS AND COMPANY CONTRIBUTIONS
|
|||
ARTICLE V - MAINTENENCE OF ACCOUNTS
|
|||
ARTICLE VI - PAYMENT OF BENEFIT
|
|||
APPENDIX B - PROVISIONS APPLICABLE TO A PARTICIPANT’S ACCOUNT UNDER THE OMNICARE, INC. DEFERRED COMPENSATION PROGRAM
|
|||
APPENDIX C - PROVISIONS APPLICABLE TO A PARTICIPANT’S ACCOUNT UNDER THE AETNA SUPPLEMENTAL 401(K) PLAN AND AETNA DEFERRED COMPENSATION PLAN
|
1.1
|
Name of Plan.
|
1.2
|
Purpose of Plan.
|
1.3
|
“Top Hat” Pension Benefit Plan.
|
1.4
|
Funding.
|
1.5
|
Effective Date.
|
1.6
|
Administration.
|
1.7
|
Number and Gender.
|
1.8
|
Headings.
|
2.1
|
Account.
|
2.2
|
Aetna Plans.
|
2.2
|
Affiliate.
|
2.3
|
Annual Cash Incentive.
|
2.4
|
Annual Cash Incentive Deferral.
|
2.5
|
Base Salary.
|
2.6
|
Base Salary Deferral
|
2.7
|
Beneficiary.
|
2.8
|
Board.
|
2.9
|
Change in Control.
|
2.10
|
Code.
|
2.11
|
Commissions.
|
2.12
|
Commissions Deferral.
|
2.13
|
Committee.
|
2.14
|
Company Account.
|
2.15
|
Company Contribution.
|
2.16
|
CVS Caremark Retention Payment.
|
2.17
|
Deferrals.
|
2.18
|
Deferral Account.
|
2.19
|
Deferred Compensation Election.
|
2.20
|
Disability.
|
2.21
|
Distribution Date.
|
2.22
|
Effective Date.
|
2.23
|
Elective Deferrals.
|
2.24
|
Eligible Executive.
|
2.25
|
Employee.
|
2.26
|
ERISA.
|
2.27
|
Executive.
|
2.28
|
Future Fund.
|
2.29
|
Grandfathered Company Account.
|
2.30
|
Grandfathered Deferral Account.
|
2.31
|
Lost Matching Contributions.
|
2.32
|
Participant.
|
2.33
|
Plan Administrator.
|
2.34
|
Plan Year.
|
2.35
|
Qualified Future Fund Matching Contribution.
|
2.36
|
Retirement.
|
2.37
|
Specified Employee.
|
2.38
|
Specific Future Year.
|
2.39
|
Termination of Employment.
|
2.40
|
Total Pay
|
2.41
|
Universal 409A Definition Document.
|
2.42
|
Valuation Date.
|
2.43
|
Year of Service.
|
3.1
|
Eligibility.
|
(a)
|
An Employee who is an Executive on October 1st of a calendar year (or such other date in the calendar year as designated by the Committee) shall be eligible to participate in the Plan. The Committee may, in its sole discretion, designate other key employees of the Company or an Affiliate who are members of a select group of management or highly compensated employees as eligible to participate in the Plan.
|
(b)
|
Notwithstanding any Plan provision to the contrary, Employees must also be subject to the income tax laws of the United States in order to be eligible for participation in the Plan.
|
(c)
|
Subject to the provisions of Sections 3.3 and Section 4.1, an Eligible Executive shall remain eligible to continue participation in the Plan for each Plan Year following his or her initial year of participation in the Plan.
|
(d)
|
A Participant who ceases to be an Executive can continue to be eligible to participate unless and until such Participant fails to make an annual deferral election under the Plan or under the CVS Health Corporation Deferred Stock Compensation Plan, at which point the Employee must meet the threshold compensation level in order to be eligible to participate for a future Plan Year.
|
(e)
|
Deferred Compensation Plan Participants who made a deferral under the Deferred Compensation Plan with respect to the two most recent enrollment periods shall, regardless of compensation threshold, be eligible to participate in the Deferred Compensation Plan for the 2020 Plan Year.
|
(f)
|
Active Aetna employees who elected to defer in either of the Aetna Plans in the two most recent enrollment periods shall, regardless of compensation threshold, be eligible to participate in the Deferred Compensation Plan for the 2020 Plan Year.
|
3.2
|
Commencement of Participation.
|
3.3
|
Termination of Participation.
|
(a)
|
Participation shall cease when the benefits that have been credited to a Participant’s Deferral Account have been distributed to him or her.
|
(b)
|
Subject to the provisions of Section 4.3(c), a Participant shall only be eligible to make Deferrals under the Plan for as long as he or she remains an Eligible Executive.
|
(c)
|
If a former Participant who has incurred a Termination of Employment with the Company and all Affiliates and whose participation in the Plan ceased under Section 3.3(a) is reemployed as an Executive, the former Participant may again become eligible to participate in accordance with the provisions of Section 3.1(a).
|
4.1
|
Deferrals.
|
(a)
|
Subject to the following provisions of this Article IV, an Eligible Executive may defer for any Plan Year, (i) up to fifty percent (50%) of Base Salary otherwise earned and payable in that Plan Year, and/or (ii) up to eighty percent (80%) of Annual Cash Incentive otherwise earned in that Plan Year and payable in that Plan Year or in the first calendar quarter of the following Plan Year, and/or (iii) up to eighty percent (80%) of Commissions otherwise earned in that Plan Year and payable in that Plan Year or in the first calendar quarter of the following Plan Year. The Plan Administrator may, as it deems appropriate, establish maximum or minimum limits on the amounts which may be deferred for a Plan Year and/or the times of such Deferred Compensation Elections. An Eligible Executive shall be given advance notice of any such limits. Notwithstanding anything in the Plan to the contrary, a previously submitted Participant’s Deferred Compensation Election (with respect to Base Salary, Annual Cash Incentive and/or Commissions) shall be disregarded following the Participant’s Termination of Employment.
|
(b)
|
Deferrals under the Plan shall be calculated with respect to the gross cash compensation payable to the Participant prior to any deductions (e.g., 401(k) deferrals) or withholdings. However, the Deferrals shall be reduced by the Plan Administrator as necessary if it is later determined, after Deferrals are made under the Plan and after additional deduction of all required income and employment taxes, 401(k) and other employee benefit deductions, and other deductions required by law, that all such total deferrals will exceed one hundred percent (100%) of the cash compensation of the Participant available under Section 4.1(a). Changes to payroll withholdings that affect the amount of compensation being deferred to the Plan shall be allowed only to the extent permissible under Section 409A of the Code.
|
4.2
|
Filing Requirements of Deferred Compensation Elections.
|
4.3
|
Modification or Revocation of Election by Participant.
|
(a)
|
A Participant’s Deferred Compensation Election for a Plan Year shall become irrevocable as of the close of business on the date established by the Plan Administrator, but not later than the last day of the calendar year preceding the Plan Year in which such Base Salary, Annual Cash Incentive or Commissions applicable to that election is earned, and shall become effective as of the first day of the Plan Year in which such Base Salary and/or Annual Cash Incentive or Commissions is earned.
|
(b)
|
If a Participant’s Deferred Compensation Election applicable to his or her Base Salary and/or Annual Cash Incentive or Commissions is cancelled for a Plan Year, he or she will not be permitted to elect to make Deferrals again until the next Plan Year.
