CVS Health Corporation, together with its subsidiaries (collectively, “CVS Health,” the “Company,” “we,” “our” or “us”) 1, is the nation’s leading health solutions company, delivering care like no one else can. CVS Health reaches more people and improves the health of communities across America through our local presence, digital channels and our over 300,000 dedicated colleagues – including more than 40,000 physicians, pharmacists, nurses and nurse practitioners. Wherever and whenever people need us, we help them with their health – whether that’s managing chronic diseases, staying compliant with their medications or accessing affordable health and wellness services in the most convenient ways. We help people navigate the health care system – and their personal health care – by improving access, lowering costs and being a trusted partner for every meaningful moment of health. The Company has more than 9,000 retail locations, approximately 1,100 walk-in medical clinics, a leading pharmacy benefits manager with over 110 million plan members with expanding specialty pharmacy solutions and a dedicated senior pharmacy care business serving more than one million patients per year. CVS Health also serves an estimated 35 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. The Company believes its innovative health care model increases access to quality care, delivers better health outcomes and lowers overall health care costs.
Virtually no part of the country has remained unaffected by opioid misuse and abuse. Our expansive reach, expertise and presence in communities position us to be part of the fight to address this issue.
Reducing opioid misuse and abuse requires involvement from stakeholders across the health care system and support from federal, state and local governments, law enforcement and regulatory agencies and, most importantly, the members of the affected communities.
CVS Health has made a commitment to help address the abuse and misuse of prescription opioids by designing programs and collaborating with community leaders, policymakers, law enforcement, health care professionals and others to increase community-based educational programs related to opioid misuse and abuse, create safe prescription drug disposal sites, expand access to life-saving antidotes and advocate for targeted and effective policies, locally and nationally. Our commitment to these efforts involves all of our employees, our senior management and our Board of Directors. Our Board has made our commitment to help address prescription opioid abuse an important priority of CVS Health. Our Board is actively engaged in our efforts through its oversight and review of the programs we implement to respond to prescription opioid abuse and working with our executive team as it develops new strategies to address it.
The role of our Board of Directors
Our Board is committed to supporting the development of solutions to reduce opioid misuse in our communities through expanded education, safe prescription drug disposal, utilization management, funding for treatment and recovery programs and advocating for legislative and regulatory changes. Within the Board, the Audit Committee, the Medical Affairs Committee, the Nominating and Corporate Governance Committee and the Management Planning and Development Committee each play a significant role in the Board’s oversight efforts.
Our Audit Committee oversees our compliance program, which includes matters related to our anti-diversion program, suspicious order monitoring and other controls related to prescription opioid misuse and abuse. The Audit Committee also reviews matters related to compliance with federal health care program requirements and oversaw compliance with our Corporate Integrity Agreement, or CIA. In January 2022, the Committee provided the final required annual certification of compliance with our now-expired 2016 CIA, which related to our institutional pharmacy services (long-term care, or LTC) operations, and to conduct that occurred prior to our August 2015 acquisition of Omnicare.
The General Counsel provides regular reports to the Audit Committee about litigation and investigations, which include significant government investigations, regulatory and legal matters, including those relating to prescription opioid misuse and abuse. The Chief Compliance Officer (CCO) provides regular reports to the Audit Committee regarding compliance matters involving opioids. The General Counsel has regularly updated the Audit Committee and the Board on the Multi-District Litigation in the U.S. District Court for the Northern District of Ohio and other opioid-related matters, including the Company’s global settlement described below. The General Counsel and other members of senior management participate in these reports to the Audit Committee and the Board, as appropriate.
In addition, the Audit Committee is charged with the primary role in carrying out risk oversight responsibilities on behalf of the Board. Pursuant to its charter, the Audit Committee annually reviews our policies and practices with respect to risk assessment and risk management, including discussing with management our major risk exposures and the steps that have been taken to monitor and mitigate such exposures. The Audit Committee also reviews CVS Health’s major financial risk exposures as well as major operational, compliance, reputational and strategic risks, including developing steps to monitor, manage and mitigate those risks. We have identified prescription opioid abuse and misuse and related litigation matters as one such risk and therefore the Audit Committee has been briefed on the action plans associated with this risk.
