Lisa Gill

Lisa Gill sought clarification on Mark Kaye's comments regarding pulled-forward investments, specifically if $0.75 of the anticipated $1 incremental investment for 2026 is still embedded in guidance, and the specific buckets for these investments.

Answer

Mark Kaye, CFO, clarified that Q4 results included $3.75 of discrete non-core items, which was $0.75 more favorable than anticipated due to strategic tax items. Given this outperformance, Elevance Health made two intentional decisions: pulling forward a quarter of the approximately $1 incremental investments planned for 2026 and deploying an additional $0.25 towards retention and targeted workforce investments. Gail Boudreaux, President and CEO, added a brief closing remark.

Lisa Gill sought clarification on Mark Kaye's comments regarding pulled-forward investments, specifically if $0.75 of the approximately $1 per share incremental investments is still embedded in the 2026 guidance, and the specific categories of these investments.

Answer

Mark Kaye, CFO, Elevance Health, clarified that Q4 results included $3.75 of discrete non-core items, which was $0.75 more favorable than anticipated due to strategic tax items. Given this outperformance, Elevance pulled forward one quarter of the approximately $1 per share incremental investments planned for 2026 and deployed an additional $0.25 towards retention and targeted workforce investments.

Lisa Gill asked for color on the potential difference in ACA membership for 2026 if the enhanced subsidies are not extended, considering the proposed rates by state.

Answer

Gail Boudreaux (President and CEO, Elevance Health) stated that Elevance Health is prepared for various policy outcomes regarding enhanced subsidies, with pricing reflecting higher acuity. Mark Kaye (CFO and EVP, Elevance Health) indicated that if enhanced advanced premium tax credits expire, a material contraction in the ACA marketplace is expected, leading to meaningfully lower enrollment and a higher mobility risk pool, as suggested by CBO estimates. This would result in a smaller, more acute pool, fewer enrollees to spread risk, and sharper premium increases.

Lisa Gill asked about the potential impact on Elevance Health's individual ACA exchange membership in 2026 if enhanced subsidies are not extended, considering the already known proposed rates.

Answer

Gail Boudreaux, President and CEO, affirmed Elevance's balanced approach to ACA filings and readiness for various policy outcomes, emphasizing commitment to affordability. Mark Kaye, CFO, projected a material contraction in the ACA marketplace with significantly lower enrollment and a higher acuity risk pool if enhanced advanced premium tax credits expire, leading to sharper premium increases.

Lisa Gill inquired about current trends in the Medicare Advantage business and sought more detail on the company's 2026 bid strategy, particularly concerning margin recovery.

Answer

CEO Gail Boudreaux confirmed that Medicare Advantage trends, while elevated, were consistent with expectations. Felicia Norwood, President of Government Health Benefits, described the 2026 bid strategy as disciplined, focusing on margin normalization, strong member retention, and sustainable value, particularly in core HMO and dual-eligible products. This continues a multi-year strategy to achieve stability.

Lisa Gill asked about Medicare Advantage trends, specifically concerning new versus existing members and risk coding. She also requested that management quantify the specific impact of the IRA changes on the Part D medical cost trend or MLR in the first quarter.

Answer

Mark Kaye, CFO, explained that IRA changes, particularly the lower out-of-pocket cap, have reversed the typical quarterly seasonality for Part D, leading to stronger financial performance in early quarters and lower margins later in the year. He confirmed this new pattern is playing out as expected. Gail Boudreaux, President and CEO, added that the company feels good about its disciplined growth strategy regarding new member populations, products, and geographies, which is playing out consistently with expectations.

Lisa Gill from JPMorgan Chase & Co. asked about two topics: the specific impact of the Medicare Part D redesign on the medical loss ratio (MLR), and the drivers of Carelon's performance, including the proportion of organic growth and margin expectations for 2025.

Answer

CFO Mark Kaye explained the 60 bps increase in the 2025 MLR guidance is driven by the Medicare growth mix including Part D changes, acquisitions like CareBridge (contributing ~20 bps), and a prudent view on cost trends. Peter Haytaian, President of Carelon, highlighted strong 2024 results and projected over 50% revenue growth for Carelon Services in 2025, with organic growth (excluding CareBridge) exceeding 20%. He also noted strong momentum in the pharmacy (Rx) business.

Lisa Gill of JPMorgan Chase & Co. asked if Elevance Health was seeing accelerating pharmacy trends, particularly in specialty, and how the strong results in CarelonRx were influenced by this dynamic.

Answer

CEO Gail Boudreaux stated that while Medicare Part D specialty drug utilization has increased, unit costs have been in line with assumptions. Peter Haytaian, President of Carelon, clarified that CarelonRx's outperformance in the quarter was largely due to a one-time favorable intra-year revenue adjustment and that its full-year margin guidance remains on track.

