CVS HEALTH Corp

Previous wording

CVS Health Corporation, together with its subsidiaries (collectively, “CVS Health,” the “Company,” “we,” “our” or “us”), is a leading health solutions company building a world of health around every consumer it serves and connecting care so that it works for people wherever they are. As of June 30, 2024, the Company had more than 9,000 retail locations, more than 1,000 walk-in medical clinics, 207 primary care medical clinics, a leading pharmacy benefits manager with approximately 90 million plan members and expanding specialty pharmacy solutions and a dedicated senior pharmacy care business serving more than 800,000 patients per year. The Company also serves an estimated more than 36 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”). The Company is creating new sources of value through its integrated model allowing it to expand into personalized, technology driven care delivery and health services, increasing access to quality care, delivering better health outcomes and lowering overall health care costs.

Current wording

CVS Health Corporation, together with its subsidiaries (collectively, “CVS Health,” the “Company,” “we,” “our” or “us”), is a leading health solutions company building a world of health around every consumer it serves and connecting care so that it works for people wherever they are. As of September 30, 2024, the Company had more than 9,000 retail locations, more than 900 walk-in medical clinics, more than 225 primary care medical clinics, a leading pharmacy benefits manager with approximately 90 million plan members and expanding specialty pharmacy solutions, and a dedicated senior pharmacy care business serving more than 800,000 patients per year. The Company also serves an estimated more than 36 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”). The Company is creating new sources of value through its integrated model allowing it to expand into personalized, technology driven care delivery and health services, increasing access to quality care, delivering better health outcomes and lowering overall health care costs.

Previous wording

The Health Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, delivers health care services in its medical clinics, virtually, and in the home, and offers provider enablement solutions. PBM solutions include plan design offerings and administration, formulary management, retail pharmacy network management services, and specialty and mail order pharmacy services. In addition, the Company provides clinical services, disease management services, medical spend management and pharmacy and/or other administrative services for providers and federal 340B drug pricing program covered entities (“Covered Entities”). The Company operates a group purchasing organization that negotiates pricing for the purchase of pharmaceuticals and rebates with pharmaceutical manufacturers on behalf of its participants and provides various administrative, management and reporting services to pharmaceutical manufacturers. During 2023, the Company completed the acquisition of two key health care delivery assets – Signify Health, Inc. (“Signify Health”), a leader in health risk assessments, value-based care and provider enablement services, and Oak Street Health, Inc. (“Oak Street Health”), a leading multi-payor operator of value-based primary care centers serving Medicare eligible patients. The Company also launched Cordavis TM, a wholly owned subsidiary that works directly with pharmaceutical manufacturers to commercialize and/or co-produce high quality biosimilar products. The Health Services segment’s clients and customers are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, the U.S. Centers for Medicare & Medicaid Services (“CMS”), plans offered on Insurance Exchanges and other sponsors of health benefit plans throughout the U.S., patients who receive care in the Health Services segment’s medical clinics, virtually or in the home, as well as Covered Entities.

Current wording

The Health Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, delivers health care services in its medical clinics, virtually, and in the home, and offers provider enablement solutions. PBM solutions include plan design offerings and administration, formulary management, retail pharmacy network management services, and specialty and mail order pharmacy services. In addition, the Company provides clinical services, disease management services, medical spend management and pharmacy and/or other administrative services for providers and federal 340B drug pricing program covered entities (“Covered Entities”). The Company operates a group purchasing organization that negotiates pricing for the purchase of pharmaceuticals and rebates with pharmaceutical manufacturers on behalf of its participants and provides various administrative, management and reporting services to pharmaceutical manufacturers. During 2023, the Company completed the acquisition of two key health care delivery assets – Signify Health, Inc. (“Signify Health”), a leader in health risk assessments, value-based care and provider enablement services, and Oak Street Health, Inc. (“Oak Street Health”), a leading multi-payor operator of value-based primary care centers serving Medicare eligible patients. The Company also launched Cordavis TM, a wholly owned subsidiary that works directly with pharmaceutical manufacturers to commercialize and/or co-produce high quality biosimilar products. The Health Services segment’s clients and customers are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, the U.S. Centers for Medicare & Medicaid Services (“CMS”), plans offered on public and private health insurance exchanges and other sponsors of health benefit plans throughout the U.S., patients who receive care in the Health Services segment’s medical clinics, virtually or in the home, as well as Covered Entities.

