JP Morgan 37th Annual Healthcare conference

Jan 8, 2019

Slides

Summary

Aetna integration targets >$750M in 2020 synergies and broader medical-cost savings.

Good morning. My name is Lisa Gill, and I am the healthcare technology and distribution analyst with JP Morgan. It is with great pleasure this morning that I introduce you to CVS Health. With us this morning is CEO Larry Merlo. We are going to hold all of our questions and take them across the hall at the Georgian Room. Larry, just as a side note, I think we are going to have to move you back to the big room next year. Well, Lisa, thank you, and good morning, everyone. It is great to see so much interest in CVS Health, and I appreciate you joining us today to learn more about CVS Health and our strategy to transform the consumer health experience, and by doing so, create long-term value for shareholders. Before I get started, I want to draw your attention to our forward-looking statement, which is also posted on our website. I would ask that you please take a moment to review it. Since I know you are all speed readers, let me just begin by giving you a brief overview of who we are. While we go to market as one enterprise, CVS Health is comprised of three interrelated operating businesses: our retail long-term care, pharmacy services, and healthcare benefits. Our retail long-term care segment consists of CVS Pharmacy, which today has more than 9,800 locations and a leading 25% share of the retail prescription market. This segment also includes MinuteClinic, our retail clinic offering, which has more than 1,100 locations, providing convenient access to high-quality, low-cost care. We also operate Omnicare, a leading provider of pharmaceuticals to the long-term care market. Our pharmacy services segment consists primarily of Caremark, the largest pharmacy benefit manager in the country, now with 93 million members. We also operate a leading specialty pharmacy with more than $35 billion in annually dispensed specialty revenues. You should also note that pharmacy dispensing at Aetna will be consolidated within the PBM. Finally, our healthcare benefits segment includes the newly acquired Aetna business with 22 million medical members, and our standalone Medicare Part D product, SilverScript, will be included in this segment beginning this year, 2019. These businesses working together as an enterprise create a uniquely powerful new platform that will enable us to transform the consumer healthcare experience, and I will get into more detail on that in just a few minutes. As to the Aetna transaction, we completed the acquisition on November 28th at an equity value of about $70 billion. The transaction was funded through a combination of cash on hand, $40 billion in senior notes, $5 billion of term loans, and the issuance of about 274 million shares of CVS stock. While we are still going through the review process with the district court as part of the Tunney Act, I want to unequivocally state that CVS Health and Aetna are one company, and our transformation work is already underway. We are making substantial progress on the Aetna integration, and we are already rolling out programs and services that benefit clients by helping their members achieve their best health at a lower cost. The ongoing court review and the voluntary commitments that we have in place will not impact the timeline for achieving the targeted synergies that I will talk about. As I said, we funded a portion of the transaction by placing new debt in the form of senior notes and term loans that, after including the $8 billion of debt we assumed from Aetna, resulted in an outstanding debt of approximately $76 billion, excluding leases, as expected. We have $1.2 billion of debt maturing this year, and we will be looking for opportunities to retire other tranches as we execute on our plan to achieve a targeted leverage ratio in the low 3x. Our plan to achieve this includes suspending our share repurchase program, maintaining our dividend per share of $2, and refraining from major M&A. With this, we will be focusing our cash available on debt retirement in order to achieve the target in a timely manner. Taking into account our activity in the commercial paper market, this year we expect interest expense of approximately $3.1 billion. Before I move into our discussion of the opportunity to transform the consumer healthcare experience that will drive long-term growth, I want to remind you that we will provide our 2019 guidance on our fourth quarter earnings call next month. However, I thought it would be good to take a minute to reiterate 2019's tailwinds and headwinds. In terms of headwinds, we expect this year to be a lighter year from a breakopen generics perspective. I think, as you all know, we maximize generic profitability during the breakopen period with multiple manufacturers in the marketplace. In 2019, we see a lower value of breakopen products, noting some delays in launches such as with Advair. This also pushes out the benefit we experience once the drug reaches the breakopen period. Additionally, we expect to continue to experience pricing and reimbursement pressure at levels similar to what we have seen over the last few years. It is a very competitive market, and we continue to see this dynamic in both the PBM and retail segments. We also expect brand inflation to continue to moderate this year, which would impact client commitments in the PBM business, as we have guarantees related to the level of rebates we provide. Lastly, in the first half of the year, we