|
(c)
|
If a Participant ceases to be an Executive after the date a Deferred Compensation Election becomes effective but continues to be employed by the Company or an Affiliate, his or her Deferred Compensation Election currently in effect shall remain in force.,
|
(d)
|
Notwithstanding anything in the Plan to the contrary, if an Eligible Executive:
|
i.
|
receives a withdrawal of deferred cash contributions on account of hardship from any plan which is maintained by the Company or an Affiliate and which meets the requirements of Section 401(k) of the Code (or any successor thereto); and
|
ii.
|
is precluded from making contributions to such 401(k) plan for at least six (6) months after receipt of the hardship withdrawal,
|
4.4
|
Company Contributions and Other Deferrals.
|
(a)
|
Company Contributions - Restoration of Lost Matching Contribution. The amount of Lost Matching Contributions credited under the Plan on a Participant’s behalf each calendar year shall be equal to (i) minus (ii) where:
|
i.
|
is the lesser of (a) total Qualified Future Fund Matching Contribution that would have been allocated on the Participant’s behalf under Future Fund for the Plan Year, without giving effect to any reductions or limitations required by Sections 401(a)(17), 401(k), 402(g) and/or 415 of the Code (i.e., 5% of Total Pay), and (b)
|
ii.
|
If the Participant is eligible to contribute to Future Fund (whether pre-tax or after-tax) during the Plan Year, the maximum amount of matching contributions that could have been made on the participants behalf to Future Fund had the participant contributed the maximum amount permissible by law for that Plan Year,
|
(b)
|
LTIP Deferrals.
|
(c)
|
Cash Retention Award Deferrals.
|
4.5
|
Deferral and Contribution Timing.
|
5.1
|
Establishment of Bookkeeping Accounts.
|
5.2
|
Subaccounts.
|
5.3
|
Hypothetical Nature of Accounts.
|
5.4
|
Vesting.
|
5.5
|
Deferral Crediting Options.
|
5.6
|
Hypothetical Gains or Losses.
|
6.1
|
Distribution Elections - Timing of Payment.
|
(a)
|
Subject to the limitations set forth in this Article VI, each time a Participant makes a Deferred Compensation Election with respect to a Plan Year beginning on or after January 1, 2016, the Participant shall designate on that applicable Deferred Compensation Election, separately for Participant deferrals and Company Contributions, as adjusted pursuant to Article V, that the distribution of such deferrals shall be made or commence, as the case may be, pursuant to Section 6.6, as of (i) the Participant’s Retirement; or (ii) a Specific Future Year not later than the Plan Year in which the Participant attains age seventy-one (71).
|
i.
|
Retirement. The distribution of the portion of a Participant’s Deferral or Company Account (or subaccount(s)) that is deferred to Retirement under this Section shall commence on the first business day in the January next following his or her Retirement, pursuant to the provisions of Section 6.6, provided, however, that with respect to a Participant who is a Specified Employee as of the date of his or her Retirement, payment of any portion of his or her Deferral or Company Account (or any subaccount(s) thereof) that is subject to Section 409A of the Code will be delayed until the first business day of the seventh (7th) month following the date such Retirement occurs.
|
ii.
|
Specific Future Year. In the event a Participant elects to have the distribution of such deferrals made or commence as of a Specific Future Year, subject to rules established by the Plan Administrator, the deferral period must be at least five (5) Plan Years. The distribution of the portion of a Participant’s Deferral or Company Account (or subaccount(s)) that is deferred to a Specific Future Year shall commence on the first business day of January in that specific year pursuant to the provisions of Section 6.6.
|
(b)
|
Company Contributions shall be distributed pursuant to the Participant’s distribution election. In the event a Participant has not made a distribution election for the Company Contributions for that Plan Year, such distribution shall mirror his or her distribution election made with respect to his or her Base Salary Deferral or Annual Cash Incentive or Commissions Deferral for that Plan Year, if any, in such order; otherwise, such distribution shall be made at the Participant’s Retirement.
|
6.2
|
Disability Distributions.
|
6.3
|
Distributions in the Event of Death.
|
6.4
|
Distributions Upon Termination of Employment Other Than Retirement, Death or Disability.
|
6.5
|
Change in Control.
|
6.6
|
Form of Payment.
|
(a)
|
Installments. Subject to the limitations set forth in Article VI, distributions will be made in annual (or quarterly, if the election was made prior to October 1, 2008) installments, as elected by the Participant, for up to, and including, ten (10) years (fifteen (15) years for an election made prior to October 1, 2008). The initial installment of an annual or quarterly payment stream will begin as of the first business day of the January (a) next following the Participant’s date of Retirement or (b) of the Specific Future Year, as the case may be, in accordance with the provisions of set forth in Section 6.1. Subsequent annual or quarterly payments will be as of the first business day of each subsequent calendar year or quarter of the installment period.
|
(b)
|
Lump sum. A Participant may elect distribution in the form of a single lump sum payment. Except for Specified Employees, distribution shall be made as of the first business day of the January (a) next following the Participant’s date of Retirement or (b) of the Specific Future Year, as the case may be, in accordance with the provisions of set forth in Section 6.1.
|
(c)
|
Distributions to a Participant made pursuant to Section 6.1 will occur pursuant to the Participant’s payment elections at the time he or she submits the applicable Deferred Compensation Election. A Participant may choose different forms of payment with respect to each Deferred Compensation Election. Company Contributions, adjusted pursuant to Article V, shall be distributed pursuant to the Participant’s form of payment election made with respect to his or her Company Contributions for that year. If the Participant has not made an election with respect to his or her Company Contributions, the portion of his or her Company Account attributable to such Company contributions will be distributed in accordance with his or her form of payment election with respect to his or her Base Salary Deferral, Annual Cash Incentive or Commissions Deferrals for that year, if any, in that order; otherwise payment will be made in a lump sum payment. In the absence of an election of the form of payment by a Participant on a Deferred Compensation Election, the portion of the Participant’s Account deferred pursuant to that Deferred Compensation Election, adjusted pursuant to the provisions of Article V, shall be paid in a single lump sum.
|
(d)
|
A Participant shall not change his or her form of payment election, except as otherwise provided in Section 6.7 below.
|
6.7
|
Change of Distribution Election.
|
(a)
|
In accordance with such procedures as the Plan Administrator may prescribe, a Participant may elect to change his or her Specific Future Year election under Section 6.1(a)(ii) with respect to a portion of his or her Deferral Account (or an Interim Distribution date election applicable to a portion of his or her Deferral Account or Company Account made pursuant to the provisions of the Plan as in effect prior to December 31, 2008) to a later Specific Future Year (or, if applicable, a later Interim Distribution date) by duly completing, executing and filing with the Plan Administrator a new Specific Future Year election (or Interim Distribution date election) applicable to such Deferrals, subject to the following limitations:
|
i.
|
such election must be made at least twelve (12) months prior to the Specific Future Year (or Interim Distribution date) then in effect with respect to that portion of his or her Deferral or Company Account (or subaccount(s) thereof), and such election will not become effective until at least twelve (12) months after the date on which the election is made; and
|
ii.