Previous wording

The following discussion explains the material changes in the Company’s operating results for the three and six months ended June 30, 2024 and 2023, and the significant developments affecting the Company’s financial condition since December 31, 2023. We strongly recommend that you read our audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”).

Current wording

The following discussion explains the material changes in the Company’s operating results for the three and nine months ended September 30, 2024 and 2023, and the significant developments affecting the Company’s financial condition since December 31, 2023. We strongly recommend that you read our audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”).

Previous wording

•Total revenues increased $5.7 billion, or 21.4%, in the three months ended June 30, 2024 compared to the prior year driven by growth in the Medicare and Commercial product lines.

Current wording

•Total revenues increased $5.7 billion, or 6.3%, in the three months ended September 30, 2024 compared to the prior year primarily driven by growth in the Health Care Benefits and Pharmacy & Consumer Wellness segments, partially offset by a decline in the Health Services segment.

Previous wording

•Operating expenses increased $465 million, or 4.7%, in the three months ended June 30, 2024 compared to the prior year. The increase in operating expenses was primarily due to increased operating expenses to support growth in the business.

Current wording

•Operating expenses increased $681 million, or 6.9%, in the three months ended September 30, 2024 compared to the prior year. The increase in operating expenses was primarily due to the accelerated recognition of unamortized acquisition costs of $394 million in connection with premium deficiency reserves recorded during the third quarter of 2024, as well as increased operating expenses to support growth in the business.

Previous wording

•Interest expense increased $46 million, or 6.7%, due to higher debt in the three months ended June 30, 2024, primarily driven by long-term debt issued in June of 2023 to fund the Company’s acquisition of Oak Street Health, as well as long-term debt issued in May of 2024. See “Liquidity and Capital Resources” later in this report for additional information.

Current wording

•Interest expense increased $59 million, or 8.5%, due to higher debt in the three months ended September 30, 2024, primarily driven by long-term debt issued in May 2024. See “Liquidity and Capital Resources” later in this report for additional information.

Previous wording

•The effective income tax rate was 24.3% for the three months ended June 30, 2024 compared to 25.5% for the three months ended June 30, 2023. The decrease in the effective income tax rate was primarily due to a state tax settlement during the three months ended June 30, 2024.

Current wording

•The effective income tax rate was 32.4% for the three months ended September 30, 2024 compared to 25.0% for the three months ended September 30, 2023. The increase in the effective income tax rate was primarily due to lower pre-tax income in the three months ended September 30, 2024 compared to the prior year.

Previous wording

•Operating expenses increased $1.2 billion, or 6.0%, in the six months ended June 30, 2024 compared to the prior year. The increase in operating expenses was primarily due to increased operating expenses to support growth in the business and operating expenses associated with Oak Street Health which was acquired in May of 2023, including the amortization of acquired intangible assets. These increases were partially offset by a decline in operating expenses in the Pharmacy & Consumer Wellness segment due to the impact of a decrease in store count.

Current wording

•Operating expenses increased $1.9 billion, or 6.3%, in the nine months ended September 30, 2024 compared to the prior year. The increase in operating expenses was primarily due to increased operating expenses to support growth in the business, the accelerated recognition of unamortized acquisition costs in connection with premium deficiency reserves recorded during the third quarter of 2024, as well as operating expenses associated with Oak Street Health which was acquired in May of 2023, including the amortization of acquired intangible assets.

Previous wording

•Operating income decreased $1.4 billion, or 20.4%, in the six months ended June 30, 2024 compared to the prior year. The decrease in operating income was primarily driven by declines in the Health Care Benefits and Health Services segments, partially offset by the absence of the $496 million restructuring charge and a $349 million loss on assets held for sale related to the write-down of the Company’s Omnicare®long-term care business, both recorded in the prior year.

Current wording

•Operating income decreased $4.2 billion, or 40.7%, in the nine months ended September 30, 2024 compared to the prior year. The decrease in operating income was primarily driven by a decline in the Health Care Benefits segment, driven by increased utilization in the Medicare and Medicaid product lines and premium deficiency reserves of approximately $1.1 billion recorded in the third quarter of 2024, as well as an increase in restructuring charges compared to the prior year. These decreases were partially offset by the absence of a $349 million loss on assets held for sale related to the write-down of the Company’s Omnicare®long-term care business recorded in the prior year.