will be wrapping the tax reform investments that we made throughout 2018, most of which are incurred in our retail segment. As we transition this year to our new business model, we are making additional investments in order to realize a number of strategic growth objectives that will benefit us in the long term. These include digital and consumer engagement tools, as well as continued investments to grow Medicare and drive improvements in our STARS ratings. Additionally, given the experience-rated nature of our large group commercial insured and group Medicare business, we expect some of Aetna's strong 2018 performance in those businesses to be reflected in pricing for this year, 2019. For tailwinds, we expect retail script growth to outpace the broader market growth, and we continue to expect to benefit from ongoing specialty growth. We are also making good progress on our enterprise streamlining initiative, and we expect that continue to favorably contribute to our performance this year, outpacing the benefits we achieved in 2018. While we had a net positive PBM selling season, the benefit from that will be smaller compared to what we have seen in previous years. In the Aetna business, we expect another strong year of growth in our government businesses as we continue to drive growth in Medicare Advantage membership, and we expect growth in Medicaid membership primarily related to Kansas and Florida. With that, let me talk more about the benefits now of the CVS-Aetna combination, and I will start with our framework for the transformational work we are doing and why we are best positioned to remake the consumer healthcare experience. Then I will take a deeper dive into our roadmap for value creation that includes many of the initiatives we are working on to achieve both our short and long-term goals. Let us start with some of the challenges with our current healthcare system. As we look at it, first we see the complexity that exists in the system, the lack of support for patients as they try to navigate to the most high-quality and cost-effective care settings. Second, we see a healthcare system that was designed for episodic care in a fee-for-service environment, and to date, there has been little incentive to move to a more holistic care model. Third, the system remains fragmented with care that often is uncoordinated between various healthcare stakeholders, and all too often, the patient has to be their quarterback for their own care. Now, all of these factors lead to unnecessary, avoidable, or wasteful spending. To underscore that point, the U.S. today spends about $3.5 trillion on healthcare, and that is growing at an unsustainable pace, and continuing the status quo is simply not an option, not for the physical and financial health of consumers or for providers, corporations, the government. We can and we must do better. So how do we address these challenges? Well, from our perspective, it starts with how you engage with consumers on their individual healthcare journeys. Through our consumer-centric assets, we can open a new front door to health that is both easier to use and less expensive, while at the same time providing convenient access to high-quality healthcare. We are uniquely positioned to engage with consumers in a differentiated manner, introducing the appropriate programs and services to help them achieve their individual health goals. By driving consumer engagement, we can improve health outcomes. You improve health outcomes, we can lower overall healthcare costs. The end result is a better, more satisfying patient experience, a patient who is healthier and more confident in their action plan to achieve better health, in a more efficient healthcare system with a lower cost trajectory. As we begin our transformation work, we're focused on three strategic imperatives that will guide our efforts, and the first is being local, and there are two components to this imperative. The first is what we describe as reach. We have more consumer touchpoints than any other healthcare company, and this enables us to engage patients with the care they need, where, when, and how they need it, whether it's in the community, in the home, or even in the palm of their hand with a digital device. The second component is what we'll call frequency. Today, we engage with one in three Americans. We have become part of their normal everyday routines, and this is critically important because as we think about the opportunities here, we don't have to build new routines. We simply have to build our programs and services into the existing routines that already exist. Second imperative is making healthcare simpler. We've created a healthcare system that is driving patients to be healthcare decision-makers, but we would say that today they lack the tools that they need to effectively navigate the system. So we're going to change that by helping to guide patients along their healthcare journeys by providing more convenient access to the information, the resources, and the services that they need. Our third imperative is to improve health. Helping people on their path to better health has been a cornerstone of our purpose at CVS, and by aligning the capabilities of Aetna with our consumer-centric assets, we'll be able to more effectively deliver on that goal. These imperatives help to guide our five initial strategies for medical cost savings that include improved care management for both common and chronic conditions, preventing hospital readmissions, site of care management, and optimizing primary