|
the new Specific Future Year (or Interim Distribution date) shall be a calendar year that is not less than five (5) years from the Specific Future Year (or Interim Distribution date) then in effect.
|
(b)
|
In accordance with such procedures as the Plan Administrator may prescribe, a Participant may elect to delay the payment of a portion of his or her Deferral or Company Account (or any subaccount(s) thereof) scheduled to be paid at his or her Retirement to his or her Retirement plus five (5) calendar years by duly completing, executing and filing with the Plan Administrator a new Retirement election applicable to such deferrals; provided, however such election must be made at least twelve (12) months prior to Retirement and
|
(c)
|
In accordance with such procedures as the Plan Administrator may prescribe, a Participant may elect to change the form of payment election under Section 6.6 applicable to his or her distribution under Section 6.1(a)(i) or (ii) by duly completing, executing and filing with the Plan Administrator a new form of payment election applicable to such deferrals, subject to the following limitations:
|
i.
|
such election must be made at least twelve (12) months prior to the Specific Future Year then in effect with respect to that portion of his or her Deferral or Company Account (or subaccount(s) thereof), and such election will not become effective until at least twelve (12) months after the date on which the election is made; and
|
ii.
|
the distribution of that portion of his or her Deferral or Company Account (or subaccount(s) thereof) shall be deferred for five (5) years from the date such amount would otherwise have been paid absent this election.
|
(d)
|
It is the Company's intent that the provisions of Sections 6.7(a), (b) and (c) comply with the subsequent election provisions in Section 409A(a)(4)(C) of the Code, related regulations and other applicable guidance, and this Section 6.7 shall be interpreted accordingly. The Plan Administrator may impose additional restrictions or conditions on a Participant's ability to make an election pursuant to this Section 6.7. For avoidance of doubt, a Participant may not elect to alter the distribution of any portion of his or her Deferral or Company Accounts (or any subaccount(s) thereof) from Retirement to a Specific Future Year or, except as provided in paragraph (a) above, from a Specific Future Year to Retirement.
|
6.8
|
Account Valuation upon a Distribution.
|
6.9
|
Designation of Beneficiary.
|
6.10
|
Unclaimed Account.
|
6.11
|
Hardship Withdrawals.
|
6.12
|
Distribution of Grandfathered Deferral Account and the Grandfathered Company Account.
|
7.1
|
Plan Administrator.
|
7.2
|
General Powers of Administration.
|
7.3
|
Costs of Administration.
|
7.4
|
Indemnification.
|
7.5
|
409A Compliance.
|
8.1
|
Claims.
|
8.2
|
Claim Decision.
|
(a)
|
The reason or reasons for such denial;
|
(b)
|
The pertinent provisions of the Plan;
|
(c)
|
Appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; and
|
(d)
|
The time limits for requesting a review under this Section.
|
8.3
|
Request for Review/Appeal.
|
8.4
|
Review of Decision.
|
8.5
|
Time Limit for Bringing Legal Action.
|
9.1
|
Not Contract of Employment.
|
9.2
|
Non-Assignability of Benefits.
|
9.3
|
Withholding and Deduction and Taxes.
|
9.4
|
Amendment and Termination.
|
9.5
|
Compliance with Securities and Other Laws.
|
9.6
|
No Trust Created.
|
9.7
|
Unsecured General Creditor Status of Employee.
|
9.8
|
Limitation.
|
9.9
|
Payment to Minors and Incompetents.
|
9.10
|
Acceleration of or Delay in Payments.
|
9.11
|
Severability.
|
9.12
|
Governing Laws.
|
9.13
|
Binding Effect.
|
6.2.
|
Form of Payment
|
6.3.
|
Disability Distributions
|
6.6.
|
Change of Distribution Election
|
4.
|
Non-Disclosure of Confidential Information.
|
6.
|
Rights to Inventions, Works.
|
7.
|
Cooperation.
|
/s/ Eva C. Boratto
|
|
/s/ Lisa Bisaccia
|
Eva C. Boratto
|
|
Lisa Bisaccia
|
|
|
Chief Human Resources Officer
|
XXXXXX
|
|
CVS Health Corporation
|
Employee ID
|
|
|
|
|
|
Date: 6/21/2019
|
|
|
|
|
|
1.
|
For an employee residing in Illinois, Kansas, or North Carolina, you are hereby advised:
|
2.
|
For an employee residing in Utah, you are hereby advised:
|
3.
|
For an employee residing in Minnesota, you are hereby advised:
|
4.
|
Non-Disclosure of Confidential Information.
|
6.
|
Rights to Inventions, Works.
|
7.
|
Cooperation.
|
/s/ Derica Rice
|
|
/s/ Lisa Bisaccia
|
Derica Rice
|
|
Lisa Bisaccia
|
|
|
Chief Human Resources Officer
|
XXXXXXX
|
|
CVS Health Corporation
|
Employee ID
|
|
|
|
|
|
Date: 6/19/19
|
|
|
|
|
|
1.
|
For an employee residing in Illinois, Kansas, or North Carolina, you are hereby advised:
|
2.
|
For an employee residing in Utah, you are hereby advised:
|
3.
|
For an employee residing in Minnesota, you are hereby advised:
|
/s/ Thomas Moriarty
|
|
/s/ Lisa Bisaccia
|
Thomas Moriarty
|
|
Lisa Bisaccia
|
|
|
Chief Human Resources Officer
|
XXXXXXX
|
|
CVS Health Corporation
|
Employee ID
|
|
|
|
|
|
Date: 7/8/19
|
|
|
|
|
|
1.
|
For an employee residing in Illinois, Kansas, or North Carolina, you are hereby advised:
|
2.
|
For an employee residing in Utah, you are hereby advised:
|
3.