Previous wording

•Interest expense increased $173 million, or 13.6%, due to higher debt in the six months ended June 30, 2024, primarily driven by long-term debt issued in February and June of 2023 to fund the Company’s acquisitions of Signify Health and Oak Street Health, respectively, as well as long-term debt issued in May 2024. See “Liquidity and Capital Resources” later in this report for additional information.

Current wording

•Interest expense increased $232 million, or 11.8%, due to higher debt in the nine months ended September 30, 2024, primarily driven by long-term debt issued in February and June of 2023 to fund the Company’s acquisitions of Signify Health and Oak Street Health, respectively, as well as long-term debt issued in May 2024. See “Liquidity and Capital Resources” later in this report for additional information.

Previous wording

•The effective income tax rate was 26.2% for the six months ended June 30, 2024 compared to 25.6% for the six months ended June 30, 2023. The increase in the effective income tax rate was primarily due to the impact of certain discrete tax items, partially offset by a state tax settlement during the six months ended June 30, 2024.

Current wording

•The effective income tax rate was 26.3% for the nine months ended September 30, 2024 compared to 25.4% for the nine months ended September 30, 2023. The increase in the effective income tax rate was primarily due to lower pre-tax income in the nine months ended September 30, 2024 compared to the prior year.

Previous wording

•Membership enrollment in Medicare Advantage plans has exceeded expectations.

Current wording

•Membership enrollment in Medicare Advantage and individual exchange plans has exceeded expectations.

Previous wording

•Utilization, particularly in Medicare Advantage programs, persisted at elevated levels through the second quarter of 2024. Although the level of Medicare utilization is difficult to accurately predict, at this time, the Company expects that continued elevated utilization will pressure its Health Care Benefits segment and its health care delivery assets in its Health Services segment for the remainder of the year. Further, continued elevated utilization in Medicare Advantage may also result in the Company having to record a Medicare premium deficiency reserve in the Health Care Benefits segment during the third quarter of 2024.

Current wording

•Utilization, particularly in Medicare Advantage programs, persisted at elevated levels through the third quarter of 2024. Although the level of Medicare utilization is difficult to accurately predict, at this time, the Company expects that continued elevated utilization will pressure its Health Care Benefits segment and its health care delivery assets in its Health Services segment for the remainder of the year. Further, continued elevated utilization may also result in the Company having to record additional premium deficiency reserves in the Health Care Benefits segment during the fourth quarter of 2024.

Previous wording

•GLP-1 supply disruptions, and the associated impact on product mix, could pressure the Company’s ability to deliver savings to clients and could impact the Company’s results.

Current wording

•Glucagon-like peptide 1 (“GLP-1”) supply disruptions, and the associated impact on product mix, could pressure the Company’s ability to deliver savings to clients and could impact the Company’s results.

Previous wording

•The Company expects benefits from ongoing enterprise-wide cost savings initiatives and investments in efficiencies, which aim to reduce the Company’s operating cost structure in a way that improves the consumer experience and is sustainable.

Current wording

•The Company expects benefits from ongoing enterprise-wide cost savings initiatives and investments in efficiencies, which aim to reduce the Company’s operating cost structure in a way that improves the consumer experience and is sustainable. During the third quarter of 2024, the Company finalized an enterprise-wide restructuring plan intended to streamline and simplify the organization, improve efficiency and reduce costs. Refer to Note 2 ‘‘Restructuring Program’’ for actions implemented under the plan.

Previous wording

(1)Total revenues of the Health Services segment include approximately $2.8 billion and $3.4 billion of retail co-payments for the three months ended June 30, 2024 and 2023, respectively, and $6.2 billion and $7.5 billion of retail co-payments for the six months ended June 30, 2024 and 2023, respectively.

Current wording

(1)Total revenues of the Health Services segment include approximately $2.7 billion and $3.2 billion of retail co-payments for the three months ended September 30, 2024 and 2023, respectively, and $8.9 billion and $10.7 billion of retail co-payments for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

(1)The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the unaudited condensed consolidated statements of operations in operating expenses within each segment. Although intangible assets contribute to the Company’s revenue generation, the amortization of intangible assets does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of the

Current wording

(1)The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the unaudited condensed consolidated statements of operations in operating expenses within each segment. Although intangible assets contribute to the Company’s revenue generation, the amortization of intangible assets does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of the Company’s acquisition activity. Accordingly, the Company believes excluding the amortization of intangible assets enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within the Company’s GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.

