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CVS Declares Quarterly Dividend and Gets a Boost from Relaxed Rebate Policy

20:00 EDT 10 Jul 2019 | Streetwise - The Life Science Report

Source: Streetwise Reports   07/11/2019

CVS Healthcare announced a $0.50/share quarterly dividend yesterday and got an added boost today as news spreads regarding easing of federal restrictions on pharmacy rebate plans.

CVS Health Corp. (CVS:NYSE) along with many other pharmacy benefits managers (PBMs) and healthcare providers got a huge shot in the arm on news out of Washington today that the Trump administration will ease back on plans to limit drug rebate programs.

CVS also announced yesterday that it will continue its quarterly dividend of $0.50/share payable to shareholders of record as of July 25, 2019, on August 2, 2019. The company's $2/share annual dividend equates to an annual yield of 3.45% based upon today's share price of around $58/share.

Reuters reported earlier today that the Trump administration just scrapped one of its most ambitious proposals for lowering prescription medicine prices, backing down from a policy that would have required health insurers to pass on billions of dollars in rebates they receive from pharmaceutical companies to Medicare patients. The Reuters report concluded that firms like CVS and Cigna Corp. (CI:NYSE) that negotiate rebates with pharmaceutical manufacturers on behalf of the government's Medicare program will continue to benefit from those discounts.

The report also raises questions about whether the administration's other efforts to lower prices will affect the major pharmaceutical manufacturers more directly.

Shares of many of the large health insurers, PBMs, and retail pharmacies are up sharply today on the news. Cigna, which partners closely with CVS on walk-in clinic and pharmacy programs, is seeing a greater than 10% increase in its share price today.

CVS is a leading pharmacy benefits manager with 94 million plan members and operates more than 9,900 retail locations and 1,100 walk-in medical clinics. The firm also serves an estimated 38 million people through traditional consumer-directed health insurance products including Medicare Advantage offerings.

Cigna is a global health service company offering products and services that include an integrated suite of health services, such as medical, dental, behavioral health, pharmacy, vision, supplemental benefits, and related products including group life, accident and disability insurance to 165 million customers in 30 countries.

CVS shares are trading up today greater than 5% above the prior day's close of $55.38 on significantly higher than average volume. Shares have traded between $58.08-60.13/share. Cigna shares are also trading much higher between $177.38-185.77 over Wednesday closing price of $160.51.

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( Companies Mentioned: CI:NYSE , CVS:NYSE, )

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