CVS Health’s profits jumped more than 50% as elective procedures the drugstore giant’s Aetna health plan pays for were postponed or delayed amid the spread of the Coronavirus strain Covid-19.
CVS Health chief executive officer Larry Merlo said the company’s diversified business portfolio that includes drug stores, retail clinics as well as drug and health benefits is helping the company weather the Covid-19 pandemic and enabled the healthcare giant Wednesday to raise its financial forecast for the rest of 2020.
CVS bought Aetna two years ago in a deal that is clearly paying off this year as the drugstore chain’s customer traffic has fallen in the pandemic. Like other retail pharmacies, in-person visits to stores dropped, particularly in the early part of the second quarter when states ordered their residents to shelter in their homes to reduce the spread of Covid-19.
CVS Health’s net income soared 54% to $2.9 billion in the second quarter compared to $1.9 billion in the year-ago period, the company said in its earnings report issued Wednesday. Revenues rose 3% to $65.3 billion.
“The increase in both operating income and adjusted operating income was primarily due to the impact of the COVID-19 pandemic, which resulted in reduced benefit costs due to the deferral of elective procedures and other discretionary utilization in the Health Care Benefits segment, partially offset by reduced volume and increased operating expenses associated with the Company’s COVID-19 pandemic response efforts in the Retail/LTC segment,” CVS said Thursday.
Elective procedures are being postponed at hospitals across the country to free up inpatient capacity for patients sickened by Covid-19, which was a big benefit in the second quarter for health insurers like the CVS Health Aetna unit. Other health insurers including UnitedHealth Group and Anthem are seeing similar benefits and that could continue into the third quarter as Covid-19 hot spots in Arizona, Texas and Florida and across the southern U.S. face rising cases of the virus.
While profits jumped thanks to the Aetna health insurance business, CVS Health has been hit hard in business losses as prescription volume fell and revenue from the front of the stores dropped thanks to the shelter-in-place orders.