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CVS Sees Potential Partner if Amazon Health Launches

By John Commins  
   February 08, 2018

The pharmacy giant saw net revenues up 4% to $185 billion in 2017, and anticipates at least $1.2 billion in cash benefits in 2018 from the Tax Cuts and Jobs Act, half of which will be used to pay down debt.

CVS Health CEO Larry Merlo says he "absolutely agrees with the goals and objectives" laid out in the healthcare partnership announced last week by Amazon, JPMorgan Chase and Berkshire Hathaway.

Now, like everyone else, he wants to see the details.

"We all saw the announcement last week," Merlo said in an earnings call with analysts on Thursday. "We absolutely agree with the goals and objectives that were outlined in that press release, but it’s important to acknowledge that the press release had few details and acknowledged that there isn't a plan."

Meanwhile, he says, the Woonsocket, RI-based company’s proposed $69 billion acquisition of Aetna will achieve many of the goals that Amazon/JP Morgan/Berkshire Hathaway hinted at, and that a potential partnership could emerge with Amazon if the proposal ever becomes reality.

"What that group aspires to is what we are going to deliver as part of this CVS/Aetna combination," Merlo says. "We have the infrastructure. We have the assets. We certainly have the healthcare expertise resident in both companies. And, we've demonstrated that we can execute on goals and objectives."

"We are chomping at the bit to get started," he says. "We want this new CVS/Aetna combination to be an open source model that, as we build out these capabilities, we can make them broadly available in the market. We are looking forward to partnering with all groups of individuals, including this new combination of Berkshire, JP Morgan and Amazon."

Thursday’s hour-long conference call was supposed to be about fourth quarter earnings and 2017 financial results. The company saw fourth quarter net revenues increase 5.3% to $8.4 billion, when compared to the fourth quarter of 2016.

For 2017, net revenues increased 4.1% to $185 billion. The company also expects a $1.2 billion windfall from the Tax Cut and Jobs Act. Half of that will be used to pay down debts, and the remainder will be used for in-store employee pay raises, and capital improvements.

However, the Aetna deal dominated the questions from analysts.

John Commins is a senior editor at HealthLeaders.


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