Associated Press
CVS Caremark Corp. reported a 21 percent drop in third-quarter profit Wednesday as its pharmacy benefit unit continued losing business from previously canceled contracts.
The company said net income fell to $809 million, or 59 cents per share, from $1.02 billion, or 71 cents per share, in the prior-year period. The company's 2009 earnings benefited from $156 million in tax benefits, or 11 cents per share.
Excluding one-time acquisition costs in the most recent quarter, the company would have earned 65 cents per share. That's in line with the average estimate of analysts polled by Thomson Reuters.
The company's revenue fell 3.1 percent to $23.88 billion partly because of lost pharmacy benefit contracts.
CVS lowered the upper range of its full-year guidance to between $2.68 and $2.70 per share. The company previously forecast earnings per share between $2.68 and $2.73. The company attributed the revision to costs for streamlining its pharmacy benefits management unit.
Analysts expect full-year earnings of $2.71 per share, on average.
In the past year, CVS has reported billions in lost contract revenue for its Caremark unit, which provides prescription drug purchasing, customer service and other pharmacy services.
Investors and analysts are still questioning the wisdom of CVS's 2007 acquisition of Caremark for an estimated $26 billion. The combination of the two companies was designed to bring more business to CVS pharmacies in the form of Caremark-covered patients filling prescriptions.
Pharmacy benefits managers handle drug benefits for health plan members and sponsors. They buy large amounts of drugs to fill prescriptions, which is one way they can save money for clients.
In the latest quarter, CVS said pharmacy services revenue fell 8.5 percent to $11.9 billion. Besides canceled contracts with private employers, CVS said it has also lost patients from its Medicare drug coverage plans.
Revenue from CVS pharmacies was $14.2 billion, with sales at locations open at least a year - a key measure of a retailer's health - increasing 2.5 percent. The company said sales were negatively pressured by the introduction of more low-cost generic drugs.
CVS Chief Financial Officer David Denton said pharmacy shoppers are still spending conservatively, though he added that the trend has benefited CVS-brand products.
"We think it's a pretty cautious consumer out there and in fact it's one of the reasons that's driving our private label and proprietary products, as well as our proximity to their homes and the value proposition overall," Denton told analysts on an earnings conference call.