|
For an employee residing in Minnesota, you are hereby advised:
|
•
|
CVS Foreign, Inc. (New York)
|
◦
|
CVS Caremark Indemnity Ltd. (Bermuda)
|
◦
|
CVS International, L.L.C. (Delaware)
|
•
|
CVS Pharmacy, Inc. (Rhode Island)
|
•
|
Aetna Inc. (Pennsylvania)
|
◦
|
Aetna Health Holdings, LLC (Delaware)
|
•
|
Aetna Health of California Inc. (California)
|
•
|
Aetna Health Inc. (Connecticut)
|
•
|
Aetna Health Inc. (Florida)
|
•
|
Aetna Health Inc. (Georgia)
|
•
|
Aetna Health Inc. (Maine)
|
•
|
Aetna Health of Michigan Inc. (Michigan)
|
•
|
Aetna Health Inc. (New Jersey)
|
•
|
Aetna Health Inc. (New York)
|
•
|
Aetna Better Health Inc. (New York)
|
•
|
Aetna Health Inc. (Pennsylvania)
|
•
|
Aetna Health Inc. (Texas)
|
•
|
Aetna Better Health of California Inc. (California)
|
•
|
Aetna Health of Ohio Inc. (Ohio)
|
•
|
Aetna Better Health of Texas Inc. (Texas)
|
•
|
Aetna Better Health of Washington, Inc. (Washington)
|
•
|
Aetna Better Health Inc. (Georgia)
|
•
|
Aetna HealthAssurance Pennsylvania, Inc. (Pennsylvania)
|
•
|
Aetna Dental of California Inc. (California)
|
•
|
Aetna Dental Inc. (New Jersey)
|
•
|
Aetna Dental Inc. (Texas)
|
•
|
Aetna Rx Home Delivery, LLC (Delaware)
|
•
|
Aetna Health Management, LLC (Delaware)
|
•
|
Aetna Ireland Inc. (Delaware)
|
•
|
Aetna Specialty Pharmacy, LLC (Delaware)
|
•
|
Cofinity, Inc. (Delaware)
|
•
|
@Credentials Inc. (Delaware)
|
•
|
Aetna Better Health Inc. (Pennsylvania)
|
•
|
Aetna Better Health Inc. (Connecticut)
|
•
|
Aetna Better Health Inc. (Illinois)
|
•
|
Aetna Better Health of Kansas Inc. (Kansas)
|
•
|
Aetna Better Health, Inc. (Louisiana)
|
•
|
Aetna Florida Inc. (Florida)
|
•
|
Aetna Better Health Inc. (Ohio)
|
•
|
Aetna Better Health of Oklahoma Inc. (Oklahoma)
|
•
|
Aetna Better Health of Nevada Inc. (Nevada)
|
•
|
Aetna Better Health Inc. (New Jersey)
|
•
|
Aetna Better Health of North Carolina Inc. (North Carolina)
|
•
|
Aetna Network Services LLC (Connecticut)
|
•
|
Aetna Risk Assurance Company of Connecticut Inc. (Connecticut)
|
•
|
Aetna Student Health Agency Inc. (Massachusetts)
|
•
|
Delaware Physicians Care, Incorporated (Delaware)
|
•
|
Schaller Anderson Medical Administrators, Incorporated (Delaware)
|
•
|
Aetna Medicaid Administrators LLC (Arizona)
|
•
|
iTriage, LLC (Delaware)
|
•
|
bswift LLC (Delaware)
|
•
|
Prodigy Health Group, Inc. (Delaware)
|
•
|
Niagara Re, Inc. (New York)
|
•
|
Performax, Inc. (Delaware)
|
•
|
Scrip World, LLC (Utah)
|
•
|
Precision Benefit Services, Inc. (Delaware)
|
•
|
American Health Holding, Inc. (Ohio)
|
•
|
Meritain Health, Inc. (New York)
|
•
|
Administrative Enterprises, Inc. (Arizona)
|
•
|
U.S Healthcare Holdings, LLC (Ohio)
|
•
|
Prime Net, Inc. (Ohio)
|
•
|
Professional Risk Management, Inc. (Ohio)
|
•
|
ADMINCO, Inc. (Arizona)
|
•
|
Aetna Pharmacy Management Services LLC (Delaware)
|
•
|
Coventry Transplant Network, Inc. (Delaware)
|
•
|
Aetna Health of Iowa Inc. (Iowa)
|
•
|
Coventry Health Care of Nebraska, Inc. (Nebraska)
|
•
|
Aetna Health Inc. (Louisiana)
|
•
|
HealthAssuance Pennsylvania, Inc. (Pennsylvania)
|
•
|
Coventry Prescription Management Services Inc. (Nevada)
|
•
|
Coventry Health and Life Insurance Company (Missouri)
|
•
|
Aetna Better Health of Kentucky Insurance Company (Kentucky)
|
•
|
Coventry Health Care of Virginia, Inc. (Virginia)
|
•
|
Coventry Health Care of Missouri, Inc. (Missouri)
|
•
|
Aetna Better Health of Missouri LLC (Missouri)
|
•
|
Coventry Health Care of Illinois, Inc. (Illinois)
|
•
|
Coventry Health Care of West Virginia, Inc. (West Virginia)
|
•
|
Coventry HealthCare Management Corporation (Delaware)
|
•
|
Coventry Health Care of Kansas, Inc. (Kansas)
|
•
|
Coventry Health Care National Accounts, Inc. (Delaware)
|
•
|
Aetna Better Health of Michigan Inc. (Michigan)
|
•
|
Aetna Health of Utah Inc. (Utah)
|
•
|
Aetna Better Health Inc. (Tennessee)
|
•
|
Coventry Health Care National Network, Inc. (Delaware)
|
•
|
Coventry Consumer Advantage, Inc. (Delaware)
|
•
|
MHNet Specialty Services, LLC (Maryland)
|
•
|
Mental Health Network of New York IPA, Inc. (New York)
|
•
|
Mental Health Associates, Inc. (Louisiana)
|
•
|
MHNet of Florida, Inc. (Florida)
|
•
|
MHNet Life and Health Insurance Company (Texas)
|
•
|
Group Dental Service, Inc. (Maryland)
|
•
|
Group Dental Service of Maryland, Inc. (Maryland)
|
•
|
Florida Health Plan Administrators, LLC (Florida)
|
•
|
Aetna Better Health of Florida Inc. (Florida)
|
•
|
Carefree Insurance Services, Inc. (Florida)
|
•
|
Coventry Health Plan of Florida, Inc. (Florida)
|
•
|
First Health Group Corp. (Delaware)
|
•
|
First Health Life & Health Insurance Company (Texas)
|
•
|
Claims Administration Corp. (Maryland)
|
•
|
Coventry Health Care Workers Compensation, Inc. (Delaware)
|
•
|
Coventry Rehabilitation Services, Inc. (Delaware)
|
•
|
First Script Network Services, Inc. (Nevada)
|
•
|
FOCUS HealthCare Management, Inc. (Tennessee)
|
•
|
Medical Examinations of New York, P.C. (New York)
|
•
|
MetraComp, Inc. (Connecticut)
|
•
|