Medical Affairs Committee
The Medical Affairs Committee oversees our medical- and pharmacy-related strategies and initiatives, which include, among other things, our programs related to combatting prescription opioid abuse. The Committee focuses on advancing accessible, cost-effective, equitable and high-quality health care, patient safety and patient experience and member health, including matters related to prescription opioid safety. The Medical Affairs Committee regularly receives reports regarding our responses and efforts concerning prescription opioids. In terms of our ongoing efforts to combat prescription opioid misuse and abuse, the Medical Affairs Committee has received reports from management, including on safe disposal, proper dispensing practices and our counselling efforts, expanded access to overdose reversal drugs, support of recovery programs and efforts to prevent theft and diversion.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is responsible for oversight of our corporate governance matters, including review and consideration of our public policy and government affairs practices, and our policies and practices on issues relating to Environmental, Social and Governance (ESG) matters and other significant public policy issues. The Committee also reviews our annual ESG Report, Healthy 2030, prior to its publication each year. This report provides our ESG strategy for the next decade, updates the four key pillars of our ESG framework: Healthy People, Healthy Business, Healthy Community and Healthy Planet, and addresses our efforts and strategies on addressing widespread prescription opioid misuse and abuse. It is available on our website at https://www.cvshealth.com/impact/esg-reports/annual-report.html. With respect to our ongoing efforts to combat prescription opioid misuse and abuse, the Committee has received reports from management, including on our community programs, such as expanded access to drug disposal units and other disposal solutions, and our Pharmacists Teach/Dose of Knowledge programs, which are described below.
Management Planning and Development Committee
The Management Planning and Development (MP&D) Committee oversees our compensation and benefits policies and programs, including the performance of designated senior executives and our Chief Executive Officer (CEO). As part of its review, the MP&D Committee performs a comprehensive assessment of all major components of our compensation programs, including our recoupment policy. Since 2009, we have maintained a recoupment policy that applies to all annual and long-term incentive awards granted to executive officers. The policy applies in cases where financial or operational results used to determine an award amount are meaningfully altered based on fraud or material financial misconduct. To further increase transparency, since March 2019 the policy requires that we publicly disclose the circumstances of any recoupment from any executive officer to the extent the underlying event has already been publicly disclosed, and the disclosure would not violate applicable law, violate legal privilege, breach contractual obligations or be likely to result in or exacerbate litigation, investigation or proceedings against us.
The MP&D Committee is responsible for reviewing and assessing potential risk arising from our compensation policies and practices. In September 2022, the MP&D Committee reviewed the Company’s comprehensive risk assessment of our compensation policies and practices to ascertain any potential material risks that may be created by the programs. Included in the assessment were all major components of our compensation programs: the mix between annual and long-term compensation; short-term incentive program design; long-term incentive program performance measures; incentive plan performance criteria and corresponding objectives; a comparison of our programs with those of our peer group; our severance and change-in-control policies; our recoupment policy; our stock retention requirements and ownership guidelines; and the Internal Audit Department’s review of the controls regarding our long-term incentive program. The MP&D Committee considered the findings of the assessment and concluded that our compensation programs are aligned with the interests of stockholders, appropriately reward pay for performance, and do not promote excessive risk-taking.
Good Corporate Governance
More broadly, the Board is focused on maintaining and promoting good corporate governance practices. We provide our stockholders with the following rights:
Right to act by written consent and to call special meetings
Majority voting in director elections
Proxy access by-law
Annual election of all directors
Annual “say-on-pay” vote
For more information about the role of the Board, its Committees and our corporate governance developments, please see our 2022 Proxy Statement, as well as CVS Health’s Certificate of Incorporation, By-Laws, Corporate Governance Guidelines and Board Committee Charters found on the Governance Documents page of our Investor Relations website.
Our Global Opioid Settlements
In November 2022 CVS Health announced that it had reached an agreement in principle designed to substantially resolve all opioid lawsuits and claims against the Company by states, political subdivisions (such as counties and cities), and tribes in the United States. An agreement was finalized in December 2022 that is aimed at fully resolving claims dating back a decade or more, and does not include an admission of any liability or wrongdoing by the Company. The comprehensive agreement includes both financial and non-financial terms, including an agreement by CVS Health with respect to efforts to help reduce prescription opioid misuse and abuse, many of which programs are described in this report. The agreement is now being reviewed by states and subdivisions, and may become effective during 2023.