Previous wording

(3)During the three and six months ended June 30, 2024, the acquisition-related integration costs relate to the acquisitions of Signify Health and Oak Street Health. During the three and six months ended June 30, 2023, the acquisition-related transaction and integration costs relate to the acquisitions of Signify Health and Oak Street Health. The acquisition-related transaction and integration costs are reflected in the Company’s unaudited condensed consolidated statements of operations in operating expenses within the Corporate/Other segment.

Current wording

(3)During the three and nine months ended September 30, 2024, the acquisition-related integration costs relate to the acquisitions of Signify Health and Oak Street Health. During the three and nine months ended September 30, 2023, the acquisition-related transaction and integration costs relate to the acquisitions of Signify Health and Oak Street Health. The acquisition-related transaction and integration costs are reflected in the Company’s unaudited condensed consolidated statements of operations in operating expenses within the Corporate/Other segment.

Previous wording

(5)During the three and six months ended June 30, 2023, the restructuring charge is primarily comprised of severance and employee-related costs and asset impairment charges. During the second quarter of 2023, the Company developed an enterprise-wide restructuring plan intended to streamline and simplify the organization, improve efficiency and reduce costs. In connection with the development of this plan and the recently completed acquisitions of Signify Health and Oak Street Health, the Company also conducted a strategic review of its various transformation initiatives and determined that it would terminate certain initiatives. The restructuring charge is reflected within the Corporate/Other segment.

Current wording

(4)During the three and nine months ended September 30, 2024, the restructuring charges are primarily comprised of a store impairment charge, corporate workforce optimization costs, including severance and employee-related costs, and other asset impairment and related charges associated with the discontinuation of certain non-core assets. During the third quarter of 2024, the Company finalized an enterprise-wide restructuring plan intended to streamline and simplify the organization, improve efficiency and reduce costs. In connection with this restructuring plan, the Company completed a strategic review of its retail business and determined that it plans to close 271 retail stores in 2025, and, accordingly, it recorded a store impairment charge to write down the associated operating lease right-of-use assets and property and equipment. In addition, during the third quarter of 2024, the Company also conducted a review of its various strategic assets and determined that it would discontinue the use of certain non-core assets, at which time impairment losses were recorded to write down the carrying value of these assets to the Company’s best estimate of their fair value. During the three months ended September 30, 2023, the restructuring charges are primarily comprised of a stock-based compensation charge. During the nine months ended September 30, 2023, the restructuring charges also include severance and employee-related costs and asset impairment charges. The restructuring charges associated with the store impairments are reflected within the Pharmacy & Consumer Wellness segment, other asset impairments and related charges are reflected within the Corporate/Other and Pharmacy & Consumer Wellness segments and corporate workforce optimization costs, including severance and employee-related costs, are reflected within the Corporate/Other segment.

Previous wording

(6)During the three and six months ended June 30, 2023, the office real estate optimization charges primarily relate to the abandonment of leased real estate and the related right-of-use assets and property and equipment in connection with the planned reduction of corporate office real estate space in response to the Company’s new flexible work arrangement. The office real estate optimization charges are reflected in the Company’s unaudited condensed consolidated statements of operations in operating expenses within the Health Care Benefits, Health Services and Corporate/Other segments.

Current wording

(5)During the three and nine months ended September 30, 2024 and 2023, the office real estate optimization charges primarily relate to the abandonment of leased real estate and the related right-of-use assets and property and equipment in connection with the Company’s continuous evaluation of corporate office real estate space in response to its ongoing flexible work arrangement. The office real estate optimization charges are reflected in the Company’s unaudited condensed consolidated statements of operations in operating expenses within each segment.

Previous wording

(4)During the six months ended June 30, 2024, the opioid litigation charge relates to a change in the Company’s accrual related to ongoing opioid litigation matters.

Current wording

(6)During the nine months ended September 30, 2024, the opioid litigation charge relates to a change in the Company’s accrual related to ongoing opioid litigation matters.