care. As we zoom out and look at the broader healthcare market and the savings that can be achieved by more effectively managing chronic conditions, the opportunity here is massive. As a nation, we spend more than $2 trillion annually on treating patients with chronic conditions, and there are numerous studies out there that estimate that about a quarter of that spend is preventable. You can do the math. This means roughly $500 billion of spend is avoidable. This is the spend that we're going to be targeting as we roll out our cost savings initiatives. The takeaway here is that percentage points matter. Addressing just 5%-10% of this opportunity results in a savings opportunity that is in the tens of billions of dollars. If you apply this same methodology to the Aetna book of business, the opportunity still starts with a B as in billion. So, now that I've provided a high-level overview of what we are going to accomplish, let me take a deeper dive into how we are going to drive value for both consumers and shareholders. It's been about six weeks since we closed on the transaction, and we have a clear line of sight to achieving our goal of more than $750 million in synergies in 2020. Now, the majority of these synergies will be derived from the reduction of corporate expenses and the integration of our operations. At the same time, we'll begin to produce some reductions in medical costs, which represent a much larger, longer-term opportunity. In terms of synergy expectations for this year, please keep in mind that we intend to provide more details when we give our 2019 guidance next month. Having said that, I thought it would be helpful to lay out a general timeline of when we expect to begin to see some of the benefits of our integration work. We've gone through the process of evaluating all of the corporate functions of both organizations and aligning them under a single leadership structure. As we rationalize redundant corporate functions, we expect the benefits to begin to accrue starting in the first quarter. We've also created a combined purchasing organization to assure that goods and services of the two companies are being acquired at the most effective price points. We expect these benefits, along with the benefits derived from formulary and plan design alignment, to begin to accrue throughout the first half of this year. As I mentioned, we also expect to realize some medical cost savings. That'll be towards the end of the year, and I'll provide more details on the foundational work we're doing to achieve that goal in just a moment. Now that we've discussed our near-term integration efforts, let me talk more on how we're going to create value over the long term, and I'll start with our portfolio of initiatives to drive medical cost savings. At a very high level, the longer-term savings will come from building upon our near-term initiatives as well as introducing new programs that are only made possible through the combination and close integration of our two companies. We're targeting substantial savings through a specific portfolio of products and initiatives that include the better management of five common chronic conditions. You know their names: cardiovascular, diabetes, hypertension, asthma, and behavioral health. We'll accomplish this by building on near-term medical cost savings through the tighter integration of pharmacy and medical claims, the rich clinical data set we will have, along with the role of our community assets. A second program is aimed at reducing avoidable hospital readmission by utilizing Aetna's clinical programs to identify patients at the point of discharge, as well as by engaging them through CVS retail assets to better support them and their care plan. Another program focuses on increasing utilization of lower-cost sites of care, including home infusion when it's appropriate. We'll also work to reduce unnecessary emergency room visits through the early identification of frequent ER users and education on the care setting options that are available to them. A fourth program is optimizing and extending primary care by expanding the scope of services available at MinuteClinic to help with the early identification and ongoing management of chronic disease. Finally, we're developing a series of comprehensive programs to better manage complex chronic diseases such as kidney disease, where the goal is to reduce hospitalizations and delay the progression of the disease, or oncology, where our objective is to align provider incentives to focus on quality and outcomes while enhancing patient support. Importantly, our solutions will be accessible through a broad range of channels, from the local community assets to virtual and digital solutions, all coordinated across the member's journey in order to simplify the process. We will work to make these solutions not only available to Aetna clients and their members, but to the wide array of healthcare partners we work with today through an open platform model. We have already taken some meaningful steps to begin to build the foundation for what I just described. Specifically, to improve the management of chronic conditions, we launched a program where pharmacists in our stores provide adherence outreach and counseling to Aetna members who have been identified to be at high risk for an adverse health event. This quarter, we will also launch a specialized program to help support Aetna members being treated for cardiovascular disease to prevent avoidable hospital readmissions. This month, we are piloting a program to