The Company’s Ongoing Efforts
Many of the programs and strategies responding to prescription opioid misuse and abuse described in the section below were developed in association with discussions among our Board, its Committees, and management, including our cross-functional, enterprise-wide Corporate Compliance Committee. Actions taken by management include the following
Providing safe prescription drug disposal options in more communities
We have installed safe disposal units in more than 3,700 CVS Pharmacy locations nationwide and donated over 1,000 additional disposal units to police departments to further expand drug disposal access in the community. Together, these disposal units have collected more than 4.8 million pounds of unwanted medication.
In addition, many CVS Pharmacy locations, including those that do not currently have a safe medication disposal kiosk, offer DisposeRx packets at no cost to patients filling select opioid prescriptions. According to the manufacturer, when water and the DisposeRx powder are added to a pill bottle with unwanted prescription medications, the combination produces a biodegradable gel, allowing for safe disposal at home.
Expanding our education programs
CVS Health, in partnership with Discovery Education, has continued to expand our no-cost prevention program, Dose of Knowledge. The program strives to empower educators and pharmacists to address substance misuse and to educate students to make good decisions for the health and well-being of themselves and their community. Collectively, our education programs have reached an estimated 1.8 million students and parents across our country.
Encouraging proper prescription opioid use through counseling provided locally
We provide comprehensive in-store counseling programs for CVS Pharmacy patients who are using prescription opioids for the first time. This counseling is designed to educate patients on proper use, secure storage in the home, and the importance of safe disposal of left-over medication.
Expanding access to critical opioid overdose reversal drug
We have established an industry-leading program to increase access to naloxone, the opioid overdose reversal drug. CVS pharmacists nationwide are able to provide naloxone to patients without a prescription (pursuant to local laws and regulations).
Encouraging proper use of prescription opioids through prescription plan design
CVS Caremark, our PBM business, has implemented utilization criteria to help members manage prescription opioid use. Complementing utilization management, our efforts to help prevent prescription opioid abuse and misuse extend to the pharmacy counter. Our pharmacists evaluate opioid prescriptions before they are dispensed, and we retrospectively monitor for outlier prescribing or dispensing patterns, including those potentially indicative of fraud or abuse.
Supporting recovery programs
We have enhanced our support for addiction recovery programs, providing grants to community health centers across the United States that deliver medication-assisted treatment and other addiction recovery services. Through our company and the CVS Health and Aetna Foundations, we have invested more than $12 million over the past several years to support mitigating and preventing prescription drug abuse and misuse.
Expanding community outreach
We have expanded Aetna’s 2018 pilot program, “Guardian Angel,” which provides support from a clinician who specializes in substance use disorders and can provide education on treatment options available to Aetna members who recently experienced an opioid overdose.
Additionally, to increase awareness among prescribers about opioid use disorder and non-opioid pain management options, Aetna has deployed an Opioid Prescriber Educational Incentive Program. This program, first launched in 2018, provides face-to-face and virtual education opportunities for in-network providers caring for Aetna’s Medicare members. The program remains focused in markets that experience higher rates of opioid use disorder and overdose and has provided education across eight states to-date. In collaboration with the non-profit organization Alosa Health, the sessions share best practices in managing patients with chronic pain, as well as identifying and treating patients struggling with addiction.
Preventing theft of medication
We have implemented a program to install time-delay safes as a way to address pharmacy robberies. Our initial pilot program in CVS Pharmacy locations in Indianapolis showed that the safes, when well-publicized, did deter such robberies. At this time, we have installed over 7,600 time-delay safes in 45 states and the District of Columbia, and we plan to complete our conversion to time-delay safes during the first half of 2023. Overall pharmacy robbery activity, which has often targeted opioids, has been greatly reduced since 2018, which we believe is largely due to our continuing roll-out of time-delay safes.