Lisa Gill posed questions regarding Optum Rx, first asking about the impact of Part D changes and subsidies on earnings seasonality, and second, about the 800 new clients, inquiring if there are new trends or differences observed in these clients for 2026.

Answer

Company representative Bobby addressed Part D, confirming more even seasonal trending due to the Inflation Reduction Act (IRA) and expressing confidence in the 2026 outlook based on 2025 pharmacy cost trends. Company representative John discussed Optum Rx's strong selling season, noting that 800 new clients and high retention helped backfill over half of UnitedHealthcare's membership loss, leading to modest 2% earnings growth in 2026. He highlighted affordability, transparency (including 100% rebate pass-through by 2028), and execution as key drivers for winning new business.

Lisa Gill asked about utilization expectations for the back half of the year, specifically for Q4, and whether a significant step-up is anticipated for Part D in Q4.

Answer

Tim Noel, CEO of UnitedHealthcare, stated that utilization is tracking in line with previous expectations across all product lines, including Part D. He noted the normal seasonality in health insurance, with a bias towards first-half earnings contribution (60% vs. 40% in the second half) this year due to observed trends and additional spend for seasonal ramps like AEP.

Lisa Gill inquired about utilization trends for the back half of the year, specifically asking about expectations for the fourth quarter and any anticipated step-up in Part D utilization.

Answer

Tim Noel (CEO of UnitedHealthcare) stated that utilization is tracking in line with expectations across all product lines (commercial, ACA, Medicare, Medicaid, and Part D). He noted the normal seasonality of the health insurance business, with a bias towards first-half earnings contribution (60% vs. 40% in the second half) this year due to observed trends and additional spend for seasonal ramps like AEP.

Asked about the investments needed for 2026, questioning if there are incremental costs to bring online and what the timeline would be for seeing returns on those investments.

Answer

Stephen Hemsley acknowledged that while there are cost-saving opportunities, there are also areas of underinvestment that need to be addressed. He specifically cited OptumInsight (product updates), the enterprise-wide AI agenda, and the fintech agenda within OptumFinancial. He expects good contributions in 2026 but said the real acceleration from these investments will be seen in 2027 and 2028. Dhivya Suryadevara added that they are launching new AI-powered solutions that make her optimistic about the future.

Lisa Gill asked about the company's path to returning to its long-term EPS growth target of 13-16%, considering the more favorable 2026 rates and the final year of the V28 risk model transition.

Answer

Andrew Witty, an executive, stated that while the final V28 step-down in pricing is a reality, the company is getting through the transition period. He characterized the current issues as 'second order derivative effects' of pricing pressure, which the company is learning to manage. He expressed confidence that these issues are addressable in 2025, setting the stage for a return to the target growth rate.

Lisa Gill of JPMorgan Chase & Co. asked about the potential business impact of PBM reform expected in 2025 and what incremental steps the company could take to educate Congress on the value PBMs provide.

Answer

CEO Andrew Witty stated that PBMs are the primary check on high drug prices set by manufacturers. To improve transparency and address criticism, he announced that Optum Rx is committed to phasing out remaining arrangements to achieve 100% pass-through of all negotiated rebates to clients by 2028 at the latest. This move is intended to focus the policy debate on the drug manufacturers who set the initial prices.

Lisa Gill of JPMorgan Chase & Co. asked about the potential business impact of PBM reform in 2025 and what incremental steps the company could take to educate policymakers on the value PBMs provide.

Answer

Executive Andrew Witty positioned PBMs as the primary check on high drug prices set by manufacturers. He announced that to increase transparency and focus the debate on manufacturers, Optum Rx is committing to a full 100% pass-through of all negotiated rebates to its clients by 2028 at the latest, removing any ambiguity about where savings go.

Lisa Gill inquired about the expected impact of recent care activity observations on 2025, focusing on the rapid acceleration in specialty pharmacy (Rx) and its effect on the Optum Rx business.

Answer

John Rex, President and CFO, noted the specialty drug acceleration was a key unexpected factor, likely pulled forward by IRA-related manufacturer campaigns. Brian Thompson, CEO of UnitedHealthcare, stated they feel adequately priced for this in 2025, having anticipated induced utilization from the IRA, though the timing was faster than expected. Patrick Conway, CEO of Optum Rx, highlighted that volume growth and new products like Savings IQ are helping customers manage specialty spend.

Lisa Gill inquired about the drivers behind McKesson's revenue growth versus operating profit expansion, particularly in the North American Pharmaceutical and Prescription Technology Solutions segments, seeking clarity on the margin profile and the sequential quarter outlook for investments.

Answer

Britt Vitalone, Chief Financial Officer, attributed the strong performance and operating margin expansion to a favorable mix, growth in technology services, new products, and access programs like prior authorizations for GLP-1 medications. He noted that higher investment levels are anticipated in the second half of the fiscal year. Brian Tyler, Chief Executive Officer, added that growth investments are a long-standing part of their strategy, not always linear, and pursued when opportunities arise.