enable Aetna care managers to facilitate the scheduling of MinuteClinic follow-up visits within 14 days post-discharge when patients are unable to see their provider. We are also piloting a program that leverages CVS pharmacists to provide face-to-face interactions to educate Aetna members on the available care management programs, as well as provide patient-specific strategies to mitigate the risk of non-adherence, side effects, or gaps in care. Hopefully you can see, while it has only been six weeks, we are absolutely off and running. Our retail pharmacies are foundational to our community health strategy and another key to our efforts to simplify the patient journey. To that end, we are opening a series of Health Concept Stores, which will be a testing ground for a new retail engagement model that brings healthcare services to consumers in a more convenient, more accessible, and more customer-focused manner. As we pilot new programs and service offerings, we will identify the solutions that are most effective and scalable, and then roll them out more broadly across our footprint. We are also excited to announce that next month, we will be opening our first concept store in the Houston, Texas market. To give you an idea of some of the services that will be tested in these concept stores, let us work clockwise around this slide. I will start with the upper left image. In the front store, we are introducing new health and wellness categories as we optimize our merchandising to focus on best-of category assortments. Moving to the right, we will offer an expanded suite of healthcare services that includes what we will call a care concierge and other health and wellness support. Below that, we have MinuteClinic, where we will introduce new clinical services such as enhanced screenings for chronic disease, as well as in-clinic phlebotomy. In the lower left, we have our pharmacy, where we will provide enhanced personalized prescription support at key points in care. We will use our data and analytics capabilities to provide actionable information to our pharmacy staff in an effort to improve patient care. As we build these out, there are two important points to remember when you think about the cost. One is that between CVS Health and Aetna, we already have a substantial capital expenditure budget of about $2.6 billion annually, and we believe that the capital associated with these remodels can be repurposed from existing remodel programs that are a component of our typical CapEx budget. Second, although our goal is to become a consumer health destination, we will be very thoughtful about how we scale these offerings. We intend to use a hub-and-spoke approach, with a selection of hub stores receiving the full expression while other stores receive a lighter touch refresh. Another example of our patient-centric approach is a simpler, more personalized program for joint replacement. In this version of a potential patient journey, you can see that the current approach lacks the necessary support and coordination for patients to achieve their best health outcome. You compare that to an enhanced service where we will be able to provide surround sound support to the patient to address many of the challenges that one faces. Could be arranging transportation to get to and from the procedure, supplying durable medical equipment to the patient's home before the operation, conducting the required pre-op blood work, or providing post-op support that includes medication reconciliation and delivery. It is another example of how we are thinking about addressing the pain points at each stage of what we are describing as patient journeys. We know in doing so that we can help patients achieve their best health. Now that I have provided some details on how we are going to remake the consumer healthcare experience, I thought it would be helpful to translate that into our vision for longer-term value creation, and we have identified five key areas. First is generating medical cost savings through some of the initiatives we talked about earlier. These medical savings have tremendous implications for our financial performance. Every 50 basis points that we can reduce medical cost trend results in about $500 million of additional underwriting margin. Second, we plan to take a portion of those savings and reinvest them back into the business to improve our competitive position and ultimately grow membership. Additionally, we will work to increase enrollment in the fast-growing Medicare space by leveraging targeted outreach along with other in-store sales opportunities. Third, we see increased utilization of CVS assets as we integrate our plan designs and introduce new, higher-margin programs and services, creating a platform that customers want to use. Fourth, you think about dramatically improving the customer experience. That is going to improve customer satisfaction. That is going to help improve retention, both for the customers who shop our stores and also for the clients that we serve across both the pharmacy and the medical benefit. Finally, we will make our new higher-margin products and services available to a wide array of healthcare partners through the open platform model that I mentioned earlier. As we execute on each of these levers of value creation, our goal is to drive enhanced margin, profitability, and generate incremental capital. We will deploy a portion of this capital to enhancing shareholder returns while also reinvesting back into the business to drive membership growth and to create new