Continental Life Insurance Company of Brentwood, Tennessee (Tennessee)
|
•
|
American Continental Insurance Company (Tennessee)
|
•
|
Aetna Life Insurance Company (Connecticut)
|
•
|
AHP Holdings, Inc. (Connecticut)
|
•
|
Aetna Insurance Company of Connecticut (Connecticut)
|
•
|
AE Fourteen, Incorporated (Connecticut)
|
•
|
Aetna Life Assignment Company (Connecticut)
|
•
|
Aetna ACO Holdings Inc. (Delaware)
|
•
|
Innovation Health Holdings, LLC (Delaware)
|
•
|
Innovation Health Insurance Company (Virginia)
|
•
|
Innovation Health Plan, Inc. (Virginia)
|
•
|
Texas Health + Aetna Health Insurance Holding Company LLC (Texas)
|
•
|
Texas Health + Aetna Health Insurance Company (Texas)
|
•
|
Texas Health + Aetna Health Plan Inc. (Texas)
|
•
|
Banner Health and Aetna Health Insurance Holding Company LLC (Delaware)
|
•
|
Banner Health and Aetna Health Insurance Company (Arizona)
|
•
|
Banner Health and Aetna Health Plan Inc. (Arizona)
|
•
|
Sutter Health and Aetna Insurance Holding Company LLC (Delaware)
|
•
|
Sutter Health and Aetna Administrative Services LLC (Delaware)
|
•
|
Sutter Health and Aetna Insurance Company (California)
|
•
|
Allina Health and Aetna Insurance Holding Company LLC (Delaware)
|
•
|
Allina Health and Aetna Insurance Company (Minnesota)
|
•
|
PE Holdings, LLC (Connecticut)
|
•
|
Aetna Resources LLC (Delaware)
|
•
|
Canal Place, LLC (Delaware)
|
•
|
Aetna Ventures, LLC (Delaware)
|
•
|
Aetna Multi-Strategy 1099 Fund, LLC (Delaware)
|
•
|
Phoenix Data Solutions LLC (Delaware)
|
•
|
Aetna Financial Holdings, LLC (Delaware)
|
•
|
Aetna Asset Advisors, LLC (Delaware)
|
•
|
U.S. Healthcare Properties, Inc. (Pennsylvania)
|
•
|
Aetna Capital Management, LLC (Delaware)
|
•
|
Aetna Partners Diversified Fund, LLC (Delaware)
|
•
|
Aetna Workers’ Comp Access, LLC (Delaware)
|
•
|
Aetna Behavioral Health, LLC (Delaware)
|
•
|
Managed Care Coordinators, Inc. (Delaware)
|
•
|
Horizon Behavioral Services, LLC (Delaware)
|
•
|
Employee Assistance Services, LLC (Kentucky)
|
•
|
Health and Human Resource Center, Inc. (California)
|
•
|
Resources for Living, LLC (Texas)
|
•
|
The Vasquez Group Inc. (Illinois)
|
•
|
Work and Family Benefits, Inc. (New Jersey)
|
•
|
Aetna Card Solutions, LLC (Connecticut)
|
•
|
PayFlex Holdings, Inc. (Delaware)
|
•
|
PayFlex Systems USA, Inc. (Nebraska)
|
•
|
Aetna Health and Life Insurance Company (Connecticut)
|
•
|
Aetna Health Insurance Company (Pennsylvania)
|
•
|
Aetna Health Insurance Company of New York (New York)
|
•
|
AUSHC Holdings, Inc. (Connecticut)
|
•
|
PHPSNE Parent Corporation (Delaware)
|
•
|
Active Health Management, Inc. (Delaware)
|
•
|
Health Data & Management Solutions, Inc. (Delaware)
|
•
|
Aetna Integrated Informatics, Inc. (Pennsylvania)
|
•
|
Health Re, Inc. (Vermont)
|
•
|
ASI Wings, LLC (Delaware)
|
•
|
Healthagen LLC (Connecticut)
|
•
|
Aetna Corporate Services LLC (Delaware)
|
•
|
Echo Merger Sub, Inc. (Delaware)
|
•
|
Aetna International Inc. (Connecticut)
|
•
|
Aetna Life & Casualty (Bermuda) Ltd. (Bermuda)
|
•
|
Aetna Global Holdings Limited (England & Wales)
|
•
|
Aetna Insurance (Hong Kong) Limited(Hong Kong)
|
•
|
Virtual Home Healthcare L.L.C. (Dubai)
|
•
|
Aetna Korea Ltd. (South Korea)
|
•
|
Minor Health Enterprise Co, Ltd. (Thailand)
|
•
|
Health Care Management Co. Ltd. (Thailand)
|
•
|
Aetna Services (Thailand) Limited (Thailand)
|
•
|
Aetna Health Insurance (Thailand) Public Company Limited (Thailand)
|
•
|
Aetna Holdings (Thailand) Limited (Thailand)
|
•
|
Health Care Management Co. Ltd. (Thailand)
|
•
|
Minor Health Enterprise Co, Ltd. (Thailand)
|
•
|
Aetna Health Insurance (Thailand) Public Company Limited (Thailand)
|
•
|
Aetna Global Benefits (Bermuda) Limited (Bermuda)
|
•
|
Goodhealth Worldwide (Global) Limited (Bermuda)
|
•
|
Aetna Global Benefits (Europe) Limited (England & Wales)
|
•
|
Aetna Global Benefits (Asia Pacific) Limited (Hong Kong)
|
•
|
Goodhealth Worldwide (Asia) Limited (Hong Kong)
|
•
|
Aetna Global Benefits Limited (DIFC, UAE)
|
•
|
Aetna Global Benefits (Middle East) LLC (UAE)
|
•
|
Pt. Aetna Global Benefits Indonesia (Indonesia)
|
•
|
Aetna Global Benefits (Bahamas) Limited (Bahamas)
|
•
|
Spinnaker Topco Limited (Bermuda)
|
•
|
Spinnaker Bidco Limited (England and Wales)
|
•
|
Aetna Holdco (UK) Limited (England and Wales)
|
•
|
Aetna Global Benefits (UK) Limited (England and Wales)
|
•
|
Aetna Insurance Company Limited (England and Wales)
|
•
|
Aetna Insurance (Singapore) Pte. Ltd. (Singapore)
|
•
|
Aetna Health Insurance Company of Europe DAC (Ireland)
|
•
|
Aetna (Shanghai) Enterprise Services Co. Ltd. (China)
|
•
|
Aetna (Beijing) Enterprise Management Services Co., Ltd. (China)
|
•
|
Aetna Global Benefits (Singapore) PTE. LTD. (Singapore)
|
•
|
Indian Health Organisation Private Limited (India)
|
•
|
PT Aetna Management Consulting (Indonesia)
|
•
|
CVS Pharmacy, Inc. (continued)
|
•
|
Alabama CVS Pharmacy, L.L.C. (Alabama)
|
•
|
Alaska CVS Pharmacy, L.L.C. (Alaska)
|
•
|
American Drug Stores Delaware, L.L.C. (Delaware)
|
•
|
Arkansas CVS Pharmacy, L.L.C. (Arkansas)
