Former President & Chief Executive Officer, CVS Health
CVS Health CEO on decision to leave the company, Covid-19 testing and the pharma industry
Larry Merlo, CVS Health CEO, joins 'Closing Bell' to discuss his decision to resign during a pandemic, the company's quarterly earnings, Covid-19 testing at the stores and the election impact on the pharmaceutical industry. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi
CVS Health reported a better-than-expected 3.5% jump in third-quarter revenue and raised its 2020 earnings guidance on Friday as its plan to remake the drugstore chain into a health services company paid off.
Offering everything from insurance to Covid-19 testing, the health-ca...
About Larry Merlo
Larry Merlo, former President and CEO of CVS Health, stated that the company was prepared to begin administering COVID-19 vaccinations within 48 hours of receiving a vaccine allocation. He said that CVS had been working with Operation Warp Speed and the CDC, and that the company's first involvement would be in long-term care facilities, with 10,000 healthcare professionals ready to administer the vaccine. Merlo also noted that CVS had conducted over seven million COVID-19 tests and had built mobile kiosks to bring testing to underserved communities. Merlo discussed CVS Health's acquisition of Aetna, describing it as an opportunity to create a new healthcare platform that is simpler and less expensive for consumers. He said that the combination of CVS and Aetna would allow the company to become more of a healthcare destination, addressing chronic disease management and reducing overall healthcare costs. Merlo also addressed the opioid crisis, stating that CVS would "vigorously defend" its actions and that the company was not "on the hook" for the crisis.
Transcript (11 segments)
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Sarah0:00
The front lines of COVID-19, just really starting to integrate your big acquisition of Aetna. Why now?
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Larry Merlo0:07
Well Sarah, this leadership transition does come at the right time for CVS Health. This month marks our two-year anniversary of CVS and Aetna coming together as one company, and I could not be prouder of the work of the organization over the last two years. The integration activities are complete. The company is operating as one company with an enterprise lens. And I think the big news today on the earnings call is the transformation foundation has been laid. We had many examples that we talked about today of new and innovative products and services coming to life in very meaningful ways, and in many respects being part of the solution as we attack the COVID virus. I couldn't be happier with the board's decision to name Karen Lynch as my replacement. Karen and I have worked together for the last two-plus years. She's a get-it-done person. She's got a proven track record of driving growth and innovation. I am very confident in her capabilities to lead the company in its next phase of growth.
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Sarah1:13
She does come from the Aetna side of things, the insurance part of the business, which I think is key for investors. Larry, do you feel like you get enough credit for buying this company and for owning an insurance company from Wall Street? There were big questions several months ago about the strategy, and it's still not 100% visibility about insurance policies coming out of Washington.
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Larry Merlo1:37
Well Sarah, I do believe that for the reasons that we were just talking about, the strategy is being validated with our results. Seven consecutive quarters of meeting and beating expectations. The fact that we're really defining what omnichannel for health really means in our country, and the need to meet people where they are, whether it's in the community, in their home, or in the palm of their hand. If I told you a year ago that six million people would travel to a CVS pharmacy for a diagnostic test for a virus, many would roll their eyes. But the reality is, in seven short months, that's exactly what happened. We're testing about 70,000 people each and every day for the virus, representing our ability to be an important part of the solution in addressing the challenges associated with COVID. But what that even means in a post-COVID world, the fact that individuals all around the country can seek care in what many would describe as non-traditional care settings.
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Sarah2:46
Larry, to what extent are those 70,000 tests a day, six million in total, been helping to drive sales in your pharmacies of more regular everyday items? I know some of them are taking place in the car parks, but is it driving traffic into the stores as well?
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Larry Merlo3:01
Yeah, well, it's a great question. All of that testing is being done from outside the store environment through our drive-through locations, so it really hasn't had any impact in terms of our in-store sales. What's interesting about what we have seen is 70% of those customers have not used CVS in the past for their prescription needs. So we do think there is an opportunity to engage these customers in a different way and make them long-term CVS customers.
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Sarah3:37
You've also signed on to help distribute the vaccine when and if it comes. Larry, what's the plan? How is that going to work, and is it going to be orderly?
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Larry Merlo3:47
Well, it absolutely is orderly. We have been very impressed with the work of Operation Warp Speed, and we have been participants in the various task forces. You saw the announcement where we were selected to be one of the partners in terms of distributing the vaccine to long-term care facilities, addressing some of our most vulnerable populations. We have been doing a lot of planning around that. There are some additional complexities with a COVID vaccine as we sit here today, from a handling and storage requirement, and the fact that most of the vaccines that are in clinical trial will require a booster shot and the complexity associated with that. Our team has done a wonderful job from a planning point of view. When a vaccine is approved, we absolutely are going to be ready to mobilize our forces, continuing to be part of that solution.
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Sarah4:44
Larry, we are of course still awaiting the result of the election, but if the winner wants to expand healthcare coverage, do you think that comes with a trade-off for the private sector, the sort of profit margins you're able to make?
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Larry Merlo4:57
Well, it's a great question. Look, I think the private sector has demonstrated its role in our country in terms of the ability to innovate and the role of competition in the private sector. What we have seen through COVID is many examples of public-private partnerships at a federal level, at a state level, at a community level. We have been proud to be part of that solution. As we think about the role that we're playing in healthcare, I firmly believe that the model that we have built, this omnichannel for health being in the community, in the home, in the palm of your hand, we will be there to be part of that solution.
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Narrator5:46
Shepard Smith here. Thanks for watching CNBC on YouTube.