Previous wording

(7)During the six months ended June 30, 2023, the loss on assets held for sale relates to the LTC reporting unit within the Pharmacy & Consumer Wellness segment. During 2022, the Company determined that its LTC business was no longer a strategic asset and committed to a plan to sell it, at which time the LTC business met the criteria for held-for-sale accounting and its net assets were accounted for as assets held for sale. During the first quarter of 2023, a loss on assets held for sale was recorded to write down the carrying value of the LTC business to the Company’s best estimate of the ultimate selling price which reflected its estimated fair value less costs to sell. As of the third quarter of 2023, the Company determined the LTC business no longer met the criteria for held-for-sale accounting and accordingly the net assets associated with the LTC business were reclassified to held and used at their respective fair values.

Current wording

(7)During the nine months ended September 30, 2023, the loss on assets held for sale relates to the LTC reporting unit within the Pharmacy & Consumer Wellness segment. During 2022, the Company determined that its LTC business was no longer a strategic asset and committed to a plan to sell it, at which time the LTC business met the criteria for held-for-sale accounting and its net assets were accounted for as assets held for sale. During the first quarter of 2023, a loss on assets held for sale was recorded to write down the carrying value of the LTC business to the Company’s best estimate of the ultimate selling price which reflected its estimated fair value less costs to sell. As of the third quarter of 2023, the Company determined the LTC business no longer met the criteria for held-for-sale accounting and accordingly the net assets associated with the LTC business were reclassified to held and used at their respective fair values.

Previous wording

•Medical benefit ratio is calculated by dividing the Health Care Benefits segment’s health care costs by premium revenues and represents the percentage of premium revenues spent on medical benefits for the segment’s Insured members. Management uses MBR to assess the underlying business performance and underwriting of its insurance products, understand variances between actual results and expected results and identify trends in period-over-period results. MBR provides management and investors with information useful in assessing the operating results of the segment’s Insured Health Care Benefits products.

Current wording

•Medical benefit ratio is calculated by dividing the Health Care Benefits segment’s health care costs by premium revenues and represents the percentage of premium revenues spent on medical benefits for the segment’s Insured members. Management uses MBR to assess the underlying business performance and underwriting of its insurance products, understand variances between actual results and expected results and identify trends in period-over-period results. MBR provides management and investors with information useful in assessing the operating results of the Health Care Benefits segment’s Insured products.

Previous wording

•Operating expenses increased $476 million, or 12.0%, in the three months ended June 30, 2024 compared to the prior year primarily driven by increased operating expenses to support growth across the business. Operating expenses as a percentage of total revenues decreased to 13.7% in the three months ended June 30, 2024 compared to 14.8% in the prior year, reflecting improved fixed cost leverage across the business due to membership growth.

Current wording

•Operating expenses increased $715 million, or 17.6%, in the three months ended September 30, 2024 compared to the prior year primarily driven by the accelerated recognition of unamortized acquisition costs of $394 million in connection with the premium deficiency reserves recorded in the third quarter of 2024 and increased operating expenses to support growth across the business. Operating expenses as a percentage of total revenues decreased to 14.5% in the three months ended September 30, 2024 compared to 15.5% in the prior year, reflecting improved fixed cost leverage across the business due to membership growth, partially offset by the 120 basis points impact of the $394 million of accelerated unamortized acquisition costs described above.

Previous wording

•The MBR increased to 90.0% in the six months ended June 30, 2024 compared to 85.4% in the prior year driven by increased utilization and the unfavorable impact of the Company’s Medicare Advantage star ratings for the 2024 payment year within the Medicare product line.

Current wording

•The MBR increased to 91.7% in the nine months ended September 30, 2024 compared to 85.5% in the prior year driven by increased utilization and the unfavorable impact of the Company’s Medicare Advantage star ratings for the 2024 payment year within the Medicare product line, higher acuity in Medicaid following the resumption of redeterminations, as well as the premium deficiency reserves recorded as health care costs in the third quarter of 2024.

Previous wording

•Operating expenses increased $952 million, or 12.1%, in the six months ended June 30, 2024 compared to the prior year primarily driven by increased operating expenses to support the growth across the business. Operating expenses as a percentage of total revenues decreased to 13.6% in the six months ended June 30, 2024 compared to 14.9% in the prior year, reflecting improved fixed cost leverage across the business due to membership growth.