|
•
|
CareCenter Pharmacy, L.L.C. (Delaware)
|
•
|
Caremark Rx, L.L.C. (Delaware)
|
◦
|
CaremarkPCS, L.L.C. (Delaware)
|
◦
|
Accordant Health Services, L.L.C. (Delaware)
|
◦
|
AdvancePCS SpecialtyRx, LLC (Delaware)
|
◦
|
AdvanceRx.com, L.L.C. (Delaware)
|
◦
|
CaremarkPCS Health, L.L.C. (Delaware)
|
▪
|
Caremark IPA, L.L.C. (New York)
|
◦
|
Caremark PhC, L.L.C. (Delaware)
|
◦
|
Caremark Ulysses Holding Corp. (New York)
|
◦
|
MemberHealth LLC (Delaware)
|
◦
|
UAC Holding, Inc. (Delaware)
|
◦
|
Caremark, L.L.C. (California)
|
◦
|
Caremark Arizona Mail Pharmacy, LLC (Arizona)
|
◦
|
Caremark Arizona Specialty Pharmacy, L.L.C. (Arizona)
|
◦
|
Caremark California Specialty Pharmacy, L.L.C. (California)
|
◦
|
Caremark Florida Mail Pharmacy, LLC (Florida)
|
◦
|
Caremark Florida Specialty Pharmacy, LLC (Florida)
|
◦
|
Caremark Hawaii Mail Pharmacy, L.L.C. (Hawaii)
|
◦
|
Caremark Hawaii Specialty Pharmacy, LLC (Hawaii)
|
◦
|
Caremark Illinois Mail Pharmacy, LLC (Illinois)
|
◦
|
CVS Caremark Advanced Technology Pharmacy, L.L.C. (Illinois)
|
◦
|
Caremark Illinois Specialty Pharmacy, LLC (Illinois)
|
◦
|
Caremark Irving Resource Center, LLC (Texas)
|
◦
|
Caremark Kansas Specialty Pharmacy, LLC (Kansas)
|
◦
|
Caremark Logistics, LLC (Delaware)
|
◦
|
Caremark Louisiana Specialty Pharmacy, LLC (Louisiana)
|
◦
|
Caremark Maryland Specialty Pharmacy, LLC (Maryland)
|
◦
|
Caremark Massachusetts Specialty Pharmacy, L.L.C. (Massachusetts)
|
◦
|
Caremark Michigan Specialty Pharmacy, LLC (Michigan)
|
◦
|
Caremark Minnesota Specialty Pharmacy, LLC (Minnesota)
|
◦
|
Caremark New Jersey Specialty Pharmacy, LLC (New Jersey)
|
◦
|
Caremark North Carolina Specialty Pharmacy, LLC (North Carolina)
|
◦
|
Caremark Ohio Specialty Pharmacy, L.L.C. (Ohio)
|
◦
|
Caremark Pennsylvania Specialty Pharmacy, LLC (Pennsylvania)
|
◦
|
Caremark Redlands Pharmacy, L.L.C. (California)
|
◦
|
Caremark Repack, LLC (Illinois)
|
◦
|
Caremark Tennessee Specialty Pharmacy, LLC (Tennessee)
|
◦
|
Caremark Texas Mail Pharmacy, LLC (Texas)
|
◦
|
Caremark Texas Specialty Pharmacy, LLC (Texas)
|
◦
|
Caremark Washington Specialty Pharmacy, LLC (Washington)
|
◦
|
Central Rx Services, LLC (Nevada)
|
◦
|
CVS Caremark TN SUTA, LLC (Delaware)
|
◦
|
Generation Health, L.L.C. (Delaware)
|
◦
|
NovoLogix, LLC (Delaware)
|
◦
|
CaremarkPCS Alabama Mail Pharmacy, LLC (Alabama)
|
◦
|
CaremarkPCS, L.L.C. (Delaware)
|
◦
|
CVS Caremark Part D Services, L.L.C. (Delaware)
|
◦
|
Eckerd Corporation of Florida, Inc. (Florida)
|
◦
|
Express Pharmacy Services of PA, L.L.C. (Delaware)
|
◦
|
Ocean Acquisition Sub, L.L.C. (Delaware)
|
◦
|
Coram LLC (Delaware)
|
◦
|
Coram Clinical Trials, Inc. (Delaware)
|
◦
|
T2 Medical, Inc. (Delaware)
|
▪
|
Coram Healthcare Corporation of Alabama (Delaware)
|
▪
|
Coram Healthcare Corporation of Florida (Delaware)
|
▪
|
Coram Healthcare Corporation of Greater D.C. (Delaware)
|
▪
|
Coram Healthcare Corporation of Greater New York (New York)
|
▪
|
Coram Healthcare Corporation of Indiana (Delaware)
|
▪
|
Coram Healthcare Corporation of Mississippi (Delaware)
|
▪
|
Coram Healthcare Corporation of Nevada (Delaware)
|
▪
|
Coram Healthcare Corporation of Northern California (Delaware)
|
▪
|
Coram Healthcare Corporation of Southern California (Delaware)
|
▪
|
Coram Healthcare Corporation of Southern Florida (Delaware)
|
▪
|
Coram Specialty Infusion Services, L.L.C. (Delaware)
|
◦
|
Coram Rx, LLC (Delaware)
|
◦
|
Coram Healthcare Corporation of North Texas (Delaware)
|
◦
|
Coram Healthcare Corporation of Utah (Delaware)
|
◦
|
Coram Healthcare Corporation of Massachusetts (Delaware)
|
▪
|
Coram Alternate Site Services, Inc. (Delaware)
|
◦
|
Geneva Woods Management, LLC (Delaware)
|
◦
|
Part D Holding Company, L.L.C. (Delaware)
|
◦
|
Accendo Insurance Company (Utah)
|
◦
|
Silverscript Insurance Company (Tennessee)
|
◦
|
Connecticut CVS Pharmacy, L.L.C. (Connecticut)
|
◦
|
CVS 2948 Henderson, L.L.C. (Nevada)
|
◦
|
CVS AL Distribution, L.L.C. (Alabama)
|
◦
|
CVS Albany, L.L.C. (New York)
|
◦
|
CVS AOC Services, L.L.C. (Delaware)
|
◦
|
CVS AOC Corporation (California)
|
◦
|
CVS Care Concierge, LLC (Delaware)
|
◦
|
CVS Health Solutions LLC (Delaware)
|
◦
|
CVS Indiana, L.L.C. (Indiana)
|
◦
|
CVS International, L.L.C. (Delaware)
|
◦
|
CCI Foreign, S.à R.L. (R.C.S. Luxembourg)
|
▪
|
Beauty Holdings, L.L.C. (Delaware)
|
•
|
Pamplona Saúde e Beleza LTDA (Brazil)
|
◦
|
CVS Kidney Care, LLC (Delaware)
|
◦
|
CVS Kidney Care Health Services LLC (Delaware)
|
◦
|
CVS Kidney Care Advanced Technologies LLC (Delaware)
|
◦
|
CVS Kidney Care Home Dialysis LLC (Delaware)
|
◦
|
CVS Manchester NH, L.L.C. (New Hampshire)
|
◦
|
CVS Media Exchange LLC (Delaware)
|
◦
|
CVS Michigan, L.L.C. (Michigan)
|
◦
|
CVS Orlando FL Distribution, L.L.C. (Florida)
|
◦
|
CVS PA Distribution, L.L.C. (Pennsylvania)
|
◦
|
CVS PR Center, Inc. (Delaware)
|
◦
|
Puerto Rico CVS Pharmacy, L.L.C. (Puerto Rico)
|
◦
|
Caremark Puerto Rico, L.L.C. (Puerto Rico)
|
◦
|
Caremark Puerto Rico Specialty Pharmacy, L.L.C. (Puerto Rico)
|
◦
|
