Friday, July 30, 2010

CVS Caremark, Aetna strike retail management contract

NEW YORK — CVS Caremark Corp. on Wednesday reported weaker quarterly earnings and lowered its profit forecast, but shares rose as investors approved of a large pharmacy benefit management services contract struck with Aetna.
CVS Caremark will administer Aetna's retail pharmacy store network and manage customer service. It will also handle prescription drug purchasing, manage inventories, and fill prescriptions for Aetna's mail order and specialty pharmacy operations. The contract will bring in revenue of $8.2 billion next year. CEO Tom Ryan said the 12-year contract is the largest and longest contract in the industry.

The contract offsets other major contracts lost in the past year. That lost business pushed second-quarter net income down 7 percent, to $821 million from $886 million. On a per-share basis, profit was unchanged at 60 cents as the company had fewer shares outstanding this quarter.

The Woonsocket, R.I., company's revenue fell 3 percent to $24 billion from $24.87 billion. Revenue from its drugstore network rose 4 percent to $14.31 billion, but because of the contract losses, Caremark's revenue fell 9 percent to $11.84 billion.

The figures add up to more than $24 billion because some revenue is counted under both businesses.

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