products that further fuel our self-sustaining growth model. Let me just wrap up with three key takeaways from our discussion here this morning that summarize why we are so excited about the future of this newly combined enterprise. First, the acquisition of Aetna broadens our healthcare reach, and it allows us to play a larger role in the healthcare system while better addressing the challenges faced by patients every day. Second, we have a clear line of sight on the synergies that exceed $750 million in 2020. We have already begun to execute against that goal. Finally, over the long term, this combination creates a platform to accelerate growth as we introduce higher-margin programs and services aimed at reducing medical costs while making investments to grow membership and enhance revenues across the enterprise. Again, thank you for your time this morning. We will invite you to the breakout session over in the Georgian Room, which is also being webcast. Good morning. This is the breakout session for CVS Health. My name is Lisa Gill. With us this morning, we have the entire management team. Let me introduce everyone. To my right is CFO Eva Boratto. To her right is Larry Merlo, and to Larry's right is Karen Lynch. Karen is heading up the Aetna business. Larry is obviously CEO, and Eva is CFO. Also to my right is Mike McGuire, in IR. First, Larry, thank you so much for the headwinds/tailwinds slide. I know that I have been asking for that, but I could not help but notice one big thing that really stood out to me, and that if I just count the number of headwinds versus tailwinds, there is more headwinds versus tailwinds. One of the tailwinds that I did not see was accretion from the actual Aetna deal. Maybe it is Eva that we want to talk about this slide. Could you maybe I know you are not giving guidance at this point. We are going to wait until the 20th of February to do so, but how do we think about sizing potentially the headwinds versus the tailwinds? Yeah. Lisa, thanks for the question, and it is difficult because we have not given the guidance yet. I think to your first point around accretion from Aetna, clearly as a result of the deal, bringing the Aetna business on, obviously, from a standalone basis, is a tailwind for us. As we had said, you have to look at that in the context of the debt as well, and saw the accretion more coming in year two. As you look at the list of headwinds and tailwinds, you are right, if you just by sheer count, looking at the headwinds, there are more. On the legacy CVS side, longstanding from a retail dispensing perspective, the impact of generics have been a huge tailwind to help us offset the impacts of reimbursement pressure. As Dave Denton said numerous times, you have ebbs and flows, and we're trying to give you some color there as to it is a lighter year on that front. One of the other headwinds that really stood out is the branded price inflation. A lot of discussion here this week. It looks like it's coming in around mid-single digits. I know there's been talk about some of your PBM contracts that have guaranteed rebates and what that means. Is there a way to size that, number one? Number two, as we think about some of the new contracting that you have in place going more towards a net cost, will that be alleviated as we move forward towards that type of contracting? Well, I think I'll take the first question first. In terms of the brand inflation, what we've seen, and it's pretty consistent with what you said, coming into early January, we've seen it continue to moderate in that mid-ish single digits versus, if you go back a few years, low double digits, teens, if you will. So, if you think about it, our PBM contracts have a three-year cycle. If you go back when that pivoted, and if you were underwriting in an environment that had that double digit, you're thinking about that catch-up over this three-year cycle. As you look forward now in this different environment, you're able to structure your contracts differently. But looking in the past, that's where the headwind comes from. Obviously, the other piece of that, Lisa, is also on the dispensing side. We carry inventory, we dispense products, so the lower inflation also affects us there. Lisa, to your second point on, I think probably everyone saw the announcement back in December on a new contractual pricing model for the PBM. Over the last few years, we have all heard this word transparency, and as an organization, we have been working to define exactly what does that mean and how do you make transparency actionable? Our work there probably started with the rollout of what we are calling Real-Time Benefits, where for a Caremark member, we are actually taking one's pharmacy benefit design and placing it in the EHR at the point that it matters, where the prescription starts at that prescription pad, which now happens to be electronically. The results that we are seeing there, we are quite pleased with, because we are showing what is the member's out-of-pocket expense, and then we are showing up the five therapeutic alternatives. We are seeing physicians switch more than 40% of the time to a lower-cost alternative with an average savings per script of about $125. This new pricing model is really another answer to what we believe is important in transparency, where the role of the PBM, right drug, right patient, lowest possible cost. Net cost. So we believe this pricing model creates absolute alignment with our clients, and it allows us to focus on the denominator of lowest net cost without