CVS
#Yes, hey, Bob, on the cash flow certainly from a 2016 yield perspective, we did quite well at delivering over $8 billion of free cash.
Some of that is timing as we built a payables position with CMS.
We'll settle that up in 2017.
So that's why you see the year-over-year decline from 2016 into 2017, is partially due to that.
I will say that I'm very proud of the team as we continue to improve our working capital turns.
Part of that is our focus on inventory in receivable and payables management.
But quite honestly, part of that is the power of the PBM.
As the PBM grows, the PBM is a very efficient working capital enterprise.
And you were seeing that, the effect of that play out from a free cash flow perspective, both in 2016 and in 2017.
Bob, I will flip your second question over to <UNK>.
Yes, I think, Bob, we feel like we probably have been on, I'd call it, the leading edge of looking at our mix of math spend versus targeted spend.
And probably more aggressive than the rest of the marketplace on pulling back on unprofitable promotion and really focused on driving profitable growth.
So I do think that as we cycle through that, the good news is we continue to grow share and win in health and beauty which is the lion's share of our focus.
And where we've pulled back and seen more of an impact on comps has been in mostly the edibles and general merchandise businesses where we have been less focused and where we really don't have as much of a point of differentiation.
A lot of sales historically have been promotional.
So that is a constant balance.
It's a balancing act we're always looking for.
But I wholeheartedly agree, in the long run we do see this as a growth business.
We stated at Analyst Day we will continue in 2017 to pull back more on mass promotions.
We continue to see profit potential there.
But at the same time we are ramping up our targeted capabilities with Extra Care and those things will evolve over the next couple of years.
The only thing I would point out as well, as you cycle into the first quarter and look for our performance, I did want you to know that we are cycling two things for Q1 in 2017 that will make the comparison more difficult.
In 2016 we had Leap Day, which we won't have in 2017.
We also have an Easter shift out of Q1 and into Q2.
And if you add those two things together, just those things will adjust our growth in Q1 of this year by negative 185 basis points.
That is front store only in terms of ---+ wanted to calibrate that for you as you look forward to Q1.
Thanks, Bob.
Yes, <UNK>, this is <UNK>.
We do have price protection in 90% of our pharma contracts.
So as manufacturers raise their prices over a pre-negotiated threshold, that value flows back to our clients in the form of a rebate.
We will have certain guarantees in therapeutic classes.
I talked about diabetes at Analyst Day so we are very targeted where we are using that.
And I think at the end of the day our clients will evaluate us based on how their overall costs are being managed.
I think our trend, once we wrap up the year, will be received very well by both our clients and stand up well with our peers.
And <UNK>, it's <UNK>.
We also have some programs, we've talked about these in the past on indication-based pricing.
Which is a version of that to some degree, that's largely in specialty, where we are working with pharma in a different way, based more on outcomes with the patient.
All those are passed through to CMS.
Think about it as part of our cost of goods sold as we price that insurance product.
And so that is how it is underwritten.
<UNK>, it's <UNK>, I will start and then I think <UNK> will jump in.
I think to a large degree those opportunities are more time-driven based on the current or existing contract and it's going to end up time back to the RFP process.
And I would say that there continues to ---+ we've talked a lot over the last year about insourcing, outsourcing.
The fact that we continue to believe we bring a lot of value to that equation and it makes a lot of sense.
I think when the health plan mergers were being bantered about, there was some growing concern around that.
It looks like those are now in the rear-view mirror.
So we still continue to believe that we can bring value for smaller regional players.
Listen, we have a great relationship with Aetna and we look forward to continuing to be a key partner with them and helping them to grow.
<UNK>, the only other thing I would add is, I don't view the health plan market as the low hanging fruit is gone and it's going to be more challenging to win health plans moving forward.
Quite frankly, the biggest barrier to health plans moving historically has been the level of effort and the disruption in those moves.
And what we've been able to do with automation and processes around moving health plans has really demonstrated we can do it in a near seamless way.
As an example, I was with two CEOs of health plans that we won this year within 10 days of welcome season, of 1/1 when they had just transitioned to us.
They were just thankful and appreciative of the great job that we did in welcome season.
So as I look forward, our capabilities and how we can help health plans manage their overall cost with all of our integrated assets and our ability to move them in a non-disruptive for way, I think becomes a compelling value position.
It was put into place early in January.
It runs through and should settle by the third quarter.
I'll encourage you to take a look at our filings later today.
You can see it in our K.
Thanks, <UNK>.
At the end of the day there's a little bit more than 40 million prescriptions that are cycling out of our business.
Those began ---+ Tricare began on December 1 for the most part, maybe some bleed before that.
And Prime begins on January 1.
So thinking about it almost pretty equally spread throughout the year for the most part, <UNK>.
So it's really 40 million scripts on our base of ---+ from a volume perspective.
I haven't looked at it that way, <UNK>, so I don't have that number right on the top of my head.
But it is something that is easily calculated if you take that 40 million scripts and pro rate them over each of the quarters, you can figure out where we would be.
No, that is not the case, <UNK>.
I think what you are seeing is a couple things.
One, and I think probably the biggest, over the last couple years you've seen a pretty big expansion of state Medicaid programs.
So that was fueling scripts into the marketplace.
So you're probably seeing a little bit less than that as we cycle into 2017.
<UNK>, a couple of things.
I would say that everybody probably had their own forecast and expectation for price increases.
What we specified today is based on our forecast for 2017, inflation's coming in a little lighter than we expected.
It's really two-fold.
Partly is that what we have seen pricing increases early in the year or late last year was a little less than what we thought.
And also, we do anticipate that trend to continue throughout the year as we think about price increases later in the year as well.
And <UNK>, if you look at the 40 million prescriptions on our base at retail, it's about 3.5% impact, if you will.
350 basis point from a script perspective.
<UNK>, it's pretty early around that.
And keep in mind that health plans typically start a little earlier, so quite frankly, some of the stuff that is starting to come in right now is really for January of 2019 because of their cycle.
So as we've done in prior years, we will have more to say on this on the first-quarter call.
We will have a better idea of certainly the RFP activity consistent with prior years.
Thanks, <UNK>.
Yes, <UNK>, I think we're all very pleased with not just standing up Red Oak, but the value that it's bringing to the supply chain.
As we've talked previously, the incremental year-over-year benefit obviously has slowed because we've got it up and running.
But I think the Red Oak team continues to look for ways in which we can make the supply chain more efficient and we are still looking and exploring those opportunities.
So I think we're all very pleased with where we are today and where we're going with it.
Yes, I would say, <UNK>, we haven't seen any material change and it's a competitive but rational market, as you just acknowledged.
Okay, thanks.
Nelson, we will take one more question, please.
<UNK>, this is <UNK>.
As far as anything new or disruptive for the selling season, it is pretty consistent with what we saw over the last couple years.
So nothing really new to report.
And, <UNK>, I think in our deck that we posted on the website should have our interest expense guidance for the year.
And I will pull it up real quickly for you here.
Do you see it.
Over $1 billion.
Okay.
With that, I know it's been a long call but hopefully we provided a lot of information for you today, in light of some of the, I'll call them current events in the marketplace.
And we appreciate everyone's time.
And as always, <UNK> and Mike are available for any follow-ups you might have.
Thanks, everyone.
