CVS Health Corp. posted a $2.6 billion net loss in the second quarter after a one-time $3.9 billion charge related to its long-term care business, the company said today in a financial report.
CVS in 2015 spent $10 billion to buy Ohio-based pharmaceutical distributor Omnicare, which provides prescription drugs to assisted-living centers, nursing homes, and other long-term-care facilities.
The business “has continued to experience challenges” that have kept it from growing as expected, President and CEO Larry Merlo said. Those include “lower client retention rates, lower occupancy rates in skilled nursing facilities, the deteriorating financial health of numerous skilled nursing facility customers, and continued facility reimbursement pressures,” Merlo said.
The company determined that the “fair value” of the business was lower than previously estimated, he said, resulting in the $3.9 billion goodwill impairment charge.
The second-quarter $2.6 billion net loss is equal to $2.52 per share — a major swing from 2017 when CVS posted a net profit of $1.1 billion, or $1.07 per share.
That left CVS with a year-to-date net loss of $1.6 billion, or $1.54 per share, down from $2 billion, or $1.99 per share, at the same point in 2017.
Merlo said sales revenues for the second quarter rose 2.2 percent to $46.7 billion, and increased 2.4 percent for the first half of the year to $92.4 billion.
Without the impairment charge, he said, second-quarter operating profits would have risen 4.6 percent to $2.4 billion. CVS saw improvement in pharmacy gross profits due to increased prescription volume, an improved economy, and generic introductions, he said.
Merlo revised his full year operating profit projection to a range of $1.40 to $1.50 per share, down from his previous estimate of $5.11 to $5.32 per share.
Meanwhile, Merlo said his company’s pending buyout of Hartford-based Aetna Inc. remains on track for completion this year.
CVS officials have said Hartford will be the headquarters of the combined companies’ health-insurance operations. Aetna has more than 5,000 employees in Connecticut.
If CVS should back out of the pending merger, it also would have to pay Aetna a termination fee of $2.1 billion.
The deal last week drew strong opposition from California Insurance Commissioner David Jones, who urged the U.S. Justice Department to block the proposed merger.
CVS Health spokeswoman Carolyn Castel however, said the merger would create a “new health-care model that will help consumers improve their health by focusing on prevention and primary care, simplifying their health-care experience, and reducing costs.” Competition within each of the business segments, in which CVS and Aetna operate — pharmacy benefit management, pharmacies, and insurers — “is fierce and will remain so,” Castel said.