getting preoccupied on any of the various variables that ultimately get you to that number. Then, again, just kind of sticking initially with this kind of headwind/tailwind, the headwind around investment spending. You talked in your slide today that you have $2.6 billion that you generally have for CapEx. What is the incremental investment spending? Yeah. Lisa, we talked both headwind/tailwind that we started a streamlining initiative a few years back. That is continuing to be on track. We expect the benefits from that in 2019 will exceed those of 2018. At the same time, we are looking to make additional investments. We talked about investments that we are making in digital to enhance our offerings, recognizing in the prepared remarks when I talked about being local, it is not just about our bricks and mortar stores. I do think that is an important point that I want to emphasize, because I know there has been a lot of attention of the HealthHUB or the Health Concept Store, whatever we talk about. While that is an important element of the strategy, it is not the only element. Being local speaks to the community, it speaks to in the home, and it also speaks to the role of that digital device, and we see a real opportunity. That is where many of the investments are going, as well as supporting the high-growth Medicare business. Lisa, just one more thing. Larry mentioned digital, but also the data and analytics, right? Right. That is the other piece I would add. I guess lastly for Karen, when we think about the Aetna experience rating, for people like me that are just new to finally following managed care, can you walk us through how to think about that headwind as we go into next year? Secondly, one of the tailwinds is growth in the government component of your book of business. Is that business that is already won now for 2019, and how do you view that going forward? Let me take the first one, relative to experience rate business. When you think about pricing insurance products, you look at history, you look at what your profit targets are, you look at your actual experience, and then when your actual experience is exceeding your target margins, then you experience rate business, you will give some of that back Right into your pricing. That is just basically what we are saying there. You will see if we are fundamentally above our target margins, we will reposition and reprice that into our book. That is what that is saying. Relative to Medicare, since we have not given guidance, just let me give you sort of how to think about Medicare growth for 2019, and I will start with individual. Our strategic objectives has always been to be above market growth. So think about the market, it is growing. We also have expanded our counties. We expanded into 358 additional counties, which really moved us from being at 62% of Medicare eligibles to 72%, so we opened up our opportunity, and then we have continued to have very strong STARS performance. So generally speaking, relative to the individual book of business, I want you to think about all those positive things as you think about Medicare growth. Group Medicare, although there was not a substantial amount of RFPs out in the marketplace, what I would tell you is we think we won our fair share. Is there any update as we think about Medicare Part D around SilverScript or Medicare Part D more broadly as we think on the PBM side? Yeah. Lisa, in terms of Part D as it relates to the legacy CVS business, at this point, it looks like the enrollment is going to be flattish to what had existed over the prior years. I know one of the questions that we have been getting is, we introduced a third plan this year. We called it SilverScript Allure. It was our effort. It was a pilot, a little bit of a test where the definition of that product took the, I will refer to rebates/discounts as one terminology. So, it took those rebates/discounts coming out of the formulary and it applied them at the point of sale. So the result of that was an increase in the premium. So as you looked at the monthly premium of that product, it was in the low $80s versus the low $30s. While there was a lot of interest in that product, we did not see much enrollment, which kind of gets back to this debate that we have around the rebates/discounts. When they are not applied at the point of sale, they are applied to buy down the monthly premium, which is exactly how Part D works, and that becomes a real focus for beneficiaries. I think that that debate continues, right? We think about in D.C., clearly we have not seen that shift to the point of sale rebates because of the cost, the incremental cost. You talked about it on the premium side and the way that this works. But Larry, clearly a lot of people in this room believe that the system we have today is broken and that we need some type of new system. You are talking about new contracting on the PBM side. We hear the pharmaceutical industry saying that the way the system is set up today structurally does not work longer term. If we had to start all over again, what would you like to see? If we had a clean slate, so forget where we are today and the cost that it would be, how would it work? Well, Lisa, I think you have to Let me kick it up a level, because if you turned around and said, "How do we find ourselves in this position today?" It was not that many years ago that as a consumer of pharmacy care, you had one variable to consider. If you were in the doc's office, "Doc, are you writing for a brand or a generic?" Because there was a copay