Current wording

•Operating expenses increased $1.7 billion, or 14.0%, in the nine months ended September 30, 2024 compared to the prior year primarily driven by increased operating expenses to support the growth across the business and the accelerated recognition of unamortized acquisition costs in connection with the premium deficiency reserves recorded in the third quarter of 2024. Operating expenses as a percentage of total revenues decreased to 13.9% in the nine months ended September 30, 2024 compared to 15.1% in the prior year, reflecting improved fixed cost leverage across the business due to membership growth, partially offset by the 40 basis points impact of the $394 million of accelerated unamortized acquisition costs described above.

Previous wording

•Adjusted operating income decreased $1.7 billion, or 50.4%, in the six months ended June 30, 2024 compared to the prior year primarily driven by increased utilization and the unfavorable impact of the Company’s Medicare Advantage star ratings for the 2024 payment year within the Medicare product line. These decreases were partially offset by an increase in net investment income and improved fixed cost leverage across the business due to membership growth.

Current wording

•Adjusted operating income decreased $4.2 billion, or 84.8%, in the nine months ended September 30, 2024 compared to the prior year primarily driven by increased utilization and the unfavorable impact of the Company’s Medicare Advantage star ratings for the 2024 payment year within the Medicare product line, the premium deficiency reserves recorded in the third quarter of 2024, as well as the higher acuity in Medicaid. These decreases were partially offset by an increase in net investment income and improved fixed cost leverage across the business due to membership growth.

Previous wording

•Medical membership as of June 30, 2024 of 27.0 million increased 200,000 members compared with March 31, 2024, reflecting increases in the Medicare and Medicaid product lines, including the commencement of the Medicaid Oklahoma contract on April 1, 2024.

Current wording

•Medical membership as of September 30, 2024 of 27.1 million increased 178,000 members compared with June 30, 2024, reflecting increases in the Commercial and Medicare product lines.

Previous wording

•Medical membership as of June 30, 2024 of 27.0 million increased by more than 1.3 million members compared with June 30, 2023, reflecting increases in the Medicare and Commercial product lines. These increases were partially offset by a decline in the Medicaid product line, primarily attributable to the resumption of Medicaid redeterminations following the expiration of the public health emergency in May 2023.

Current wording

•Medical membership as of September 30, 2024 of 27.1 million increased 1.4 million members compared with September 30, 2023, reflecting increases in the Medicare and Commercial product lines.

Previous wording

•Total revenues decreased $4.0 billion, or 8.8%, in the three months ended June 30, 2024 compared to the prior year primarily driven by the previously announced loss of a large client and continued pharmacy client price improvements. These decreases were partially offset by pharmacy drug mix, increased contributions from the Company’s health care delivery assets and growth in specialty pharmacy.

Current wording

•Total revenues decreased $2.8 billion, or 5.9%, in the three months ended September 30, 2024 compared to the prior year primarily driven by the previously announced loss of a large client and continued pharmacy client price improvements. These decreases were partially offset by pharmacy drug mix, increased contributions from the Company’s health care delivery assets and growth in specialty pharmacy.

Previous wording

•Adjusted operating income increased $21 million, or 1.1%, in the three months ended June 30, 2024 compared to the prior year primarily driven by improved purchasing economics, partially offset by continued pharmacy client price improvements and the previously announced loss of a large client.

Current wording

•Adjusted operating income increased $326 million, or 17.4%, in the three months ended September 30, 2024 compared to the prior year primarily driven by improved purchasing economics, partially offset by continued pharmacy client price improvements and the previously announced loss of a large client.

Previous wording

•Pharmacy claims processed decreased 18.3% on a 30-day equivalent basis in the three months ended June 30, 2024 compared to the prior year, reflecting the previously announced loss of a large client.

Current wording

•Pharmacy claims processed decreased 16.5% on a 30-day equivalent basis in the three months ended September 30, 2024 compared to the prior year, reflecting the previously announced loss of a large client.

Previous wording

•Total revenues decreased $8.4 billion, or 9.2%, in the six months ended June 30, 2024 compared to the prior year primarily driven by the previously announced loss of a large client and continued pharmacy client price improvements. These decreases were partially offset by pharmacy drug mix, increased contributions from the Company’s health care delivery assets, including the acquisitions of Oak Street Health and Signify Health, as well as growth in specialty pharmacy.

