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Dollar General posts 13.7% sales lift in Q4, plans 1K new stores

BY Marianne Wilson
GOODLETTSVILLE, Tenn. — Dollar General on Thursday reported better-than-expected fourth-quarter sales and earnings and said it planned to raise compensation and increase training for store managers.
 
The discounter also said it plans to open approximately 1,000 stores and remodel or relocate 900 existing stores in fiscal 2017.
  
Dollar General’s net income rose to $414.2 million or $1.49 per share in the fourth quarter, from $376.2 million or $1.30 per share a year earlier. Analysts on average had expected earnings of $1.41 per share.
 
Net sales increased 13.7% to $6.0 billion in the quarter.
 
Same-store sales increased 1.0% from the year-ago period, primarily due to an increase in average transaction amount, partially offset by a slight decline in traffic that moderated from the second and third quarters.  
 
Same-store sales were driven by positive results in the consumables and home products categories, partially offset by negative results in the seasonal and apparel categories.
 
Dollar General said on Thursday it would hike compensation and provide more training for its store managers, a move that it hopes will improve service quality in stores over time but will pressure earnings this year.
 
Dollar General said its manager pay hike would put pressure on earning this year. It forecast earnings of $4.25 to $4.50 per share for the year ending February 2018, below the average analyst estimate of $4.39.
 
“Dollar General is well-positioned to serve our customers with value and convenience given our plans to open approximately 1,000 new stores in 2017,” said Todd Vasos, Dollar General’s CEO. “To strengthen our position for the long term, we are making significant investments, primarily in compensation and training for our store managers given the critical role this position plays in our customer experience, as well as strategic initiatives. While these investments are expected to put pressure on our 2017 earnings, we believe they will strengthen our market share position over time and are positive steps to further support sustainable growth for our shareholders over the long term.”
 
Dollar General’s full year 2016 net sales increased 7.9% to $22.0 billion. Same-store sales increased 0.9%. During 2016, the company opened 900 new stores and remodeled or relocated 906 stores.
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CVS Health PBM clients achieve lowest drug trend in four years

BY Brian Berk

WOONSOCKET, R.I. — CVS Health’s pharmacy benefits management clients achieved the lowest drug trend in the past four years, despite rising drug prices. CVS Caremark clients saw their prescription drug trend drop to an average of 3.2% compared to 5.0% in 2015, according to the company. In addition, 38% of CVS Caremark commercial clients achieved a negative trend, which means they actually spent less on their prescription benefit in 2016 than they did in 2015, despite rising drug prices. Out-of-pocket costs for members also dropped 3.0% compared to the previous year.

"No one is more concerned about the high cost of prescription drugs than CVS Health," said Troyen Brennan, M.D., EVP and Chief Medical Officer, CVS Health. "Our very favorable drug trend results for 2016 demonstrate that we have been able to deliver best-in-class value to clients and their members."

Unmanaged drug trend for 2016 was 11.0%, driven primarily by price inflation for branded specialty and traditional drugs, as well as increased utilization due to an aging population. CVS Caremark was able to reduce trend for clients by 7.8 percentage points to 3.2% through PBM management solutions that include price protection and the negotiation of rebates, of which more than 90 percent are passed back to clients. CVS Caremark also encouraged the use of less expensive generic drugs through managed formularies and applied targeted approaches to addressing high-spend drivers such as hyper-inflating drugs. On average, clients who selected the CVS Caremark standard managed formulary achieved a trend of 2.2%, which was less than half the trend of 4.5% for clients who used a custom formulary and opted out of drug removals. Additionally, clients who chose our generic-focused value formulary had the highest generic dispensing rate at 88.2% and the lowest baseline cost at $81.86 per member per month.

Although overall drug price inflation was lower in 2016, it still accounted for almost 80% of the unmanaged trend, stated CVS. The relative impact of inflation on specialty branded products continued to increase relative to traditional branded medications. At the same time, overall specialty products grew to nearly 36% of overall gross spend. Three of the top five categories contributing to gross trend were specialty drug categories, including anti-inflammatory medications for rheumatoid arthritis and psoriasis; antineoplastics and adjunctive therapies used to treat cancer; and psychotherapeutic and neurological agents, including multiple sclerosis therapies. Meanwhile, generic utilization growth kept costs low for members as well as clients and drove a 3.5 point overall cost reduction for clients.

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CVS’ Denton: We have a ‘lot of tools in our tool chest to differentiate ourselves’

BY Brian Berk

MIAMI — CVS Health’s integrated pharmacy model arms the retailer with “a lot of tools in our tool chest to differentiate ourselves” from the competition, David Denton, EVP and chief financial officer, stated Wednesday during the Barclays Global Healthcare Conference at the Lowes Miami Beach Hotel here.

One “tool” delivering excellent growth is CVS Specialty Connect, he said. CVS Health’s Specialty Connect is a specialty prescription services program offers patients choice and flexibility in how they access their specialty medications, while providing centralized, expert clinical support. Patients have the option to bring their specialty prescriptions to any CVS Pharmacy. After dropping off their prescription at the pharmacy, patients receive insurance guidance and dedicated clinical support by phone from a team of specialty pharmacy experts, trained in each therapeutic area, who are available 24 hours a day, 365 days a year.

Once the prescription is ready, the program also makes it easy for patients to receive their specialty drugs. Patients can choose between in-store pickup at any of the many CVS Pharmacy stores nationwide, or they can receive their medications by mail.

“We’ve seen great share gain [with Specialty Connect],” Denton remarked during the event.

Denton also cited MinuteClinic, the retail medical clinic of CVS Health, as another tool showing excellent growth that is differentiating itself from competitors.

Other notes from Denton during the question-and-answer format included:

  • Regarding changes in the pharmacy benefit manager portion of the business, the market has changed dramatically during the past five years as $100 million worth of products has lost patent protection in this time.
  • CVS has experienced operational success regarding Medicare Part D. “Our platform is extremely stable,” said Denton. He added that adherence is very important in this space.
  • Likewise, the retailer has also enjoyed managed care plan success regarding Medicare Plan B.

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