CVS Health CEO rebukes 'Medicare for All' push

The top executive at CVS Health on Wednesday joined fellow health care industry leaders in pushing back against Democratic party attempts to advance so-called “Medicare for All” legislation that would eliminate private insurers.

Health care is likely to be one of the most fiercely debated topics during the upcoming 2020 presidential election, as President Trump pushes Congress to repeal Obamacare and Democrats increasingly call for a move to government-backed insurance.

Sharp divisions in both parties are emerging, however, as Republicans push Trump to delay his calls to eliminate former President Barack Obama’s signature domestic achievement and Democratic 2020 candidates like former Vice President Joe Biden and Sen. Amy Klobuchar, D-Minn., push back against more radical proposals from progressives like Sen. Kamala Harris, D-Calif.

Regardless of the future of the U.S. health care system, CVS will “continue to be an active participant” in the discussion, according to CEO Larry Merlo.

“Regardless of what shape and form the next stage of healthcare takes, we remain confident that the private sector will play an essential role in both shaping and executing that stage,” he told investors.

His comments come after UnitedHealth Group’s CEO David Wichmann said a “Medicare for All” system would lead to a “wholesale disruption of American health care.”

Health care stocks like CVS were hammered in recent weeks as House Democrats intensified their efforts on legislation to move all U.S. individuals from a private insurance plan to a government-sponsored plan. The House Rules Committee on Tuesday held its first hearing on the measure.

Alongside potential changes to the overall health care system, the White House is proposing a rule to eliminate the lucrative drug rebates in Medicare Part D that bolster profits at middlemen pharmacy benefit managers (PBMs).

The rule, which is not yet final, was originally proposed to take effect in 2020, though experts predict the timeline will slip. The Trump administration is also allowing insurers to ease-in to the new regulations by participating in a two-year pilot program.

Merlo on Wednesday said CVS would participate in the demo.

"This demonstration project will allow the administration to evaluate in real-time the potential impact to Part D members' premium and to the actual costs that will be incurred by CMS," he said on the firm's earnings call.

Large PBMs, the bulk of which also operate a separate health insurance business, warn they will have to raise premiums to compensate for the lost revenue from the rebates.

Ticker Security Last Change Change %
CVS CVS HEALTH CORP. 84.02 +1.62 +1.97%

CVS now expects 2019 profits to be as high as $6.90 per share, up from a prior estimate of $6.88 per share.

Meanwhile, CVS revenue in the first quarter rose 34.8 percent to $61.6 billion. Profits in the three months through March grew 42 percent to $1.4 billion, or adjusted to $1.62 per share. Both results were higher than Wall Street expected.

Driving the increase in the period was higher costs for brand name drugs, the Woonsocket, Rhode Island-based pharmacy chain said.


CVS recently closed its merger with health insurer Aetna, one that the combined company now expects to generate up to $2 billion in annual savings by 2022.