Current wording

•Total revenues decreased $11.1 billion, or 8.1%, in the nine months ended September 30, 2024 compared to the prior year primarily driven by the previously announced loss of a large client and continued pharmacy client price improvements. These decreases were partially offset by pharmacy drug mix, increased contributions from the Company’s health care delivery assets, including the acquisitions of Oak Street Health and Signify Health, as well as growth in specialty pharmacy.

Previous wording

•Operating expenses increased $55 million, or 6.9%, in the three months ended June 30, 2024 compared to the prior year primarily due to operating expenses associated with Oak Street Health, including the amortization of acquired intangible assets.

Current wording

•Operating expenses increased $300 million, or 14.0%, in the nine months ended September 30, 2024 compared to the prior year primarily due to operating expenses associated with Oak Street Health, including the amortization of acquired intangible assets.

Previous wording

•Adjusted operating income decreased $296 million, or 8.3%, in the six months ended June 30, 2024 compared to the prior year primarily driven by continued pharmacy client price improvements and the previously announced loss of a large client. These decreases were partially offset by improved purchasing economics.

Current wording

•Adjusted operating income increased slightly in the nine months ended September 30, 2024 compared to the prior year primarily driven by improved purchasing economics, largely offset by continued pharmacy client price improvements and the previously announced loss of a large client.

Previous wording

•The Company’s pharmacy claims processed decreased 19.7% on a 30-day equivalent basis in the six months ended June 30, 2024 compared to the prior year, reflecting the previously announced loss of a large client.

Current wording

•The Company’s pharmacy claims processed decreased 18.7% on a 30-day equivalent basis in the nine months ended September 30, 2024 compared to the prior year, reflecting the previously announced loss of a large client.

Previous wording

•Total revenues increased $1.1 billion, or 3.7%, in the three months ended June 30, 2024 compared to the prior year primarily driven by increased prescription volume and pharmacy drug mix. These increases were partially offset by continued pharmacy reimbursement pressure, the impact of recent generic introductions and decreased front store volume, including the impact of a decrease in store count and lower contributions from COVID-19 over-the-counter (“OTC”) test kits since the expiration of the public health emergency in May 2023.

Current wording

•Total revenues increased $3.6 billion, or 12.3%, in the three months ended September 30, 2024 compared to the prior year primarily driven by increased prescription volume, including increased contributions from vaccines, and pharmacy drug mix. These increases were partially offset by continued pharmacy reimbursement pressure, the impact of recent generic introductions and decreased front store volume, including the impact of a decrease in store count.

Previous wording

•Pharmacy same store sales increased 9.1% in the three months ended June 30, 2024 compared to the prior year. The increase was primarily driven by the 6.5% increase in pharmacy same store prescription volume on a 30-day equivalent basis and pharmacy drug mix. These increases were partially offset by continued pharmacy reimbursement pressure and the impact of recent generic introductions.

Current wording

•Pharmacy same store sales increased 19.5% in the three months ended September 30, 2024 compared to the prior year. The increase was primarily driven by the 9.1% increase in pharmacy same store prescription volume on a 30-day equivalent basis, including increased contributions from vaccines, and pharmacy drug mix. These increases were partially offset by continued pharmacy reimbursement pressure and the impact of recent generic introductions.

Previous wording

•Front store same store sales decreased 3.1% in the six months ended June 30, 2024 compared to the prior year. The decrease was primarily due to general softening of consumer demand and lower contributions from COVID-19 OTC test kits compared to the prior year.

Current wording

•Front store same store sales decreased 1.1% in the three months ended September 30, 2024 compared to the prior year. The decrease was primarily due to general softening of consumer demand compared to the prior year.

Previous wording

•Adjusted operating income decreased $170 million, or 12.0%, in the three months ended June 30, 2024 compared to the prior year primarily driven by continued pharmacy reimbursement pressure and decreased front store volume, including lower contributions from COVID-19 OTC test kits. These decreases were partially offset by increased prescription volume, improved drug purchasing and pharmacy drug mix.

Current wording

•Adjusted operating income increased $207 million, or 14.9%, in the three months ended September 30, 2024 compared to the prior year primarily driven by increased prescription volume, including increased contributions from vaccinations, as well as improved drug purchasing. These increases were partially offset by continued pharmacy reimbursement pressure and decreased front store volume in the three months ended September 30, 2024.