for each, and you knew what it was. Once you had that answer, you were done. Well, plan designs have completely taken that apart. In the tools with which to look at as a consumer at out-of-pocket costs, they have gotten pretty darn complex. A lot of that is what led to what I had talked about earlier around Real-Time Benefits. I would sit here and say the second dynamic in play is the growth of formularies. What has driven that? Size, scale, competition. Yes, whether you want to refer to it as a rebate or a discount, the pharmaceutical industry is stepping up to lower the cost of care for formulary placement when there is more than one clinically equivalent product within a therapeutic class. Lisa, whatever happens with rebates, I do not see the dynamic that I just described going away. Size, scale, the ability to move market share, and competition driving down cost, that dynamic is not going to change. I think the question that has to be answered is, we disclosed back in August that the vast percent of those rebates, discounts are being returned back to plan sponsors. We retained 2% in 2018 of the rebates that we negotiated. The big debate should be, what happens to those plan dollars? They are either being applied at the point of sale or they are being applied to buy down the monthly premium. Whatever we answer there, we may squeeze the balloon here, but the balloon is going to grow here. I think, Lisa, a lot of this comes back to, what else can we do that is going to take real costs out of the system? I know we are going to have that debate. I will give you a plug. We are going to end up having this debate at 5:00 P.M. with Eli Lilly. We are going to have a very good discussion at 5:00 P.M. today with Eli Lilly. I guess, and I will open it to the audience in a minute here, but I thought it was fascinating when you talked about the medical cost savings, 50 basis points equals $500 million. I think over the years, I have heard Mark Bertolini talk about something similar to that. You talked about reinvesting it in membership growth, and I think that is something that sometimes investors fear in taking some of these savings and reinvesting it and making it a more competitive marketplace. Two things I would just really ask is, one, when we think about underwriting a product and making assumptions around underwriting those products, Karen, help us to have confidence in your visibility around that cost savings when you are thinking about underwriting something for membership growth, number one. Number two, when we think about where those medical cost savings are coming from, what are the biggest buckets? Is it really the site of care? Is it pharmacy? Pharmacy is 15% of the dollar. I have to imagine that it is probably other things beyond pharmacy. I think, Lisa, the question really at hand is, will you maintain your pricing and underwriting discipline in this kind of new world? I can unequivocally say, yes, we will continue to remain very disciplined around our pricing and around our underwriting. When we price, we have certain margin targets we need to hit. When you're underwriting, you're making judgments, but you get a lot of data. Right. We have very seasoned, skilled actuarial professionals to maintain that discipline around our underwriting philosophy and our underwriting margin. It's a balance, as you know. You balance for growth and for margin. In our commercial business, we have consistently tried to maintain that balance, but always making sure that we're hitting our margin targets. That is important to us as we think about the financials going forward. Lisa, the second part of that question on savings, I do think that there'll be elements of what I described that we'll be able to translate into savings more rapidly. I mean, just think about the ability to reduce or better align site of care as it relates to the acuity of care required- Right with the cost level of that acuity where the consumer ends up. The easy example is, why do people go to the ER with a sore throat and a 102-degree temperature when they have other options, other lower cost, where the acuity level required to adequately treat them is much less than what's required in the ER? I know we can do better around that. Don't you think it is just one visit to the ER and the $2,000, right, bill that you get on the other end that you realize, "Hey, maybe I need to find somewhere else to go to"? I think as we look at the MinuteClinic, you have owned the MinuteClinic since 2005, 2006 timeframe. Is that right? 2006 timeframe? It has grown during that period of time, but it still feels underutilized to me. What is it that you put this as part of the plan design within Aetna that helps to grow that? Is it net promoter scores that help to grow that? What do you think helps to grow this whole idea in consumerism that we actually get people to that low-cost site of care? Yeah. Lisa, I do not think there is just one answer to that. I think it is a combination. I think plan design will play an important role. I think expanding our scope of practice, whether it is, I talked in over in the other room on, we are going to add in-clinic phlebotomy. We are going to be adding some additional services around the management of chronic disease. I do think that there are a handful of activities that will drive utilization. The good news is that there is excess capacity in many of our clinics today. The scalability of that is, it is not that difficult. In some respects, it is analogous to what we described as to how the pharmacy