(Reuters) - CVS Health Corp beat analysts’ estimates for quarterly profit on Wednesday and the drugstore operator defended its pharmacy benefits management business in the face of the Trump administration’s move to clamp down on escalating drug costs.
Shares of CVS Health, which agreed to buy health insurer Aetna for $69 billion in December, rose 3.6 percent to $67.76.
Pharmacy benefit managers (PBMs) are in the crosshairs of the U.S. administration, which last month proposed a rule that would scale back protections currently in place that allow rebates between drug manufacturers, insurers and PBMs.
“Drug manufacturers want you to believe that increasing drug prices are a result of them (being) happy to pay rebates and that PBMs are retaining these rebates,” CVS Health Chief Executive Officer Larry Merlo said on a conference call.
“This is simply not true.”
The company said new rules announced on Tuesday that gave Medicare Advantage health plans tools to negotiate for lower prescription drug prices, indicates the administration recognizes PBMs have a key role to play in reducing drug costs.
Adding to competition, Amazon in June agreed to acquire a small online pharmacy firm, a move that put the world’s biggest online retailer in direct competition with drugstore chains, drug distributors and PBMs.
“We welcome competition ... expect more of it in the years to come and are confident that we ourselves are key disruptors,” Merlo said.
CVS Health also said it now expects its Aetna deal to close during the third quarter or early in the fourth quarter of 2018.
The Aetna deal is likely to reshape healthcare in the United States as it brings together one of the nation’s largest PBMs and pharmacy operators with one of the oldest health insurers, whose national business ranges from employer healthcare to government plans.
Net loss attributable to CVS was $2.56 billion, or $2.52 per share, in the second quarter ended June 30.
CVS said it took a $3.9 billion goodwill impairment charge in the reported quarter related to the Omnicare business in its retail unit.
“The Omnicare write-down was somewhat of a surprise, but overall we were already expecting modest results out of that business,” Edward Jones analyst John Boylan said.
Excluding items, the company earned $1.69 per share, beating analysts’ average estimate of $1.61, according to Thomson Reuters I/B/E/S.
Reporting by Ankur Banerjee in Bengaluru, Additional reporting by Ashwin Shyam; Editing by Shailesh Kuber and Shounak Dasgupta