We have also taken a number of steps to enhance corporate-level visibility of exceptions to our internal counts of inventory of controlled substances, to further reduce the possibility of diversion. In this regard, we have: reengineered inventory reporting to view it at a deeper lever; performed more frequent reviews of exceptions; implemented reviews of every CII adjustment performed at store level to seek of losses or diversion; incorporated both daily and weekly corporate-level balance-on-hand counts as an additional filter, allowing us to research issues without relying solely on store-level counts; and added capability to reconcile inventory from multiple data points, for better evaluation of possible losses.
Long-term strategy on supporting the prevention of opioid misuse
We utilize an enterprise-wide approach to help address prescription misuse and abuse. We continue to expand our efforts through a variety of programs and initiatives, including education, safe prescription drug disposal, advocacy and collaboration with partners. We aim to provide appropriate access to opioid medications for patients with legitimate prescriptions while taking steps to prevent diversion and abuse.
Please see more details about our various ESG programs on our website: https://www.cvshealth.com/impact/esg-reports/annual-report.html. You can also find more information specifically about our Opioid Action Plan on our website at: https://www.cvshealth.com/impact/healthy-community/our-opioid-response.html.
Implementing and advocating for effective policies
We currently act as a distributor only with respect to Schedule III-V controlled substances shipped to CVS-owned pharmacies. We do not distribute Schedule II opioids such as oxycodone, hydrocodone, or fentanyl products, nor do we distribute controlled substances to any retail pharmacies that we do not own. With respect to those controlled substances that we currently distribute, orders are subject to a suspicious order monitoring system that utilizes both algorithmic analysis as well as a dedicated team of reviewers who conduct due diligence on flagged orders. Orders determined to be suspicious are reported to the U.S. Drug Enforcement Administration (DEA) and are not shipped. Our current suspicious order monitoring system has been in place since 2014 and is updated from time to time to time. We are now in the process of exiting the distribution of all controlled substances (i.e., those on Schedules III-V) and expect to complete our exit during 2023.
In addition to suspicious order monitoring, CVS Health maintains numerous anti-diversion and compliance programs, including:
Policies and procedures requiring that pharmacy personnel comply with all state and federal laws concerning controlled substances.
Training of pharmacy personnel with respect to controlled substances multiple times each year.
Regular store visits and review by field leaders on matters related to compliance with controlled substance laws.
Programmatic use of data analytics to monitor prescribers for outlier prescribing patterns indicative of potential diversion; we have suspended hundreds of prescribers from having controlled substance prescriptions filled at CVS Pharmacy locations.
Programmatic use of data analytics to monitor for potential indicators of prescription forgery activity; we have a program in place to identify and report forged prescriptions to law enforcement.
Use of overt camera systems to assist in deterring/investigating diversion; CVS pharmacy areas in over 5,200 stores now have “virtual” 100% camera coverage.
Programmatic use of data analytics to help ensure optimal store dispensing practices.
Programmatic monitoring of store inventory levels to identify potential theft; a team of approximately 200 asset protection investigators conduct investigations of potential diversion.
Routine pharmacy audits with respect to compliance with controlled substance laws; compliance is considered in evaluating pharmacy staff performance.
Frequent cooperation with state Board of Pharmacy and DEA inspections at our pharmacies.
Excluding the dispensing of controlled substances from performance metrics and compensation programs.
Reducing opioid misuse and abuse requires commitment and involvement from participants in the health care system across the spectrum, including public and private organizations as well as government agencies. While CVS Health has developed and implemented numerous programs and initiatives to help combat prescription opioid misuse, another significant part of our engagement involves advocating for effective public policies to address this public health issue. These include:
Reducing opportunities for fraudulent prescriptions
CVS Health supports legislation that requires e-prescribing for controlled substances to reduce the risk of fraudulent prescriptions. Prescribers under the Medicare Advantage and Part D programs were required to do so by January 1, 2023, subject to certain exceptions and a compliance threshold. As of January 2023, 35 states in the U.S. have adopted e-prescribing requirements, with four more states that have e-prescribing laws pending, and our advocacy efforts involve encouraging mandatory e-prescribing nationwide.