works, okay? Yes, there is a threshold when you begin to add staff based on volume, but whether it is that next prescription or that next patient visit, that is going to be the most profitable. Can you talk about virtual care? As you think about, the whole offering, and you think about your relationship with Teladoc, the entire When I think about Teladoc, it's really like the intel inside of your app today. That opportunity to leverage a group of doctors by having a lower-cost nurse practitioner or physician's assistant in your MinuteClinic. How do you think about your virtual care strategy as it pertains to business today, but then also around chronically ill patients? Yeah. Lisa, there's probably a couple strategies in there. One is that it can provide access in areas or geographies where maybe it just doesn't make sense for a bricks-and-mortar MinuteClinic. That's right. Okay? It's going to expand our reach. The second dynamic in play is that it can also expand our scope of practice. I think the easy example that folks get their head around is, today we don't do a lot with derm, okay? But the opportunity now through telehealth, okay, to immediately engage with a dermatologist, recognizing that there's a lot that can be treated in a virtual way. That's how we're thinking about it. To your point in terms of, there is an opportunity around more of the complex chronic disease where mobility is compromised for the individual. That's something that we have on our radar screen in terms of how do we think about that. I think if you were in the other room, you heard me use patient journey multiple times, okay? That's how we're thinking about these various opportunities, because I've been impressed with the quality of, Lisa, you in one of the earlier questions. Eva talked about the role of analytics, and I think we've all been impressed with the quality of analytics that resides in Aetna and their ability to understand what is the next best action for the members that they serve. I think one of the opportunities that is unlocked in this combination is, Aetna as an insurer, how do they execute against that next best action to create a behavior change and action? That's, again, that's where this combination comes to life in a differentiated way because of the role that the legacy CVS assets play in the community. Lisa, just one more thing on site of care to add to Larry. We didn't talk about Coram. Right Our presence in the home and our infusion capabilities. If you think about other things that have been discussed here and where innovation is coming from, that's also an asset that we can think about differently going forward. I would agree with that. I guess in the last few minutes here, I just really want to talk about the concept of open platform for broad partnerships. I think we get a lot of questions around, how do you convince those that you compete with in many aspects of your business to also come and bring services to your platform? Lisa, it is a great question, and it is an important one. If you look at the status of the marketplace today, the lines are blurring like never before. There are several proof points. We have our own proof points in terms of, we can be competitors and at the same time we can be business partners. We look at the role of Caremark in Medicare Part D, where we have grown SilverScript quite nicely to more than 6 million members, and at the same time, we manage the Part D benefit for more than 40 health plan clients. We have been able to demonstrate for them the intel inside Caremark has allowed them to grow faster than the overall market with a large percent of their beneficiaries in four-star plus performing plans. That is important to this discussion because, what is the point of differentiation that we can provide that, I know I compete with them, but based on the opportunities that are afforded to me, I am not going to move my business forward to the level that I possibly can if I get emotional about, I got a competitor in the marketplace. I believe that we can do this. We have got some proof points today, not just with Part D, but what we have done at CVS Pharmacy in terms of partnering with PBMs that are not Caremark. Right With some of the differentiation we provide. I should also mention that there will be elements of what we create that will have the benefit of owner economics that will be, it will reside within the CVS-Aetna combination and will be much more difficult to open platform, if you will. That doesn't mean that there won't be many things that we can. If you look at what we have learned along the way, Maintenance Choice is a great example of that. Maintenance Choice has grown the, or has driven the growth of 90-day plan designs, but today, almost nine years later, there is not an exact equivalent of Maintenance Choice because of the role of owner economics. But CVS Pharmacy has partnered with some of the innovation with other PBMs that it doesn't destroy the value proposition that Caremark has in the market. Larry, when we are sitting here next year together, what will investors appreciate at that point that they don't appreciate about the CVS Health story today? You know what, Lisa? It's a great question, and I think it stems from our belief that putting the consumer, that there is consumerism in healthcare, that's not going to diminish, it's only going to grow. Having a strategy that puts the consumerism at the center of their care, you can produce viable results for long-term growth. Great. Well, thanks, everybody. We appreciate your time. Thank you.