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CVS To Invest Tax Cut In Workers Wages And Reducing Aetna Deal's Debt

By newadmin / Published on Thursday, 08 Feb 2018 13:19 PM / No Comments / 4 views


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A pedestrian walks past a CVS Health Corp. store in San Francisco, California, U.S., on Thursday, April 23, 2015.&nbsp; (Photo: David Paul Morris/Bloomberg)

CVS Health Thursday said it plans to invest $425 million annually in wages and benefits for its workers and hundreds of millions more in data analytics, “care management solutions” and debt reduction from its purchase of Aetna.

The drugstore chain is gaining $1.2 billion in overall annual tax savings from the U.S. Tax Cuts and Jobs Act passed last year by the Republican-led Congress and signed into law by President Trump. CVS plans to use $425 million annually to increase the starting wage for hourly employees to $11 an hour , freeze employee health premiums for a year and create a new parental leave program.

Aside from the worker wages and new benefits, CVS’ annualized tax benefit will also be directed toward “data analytics, care management solutions and store service offering pilots to improve health outcomes and lower costs for patients, as well as on debt reduction related to its planned acquisition of Aetna,” CVS said on the same day it announced fourth quarter 2017 earnings and discussed the 2018 year ahead.

Buoyed by strong revenue from pharmacy services, CVS said net income rose to&nbsp;$3.29 billion, or $3.22 per share in the company’s 2017 fourth quarter. That compares to $1.71 billion, or $1.59 per share for the same period last year. Revenues rose 5% to more than $48 billion, the company’s report said.&nbsp;

“We are also making additional, significant, infrastructure investments that will allow us to accelerate our long-term growth objectives,” CVS chief executive Larry Merlo said.

The tax cut windfall comes at a good time for CVS, which this year hopes to complete its $69 billion acquisition of Aetna , the nation’s third largest health insurance company. CVS stock is only recently been returning to a price it was achieving a year ago and before speculation became rampant that online retailer Amazon was going to enter the pharmacy business. The stock of CVS’ rival Walgreens Boots Alliance has also been hit by Amazon speculation.

But so far Amazon has made no public announcement regarding a future in the pharmacy business. Instead, Amazon, Warren Buffett’s Berkshire Hathaway and JPMorgan Chase &amp; Co. last week said they want to create a health company for their workers. Initially, the Amazon-Berkshire venture’s focus will be on “technology solutions” that will provide U.S. employees and their families with “simplified, high-quality and transparent healthcare at a reasonable cost.”

CVS says the cash benefits from the tax cuts will allow the company to “make strategic investments in 2018 to stimulate greater growth over the longer term, and our updated guidance reflects this,” CFO David Denton said. “These investments will accelerate our ability to continue to improve health outcomes and lower costs for patients. Additionally, we will spend at least half of the benefits on debt reduction as we look to lower our leverage ratio.”

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A pedestrian walks past a CVS Health Corp. store in San Francisco, California, U.S., on Thursday, April 23, 2015.  (Photo: David Paul Morris/Bloomberg)

CVS Health Thursday said it plans to invest $425 million annually in wages and benefits for its workers and hundreds of millions more in data analytics, “care management solutions” and debt reduction from its purchase of Aetna.

The drugstore chain is gaining $1.2 billion in overall annual tax savings from the U.S. Tax Cuts and Jobs Act passed last year by the Republican-led Congress and signed into law by President Trump. CVS plans to use $425 million annually to increase the starting wage for hourly employees to $11 an hour , freeze employee health premiums for a year and create a new parental leave program.

Aside from the worker wages and new benefits, CVS’ annualized tax benefit will also be directed toward “data analytics, care management solutions and store service offering pilots to improve health outcomes and lower costs for patients, as well as on debt reduction related to its planned acquisition of Aetna,” CVS said on the same day it announced fourth quarter 2017 earnings and discussed the 2018 year ahead.

Buoyed by strong revenue from pharmacy services, CVS said net income rose to $3.29 billion, or $3.22 per share in the company’s 2017 fourth quarter. That compares to $1.71 billion, or $1.59 per share for the same period last year. Revenues rose 5% to more than $48 billion, the company’s report said

“We are also making additional, significant, infrastructure investments that will allow us to accelerate our long-term growth objectives,” CVS chief executive Larry Merlo said.

The tax cut windfall comes at a good time for CVS, which this year hopes to complete its $69 billion acquisition of Aetna , the nation’s third largest health insurance company. CVS stock is only recently been returning to a price it was achieving a year ago and before speculation became rampant that online retailer Amazon was going to enter the pharmacy business. The stock of CVS’ rival Walgreens Boots Alliance has also been hit by Amazon speculation.

But so far Amazon has made no public announcement regarding a future in the pharmacy business. Instead, Amazon, Warren Buffett’s Berkshire Hathaway and JPMorgan Chase & Co. last week said they want to create a health company for their workers. Initially, the Amazon-Berkshire venture’s focus will be on “technology solutions” that will provide U.S. employees and their families with “simplified, high-quality and transparent healthcare at a reasonable cost.”

CVS says the cash benefits from the tax cuts will allow the company to “make strategic investments in 2018 to stimulate greater growth over the longer term, and our updated guidance reflects this,” CFO David Denton said. “These investments will accelerate our ability to continue to improve health outcomes and lower costs for patients. Additionally, we will spend at least half of the benefits on debt reduction as we look to lower our leverage ratio.”

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