CVS RS Arizona, L.L.C. (Arizona)
|
◦
|
Arizona CVS Stores, L.L.C. (Arizona)
|
◦
|
CVS 3268 Gilbert, L.L.C. (Arizona)
|
◦
|
CVS 3745 Peoria, L.L.C. (Arizona)
|
◦
|
CVS Gilbert 3272, L.L.C. (Arizona)
|
◦
|
CVS Rx Services, Inc. (New York)
|
◦
|
Busse CVS, L.L.C. (Illinois)
|
◦
|
Goodyear CVS, L.L.C. (Arizona)
|
◦
|
Sheffield Avenue CVS, L.L.C. (Illinois)
|
◦
|
South Wabash CVS, L.L.C. (Illinois)
|
◦
|
Thomas Phoenix CVS, L.L.C. (Arizona)
|
◦
|
Washington Lamb CVS, L.L.C. (Nevada)
|
◦
|
CVS SC Distribution, L.L.C. (South Carolina)
|
◦
|
CVS State Capital, L.L.C. (Maine)
|
◦
|
CVS TN Distribution, L.L.C. (Tennessee)
|
◦
|
CVS Transportation, L.L.C. (Indiana)
|
◦
|
CVS Vero FL Distribution, L.L.C. (Florida)
|
◦
|
D.A.W., LLC (Massachusetts)
|
◦
|
Delaware CVS Pharmacy, L.L.C. (Delaware)
|
◦
|
Digital eHealth, LLC (Rhode Island)
|
◦
|
District of Columbia CVS Pharmacy, L.L.C. (District of Columbia)
|
◦
|
Enterprise Patient Safety Organization, LLC (Rhode Island)
|
◦
|
E.T.B., INC. (Texas)
|
◦
|
Garfield Beach CVS, L.L.C. (California)
|
◦
|
Georgia CVS Pharmacy, L.L.C. (Georgia)
|
◦
|
German Dobson CVS, L.L.C. (Arizona)
|
◦
|
Grand St. Paul CVS, L.L.C. (Minnesota)
|
◦
|
Highland Park CVS, L.L.C. (Illinois)
|
◦
|
Holiday CVS, L.L.C. (Florida)
|
◦
|
Hook-SupeRx, L.L.C. (Delaware)
|
◦
|
Idaho CVS Pharmacy, L.L.C. (Idaho)
|
◦
|
Iowa CVS Pharmacy, L.L.C. (Iowa)
|
◦
|
Kansas CVS Pharmacy, L.L.C. (Kansas)
|
◦
|
Kentucky CVS Pharmacy, L.L.C. (Kentucky)
|
◦
|
Longs Drug Stores California, L.L.C. (California)
|
◦
|
Louisiana CVS Pharmacy, L.L.C. (Louisiana)
|
◦
|
Maryland CVS Pharmacy, L.L.C. (Maryland)
|
◦
|
Melville Realty Company, Inc. (New York)
|
◦
|
CVS Bellmore Avenue, L.L.C. (New York)
|
◦
|
MinuteClinic, L.L.C. (Delaware)
|
◦
|
MinuteClinic Diagnostic of Alabama, L.L.C. (Alabama)
|
◦
|
MinuteClinic Diagnostic of Arizona, LLC (Minnesota)
|
◦
|
MinuteClinic Diagnostic of Florida, LLC (Minnesota)
|
◦
|
MinuteClinic Diagnostic of Georgia, LLC (Minnesota)
|
◦
|
MinuteClinic Diagnostic of Hawaii, L.L.C. (Hawaii)
|
◦
|
MinuteClinic Diagnostic of Illinois, LLC (Delaware)
|
◦
|
MinuteClinic Diagnostic of Kentucky, L.L.C. (Kentucky)
|
◦
|
MinuteClinic Diagnostic of Louisiana, L.L.C. (Louisiana)
|
◦
|
MinuteClinic Diagnostic of Maine, L.L.C. (Maine)
|
◦
|
MinuteClinic Diagnostic of Maryland, LLC (Minnesota)
|
◦
|
MinuteClinic Diagnostic of Massachusetts, LLC (Massachusetts)
|
◦
|
MinuteClinic Diagnostic of Nebraska, L.L.C. (Nebraska)
|
◦
|
MinuteClinic Diagnostic of New Hampshire, L.L.C. (New Hampshire)
|
◦
|
MinuteClinic Diagnostic of New Mexico, L.L.C. (New Mexico)
|
◦
|
MinuteClinic Diagnostic of Ohio, LLC (Ohio)
|
◦
|
MinuteClinic Diagnostic of Oklahoma, LLC (Oklahoma)
|
◦
|
MinuteClinic Diagnostic of Oregon, LLC (Oregon)
|
◦
|
MinuteClinic Diagnostic of Pennsylvania, LLC (Minnesota)
|
◦
|
MinuteClinic Diagnostic of Rhode Island, LLC (Minnesota)
|
◦
|
MinuteClinic Diagnostic of South Carolina, L.L.C. (South Carolina)
|
◦
|
MinuteClinic Diagnostic of Texas, LLC (Minnesota)
|
◦
|
MinuteClinic Diagnostic of Utah, L.L.C. (Utah)
|
◦
|
MinuteClinic Diagnostic of Virginia, LLC (Virginia)
|
◦
|
MinuteClinic Diagnostic of Washington, LLC (Oregon)
|
◦
|
MinuteClinic Diagnostic of Wisconsin, L.L.C. (Wisconsin)
|
◦
|
MinuteClinic Online Diagnostic Services, LLC (Delaware)
|
◦
|
MinuteClinic Physician Practice of Texas (Texas)
|
◦
|
MinuteClinic Telehealth Services, LLC (Delaware)
|
◦
|
Mississippi CVS Pharmacy, L.L.C. (Mississippi)
|
◦
|
Missouri CVS Pharmacy, L.L.C. (Missouri)
|
◦
|
Montana CVS Pharmacy, L.L.C. (Montana)
|
◦
|
Nebraska CVS Pharmacy, L.L.C. (Nebraska)
|
◦
|
New Jersey CVS Pharmacy, L.L.C. (New Jersey)
|
◦
|
North Carolina CVS Pharmacy, L.L.C. (North Carolina)
|
◦
|
Ohio CVS Stores, L.L.C. (Ohio)
|
◦
|
Oklahoma CVS Pharmacy, L.L.C. (Oklahoma)
|
◦
|
Omnicare, Inc. (Delaware)
|
◦
|
ACS ACQCO CORP. (Delaware)
|
▪
|
Advanced Care Scripts, Inc. (Florida)
|
◦
|
Omnicare Holding Company (Delaware)
|
▪
|
Evergreen Pharmaceutical of California, Inc. (California)
|
▪
|
JHC Acquisition, LLC (Delaware)
|
•
|
Geneva Woods Pharmacy, LLC (Alaska)
|
◦
|
Geneva Woods Health Services, LLC (Delaware)
|
▪
|
Geneva Woods Retail Pharmacy LLC (Delaware)
|
▪
|
Geneva Woods LTC Pharmacy, LLC
|
•
|
Geneva Woods Pharmacy Wyoming, LLC (Delaware)
|
•
|
Geneva Woods Pharmacy Washington, LLC (Delaware)
|
•
|
Geneva Woods Pharmacy Alaska, LLC (Delaware)
|
▪
|
AMC - Tennessee, LLC (Delaware)
|
▪
|
CHP Acquisition, LLC (Delaware)
|
•
|
Home Pharmacy Services, LLC (Missouri)
|
▪
|
CP Acquisition, LLC (Oklahoma)
|
▪
|
Managed Healthcare, LLC (Delaware)
|
▪
|
Med World Acquisition Corp. (Delaware)
|
▪
|
Medical Arts Health Care, LLC (Georgia)
|
▪
|
MHHP Acquisition Company, LLC (Delaware)
|
▪
|
NCS Healthcare, LLC (Delaware)
|
•
|
NCS Healthcare of South Carolina, LLC (Ohio)
|
•
|
NCS Healthcare of Tennessee, LLC (Ohio)
|
•
|
NCS Healthcare of Kentucky, Inc. (Oh
|
•
|
NCS Healthcare of Montana, LLC (Ohio)
|
•
|
NCS Healthcare of New Mexico, LLC (Ohio)
|
•
|
UNI-Care Health Services of Maine, LLC (New Hampshire)