Limiting opioid quantities
We also support states’ efforts to follow Medicare Part D in instituting seven-day limits on the quantity of opioids dispensed to patients who are receiving opioids for the first time. Limiting the supply of opioids also helps ensure the prescription fits the medical condition and encourages more frequent check-ins with prescribers. As of January 2023, more than half of the states in the U.S. have adopted restrictions on first fills for opioids, typically limiting quantities prescribed to seven days or less. Limiting the quantity of opioids dispensed by prescription also helps focus the prescription to the medical condition and encourages more frequent check-ins with prescribers and local pharmacists.
Promoting information sharing across state lines
We support efforts to strengthen Prescription Drug Monitoring Programs (PDMPs), that when used effectively, can help prescribers and pharmacists identify potential indicators of diversion, even across state lines.
Purpose of our Compliance and Integrity Program
The current health care environment is extremely complex and is characterized by a growing number of regulatory enforcement and compliance activities. There are a myriad of federal, state, and local rules and regulations that are complex in both application and interpretation. The primary purpose of our Compliance and Integrity Program is to ensure that our colleagues understand our legal and ethical obligations and to prevent, detect, and resolve violations of laws, regulations, and company policies.
Ensuring compliance and integrity
Complying with legal requirements, applicable federal and state laws, and acting with integrity are important to us for many reasons. In addition to the fines and penalties associated with violating laws and regulations, non-compliance can significantly impact stockholder value and profitability, as well as our corporate reputation. Violating health care laws, including customer and patient privacy laws and regulations, can also result in being excluded from federally funded programs such as Medicare. We are committed to ensuring that we have sound practices, policies, processes and compliance mechanisms in place.
Our commitment extends to everyone within our organization. Our colleagues are expected to uphold our ethical standards in all interactions with customers, plan members, clients, physicians, vendors and all other business relationships. Our Compliance and Integrity Program provides a framework for fostering a culture of compliance throughout our organization that begins with our enterprise-wide Code of Conduct. The program includes the following components:
Compliance oversight and governance;
Policies, procedures and standards of conduct;
Due diligence in personnel;
Training and education;
Monitoring, auditing and reporting systems;
Effective lines of communication; and
Enforcing standards and disciplinary procedures.
Providing effective compliance oversight
Our Chief Compliance Officer (CCO) is responsible for implementing and overseeing our Compliance and Integrity Program. The CCO reports to the Audit Committee of our Board of Directors and to our CEO and is independent of all business units including the legal and finance functions. As part of the administration of the program, the CCO chairs the Corporate Compliance Committee, a cross-functional group comprised of our legal and business leaders from throughout the enterprise who provide expertise, coordination and oversight.
Our Compliance and Integrity Program is comprised of four main functional areas: Compliance Administration, Compliance Operations, Center of Excellence and Corporate Security and Resiliency. Compliance Administration manages core compliance activities, including policy management, supporting Ethics Line inquiries, communications, training, anti-money laundering and monitoring of regulatory settlement obligations. Compliance Operations is responsible for ensuring the requirements of new mandates are implemented for each of the Company’s main business areas, such as Pharmacy, Medicare, Medicaid, and Commercial Insurance. The Compliance Operations team includes Business Compliance Officers (BCOs) and compliance leads with subject matter expertise in the areas they support to ensure appropriate oversight, validation and monitoring of compliance activities. The Compliance Operations team also is responsible for performing compliance risk assessments and compliance analytics activities. Corporate Security and Resiliency is responsible for protecting and securing CVS Health’s assets: its people, facilities, and critical business operations. The Corporate Security and Resiliency team works closely with internal and external partners to evaluate operational risk, promote integrated technological solutions and security services to mitigate these risks, and provide 24/7 monitoring and support in response to identified incidents.
Implementing monitoring, auditing and reporting systems
We have a number of BCOs, who are designated Compliance Department staff members assigned to different business units. The BCOs work closely with their respective business units with the goal of creating two-way communication between the Compliance Department and our various businesses. In addition to informing the business of new or changing compliance requirements, the BCOs meet regularly with business unit leaders to identify potential compliance issues resulting from their business initiatives. The BCOs also coordinate with the Legal Department to interpret laws and regulations and assess risk. When action is required by the business to address a compliance-related issue, the business will be responsible for developing an action plan. The BCO will approve the action plan, monitor and report on its progress, validate its implementation upon completion, and establish post-implementation monitoring to help ensure ongoing compliance. Additionally, we use other tools and processes, including monitoring performed by our Center of Excellence team and Internal Audit reviews, to monitor and detect policy violations or improper conduct.