|
▪
|
NeighborCare, Inc. (Pennsylvania)
|
•
|
Three Forks Apothecary, LLC (Kentucky)
|
•
|
NeighborCare Holdings, Inc. (Delaware)
|
◦
|
Badger Acquisition of Kentucky LLC (Delaware)
|
◦
|
NeighborCare Services Corporation (Delaware)
|
▪
|
D & R Pharmaceutical Services LLC (Kentucky)
|
▪
|
NeighborCare Pharmacy Services, Inc. (Delaware)
|
•
|
APS Acquisition LLC (Delaware)
|
•
|
ASCO HealthCare, LLC (Maryland)
|
•
|
Badger Acquisition LLC (Delaware)
|
◦
|
Badger Acquisition of Minnesota LLC (Delaware)
|
▪
|
Merwin Long Term Care, LLC (Minnesota)
|
◦
|
Badger Acquisition of Ohio LLC (Delaware)
|
•
|
Best Care LTC Acquisition Company, LLC (Delaware)
|
•
|
Care Pharmaceutical Services, LP (Delaware)
|
•
|
CCRx Holdings, LLC (Delaware)
|
◦
|
Continuing Care Rx, LLC (Pennsylvania)
|
◦
|
CCRx of North Carolina LLC (Delaware)
|
•
|
Compscript, LLC (Florida)
|
◦
|
Campo’s Medical Pharmacy, LLC (Louisiana)
|
•
|
Enloe Drugs, LLC (Delaware)
|
•
|
Evergreen Pharmaceutical, LLC (Washington)
|
•
|
Home Care Pharmacy, LLC (Delaware)
|
•
|
Interlock Pharmacy Systems, LLC (Missouri)
|
•
|
Langsam Health Services, LLC (Delaware)
|
◦
|
LCPS Acquisition, LLC (Delaware)
|
▪
|
Omnicare Pharmacy of Tennessee LLC (Delaware)
|
•
|
Lobos Acquisition, LLC (Delaware)
|
•
|
Lo-Med Prescription Services, LLC (Ohio)
|
◦
|
ZS Acquisition Company, LLC (Delaware)
|
•
|
NCS Healthcare of Illinois, LLC (Ohio)
|
•
|
NCS Healthcare of Iowa, LLC (Ohio)
|
◦
|
Martin Health Services, LLC (Delaware)
|
•
|
NCS Healthcare of Kansas, LLC (Ohio)
|
•
|
NCS Healthcare of Ohio, LLC (Ohio)
|
•
|
NCS Healthcare of Wisconsin, LLC (Ohio)
|
•
|
North Shore Pharmacy Services LLC (Delaware)
|
•
|
Omnicare Indiana Partnership Holding Company LLC (Delaware)
|
•
|
Omnicare of New York, LLC (Delaware)
|
◦
|
NeighborCare of Indiana, LLC (Indiana)
|
▪
|
Grandview Pharmacy, LLC (Indiana)
|
◦
|
NeighborCare of Virginia, LLC (Virginia)
|
•
|
Omnicare Pharmacies of Pennsylvania West LLC (Pennsylvania)
|
◦
|
Omnicare Pharmacies of Pennsylvania East LLC (Delaware)
|
•
|
Omnicare Pharmacy and Supply Services LLC (South Dakota)
|
•
|
Omnicare Pharmacy of the Midwest, LLC (Delaware)
|
•
|
Omnicare Property Management, LLC (Delaware)
|
•
|
Pharmacy Consultants, LLC (South Carolina)
|
•
|
PRN Pharmaceutical Services, LP (Delaware)
|
•
|
Roeschen’s Healthcare LLC (Wisconsin)
|
◦
|
PP Acquisition Company LLC (Delaware)
|
•
|
Specialized Pharmacy Services, LLC (Michigan)
|
•
|
Value Health Care Services LLC (Delaware)
|
•
|
VAPS Acquisition Company, LLC (Delaware)
|
•
|
Westhaven Services Co, LLC (Ohio)
|
▪
|
NIV Acquisition, LLC (Delaware)
|
▪
|
OCR Services, LLC (Delaware)
|
•
|
Shore Pharmaceutical Providers, LLC (Delaware)
|
▪
|
Omnicare of Nevada, LLC (Delaware)
|
▪
|
Omnicare Pharmacies of the Great Plains Holding, LLC (Delaware)
|
•
|
Omnicare of Nebraska LLC (Delaware)
|
▪
|
Pharmacy Associates of Glenn Falls, LLC (New York)
|
▪
|
Sterling Healthcare Services, LLC (Delaware)
|
▪
|
Superior Care Pharmacy, LLC (Delaware)
|
▪
|
TCPI Acquisition, LLC (Delaware)
|
▪
|
UC Acquisition, LLC (Delaware)
|
▪
|
Weber Medical Systems LLC (Delaware)
|
▪
|
Williamson Drug Company, LLC (Virginia)
|
•
|
CVS Pharmacy, Inc. (continued)
|
◦
|
Oregon CVS Pharmacy, L.L.C. (Oregon)
|
◦
|
Pennsylvania CVS Pharmacy, L.L.C. (Pennsylvania)
|
◦
|
ProCare Pharmacy Direct, L.L.C. (Ohio)
|
◦
|
ProCare Pharmacy, L.L.C. (Rhode Island)
|
◦
|
Red Oak Sourcing, LLC (Delaware)
|
◦
|
Rhode Island CVS Pharmacy, L.L.C. (Rhode Island)
|
◦
|
South Carolina CVS Pharmacy, L.L.C. (South Carolina)
|
◦
|
Tennessee CVS Pharmacy, L.L.C. (Tennessee)
|
◦
|
Utah CVS Pharmacy, L.L.C. (Utah)
|
◦
|
Vermont CVS Pharmacy, L.L.C. (Vermont)
|
◦
|
Virginia CVS Pharmacy, L.L.C. (Virginia)
|
◦
|
Warm Springs Road CVS, L.L.C. (Nevada)
|
◦
|
Washington CVS Pharmacy, L.L.C. (Washington)
|
◦
|
Wellpartner, LLC (Delaware)
|
◦
|
West Virginia CVS Pharmacy, L.L.C. (West Virginia)
|
◦
|
Wisconsin CVS Pharmacy, L.L.C. (Wisconsin)
|
◦
|
Woodward Detroit CVS, L.L.C. (Michigan)
|
(1)
|
Registration Statement (Form S-3ASR No. 333-217596) of CVS Health Corporation, and
|
(2)
|
Registration Statements (Form S-8 Nos. 333-230035, 333-228622, 333-167746, 333-217853, 333-208805, 333-141481, 333-139470, 333-63664, 333-91253, 333-49407, 333-34927, and 333-28043) of CVS Health Corporation;
|
1.
|
I have reviewed this annual report on Form 10-K of CVS Health Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
February 18, 2020
|
By:
|
/S/ LARRY J. MERLO
|
|
|
|
Larry J. Merlo
|
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10-K of CVS Health Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
February 18, 2020
|
By:
|
/S/ EVA C. BORATTO
|
|
|
|
Eva C. Boratto
|
|
|
|
Executive Vice President and Chief Financial Officer
|
Date:
|
February 18, 2020
|
/S/ LARRY J. MERLO
|
|
|
Larry J. Merlo
|
|
|
President and Chief Executive Officer
|
Date:
|
February 18, 2020
|
/S/ EVA C. BORATTO
|
|
|
Eva C. Boratto
|
|
|
Executive Vice President and Chief Financial Officer
|