Compliance program metrics
We periodically evaluate the overall effectiveness of our Compliance and Integrity Program, primarily through self-assessments utilizing the Department of Justice (DOJ) guidance on the evaluation of corporate compliance programs and other regular compliance and audit reviews. Another tool utilized to measure Compliance and Integrity Program effectiveness and the Compliance culture within our organization is the annual colleague engagement survey. This survey includes soliciting information from a broad range of colleagues covering every level from senior executives to hourly colleagues. Survey results are communicated across the organization and used to modify Compliance and Integrity Program components accordingly.
Additionally, we have programs that incentivize our values and ethical behavior. Colleagues must comply with all applicable laws and regulations and CVS Health policies and procedures and failure to do so would result in discipline, up to and including termination. Furthermore, starting in 2012, we took steps to remove controlled substances from our prescription volume metrics that could impact pharmacy staff compensation. Our colleagues are never incented to dispense opioids.
Internal Audit serves as an independent assurance function assessing financial and operational controls and procedures. The Chief Audit Executive reports to the Audit Committee of the Board and administratively to the Chief Financial Officer (CFO). The independent nature of Internal Audit activity helps to promote a third line of defense to help validate our overall performance.
Legal notice, cautionary statement concerning forward-looking statements
The Private Securities Litigation Reform Act of 1995 (the “Reform Act”) provides a “safe harbor” for forward-looking statements, so long as (1) those statements are identified as forward-looking, and (2) the statements are accompanied by meaningful cautionary statements that identify important factors that could cause actual results to differ materially from those discussed in the statement. We want to take advantage of these safe harbor provisions.
Certain information contained in this report is forward-looking within the meaning of the Reform Act or SEC rules. In addition, throughout this report and our other reports and communications, we use the following words or variations or negatives of these words and similar expressions when we intend to identify forward-looking statements:
All statements addressing the future operating performance of CVS Health or any segment or any subsidiary and/or future events or developments, including statements relating to corporate strategy, revenue or adjusted revenue, operating income or adjusted operating income, earnings per share or adjusted earnings per share, Pharmacy Services segment business, sales results and/or trends and/or operations, Retail/LTC segment business, sales results and/or trends and/or operations, Health Care Benefits segment business, sales results and/or trends, medical cost trends, medical membership, Medicare Part D membership, medical benefit ratios and/or operations, incremental investment spending, interest expense, effective tax rate, weighted-average share count, cash flow from operations, net capital expenditures, cash available for debt repayment, integration synergies, net synergies, integration costs, enterprise modernization, transformation, leverage ratio, cash available for enhancing shareholder value, inventory reduction, turn rate and/or loss rate, debt ratings, the Company’s ability to attract or retain customers and clients, store development and/or relocations, new product development, and the impact of industry and regulatory developments; and statements expressing optimism or pessimism about future operating results or events, are forward-looking statements within the meaning of the Reform Act.
Forward-looking statements rely on a number of estimates, assumptions and projections concerning future events, and are subject to a number of significant risks and uncertainties and other factors that could cause actual results to differ materially from those statements. Many of these risks and uncertainties and other factors are outside our control. Certain of these risks and uncertainties and other factors are described under “Risk Factors” included in Item 1A of our most recent Annual Report on Form 10-K and/or under “Risk Factors” included in Part II, Item 1A of our recent Forms 10-Q; these are not the only risks and uncertainties we face. There can be no assurance that the Company has identified all the risks that affect it. Additional risks and uncertainties not presently known to the Company or that the Company currently believes to be immaterial also may adversely affect the Company’s businesses. If any of those risks or uncertainties develops into actual events, those events or circumstances could have a material adverse effect on the Company’s businesses, operating results, cash flows, financial condition and/or stock price, among other effects.
You should not put undue reliance on forward-looking statements. Any forward-looking statement speaks only as of the date of this report, and we disclaim any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events, uncertainties or otherwise.
Please see the Company’s latest Annual Report on Form 10-K and subsequent SEC filings for a discussion of risks that could cause actual results to vary materially from those indicated or anticipated.
Updated January 4, 2023