Lisa Gill asked about the drivers behind the revenue growth versus operating profit expansion in the North American Pharmaceutical and Prescription Technology Solutions segments, specifically inquiring about the margin profile, new products, enhanced programs, and the cadence of incremental investments for the remainder of fiscal 2026.

Answer

Britt Vitalone, CFO, explained that the operating margin expansion in Prescription Technology Solutions is driven by a favorable mix, growth in technology services components, new products and programs, and increased demand for access solutions like prior authorizations, particularly for GLP-1 medications. He noted that higher investment spending is anticipated in the second half of the year. Brian Tyler, CEO, added that these growth investments are part of a long-standing algorithm to innovate and expand markets.

Lisa Gill from JPMorgan Chase & Co. asked about the U.S. Pharmaceutical segment, seeking clarity on any negative impacts from Rite Aid's situation and the expected cadence of performance throughout the fiscal year, considering recent acquisitions.

Answer

EVP & CFO Britt Vitalone stated that the impact from Rite Aid's second bankruptcy is immaterial to McKesson's operations and profit growth for fiscal 2026. He highlighted strong momentum from stable utilization, the successful onboarding of new customers, and robust growth in specialty and oncology, further boosted by the acquisitions of Prism Vision and Core Ventures, which are expected to contribute 6-7% to the segment's operating profit growth.

Lisa Gill from JPMorgan Chase & Co. inquired about the potential impact of tariffs on both the pharmaceutical (branded and generic) and medical supply businesses, and what is factored into the fiscal 2026 guidance.

Answer

CEO Brian Tyler explained that the pharmaceutical business model is largely insulated due to reimbursement mechanisms, and the generic sourcing program is well-diversified. He noted the medical-surgical business also has a diversified sourcing strategy and pricing flexibility. CFO Britt Vitalone confirmed that based on current understanding, tariffs are not expected to have a material impact on fiscal 2026 guidance.

Lisa Gill from JPMorgan Chase & Co. requested details on the formulary changes mentioned, asking if they relate to major biosimilar shifts like HUMIRA or STELARA and whether the impact is a revenue shift or a loss of distribution to PBM self-distribution.

Answer

CFO Britt Vitalone specified that his comment pertained to a single product that went biosimilar, leading to a formulary change by a large retail national customer. He characterized it as a revenue impact for McKesson and noted it was the same issue that had been called out in previous quarters, declining to comment on future product shifts.

Lisa Gill inquired about the Medical Supply segment's underperformance relative to its long-term target, the competitive landscape, potential tariff impacts, the drivers of the strong 8% drug distribution growth, the discrepancy in GLP-1 inventory commentary versus Eli Lilly, the financial impact of the Rexall divestiture, and visibility into the second-half profit forecast.

Answer

CFO Britt Vitalone stated it was too early to change long-term targets for the Medical segment, noting its supplier base is diversified away from heavy China concentration. He attributed strong pharma growth to factors including GLP-1s and specialty drugs. He clarified that McKesson manages inventory based on demand, couldn't speak for Eli Lilly, confirmed the Rexall exit's impact is immaterial, and expressed high confidence in the back-half forecast.

Lisa Gill asked about Cencora's strategic priorities for fiscal 2026 and beyond, specifically regarding the focus on specialty, the MSO business, and the potential for incremental acquisitions within the MSO platform after divesting certain businesses into the 'other' segment.

Answer

CEO Bob Mauch explained that the strategic review aims for focused execution, dedicating resources and capital to areas that best align with Cencora's strategy, particularly specialty. He highlighted the MSO platforms (RCA and One Oncology) as key investment areas to enhance patient and physician care. EVP and CFO Jim Cleary added that the strong performance of RCA and One Oncology reinforces this strategy, contributing positively to distribution and GPO businesses.

Lisa Gill asked about Cencora's strategic priorities, particularly in specialty and the MSO business, and the potential for incremental acquisitions within the MSO platform, following the re-evaluation of certain businesses.

Answer

CEO Bob Mauch emphasized a focused strategic execution, dedicating resources and capital to areas aligned with Cencora's strategy, especially specialty and MSO platforms. He highlighted the MSO value proposition in making care easier for patients and physicians. CFO Jim Cleary added that strong performance from RCA and OneOncology reinforces this strategy, with inorganic growth positively contributing to distribution and GPO businesses.

Lisa Gill of JPMorgan Chase & Co. inquired about the key drivers behind the U.S. Healthcare segment's strong profit growth despite a slight reduction in its revenue guidance. She also asked for clarification on the environmental factors affecting the international business, particularly concerning the mid-sized biotech and pharma sector.

Answer

EVP & CFO James Cleary explained that the U.S. revenue moderation was due to biosimilars, decelerating (though still strong) GLP-1 growth, and the loss of a high-revenue, low-margin grocery customer. He credited the robust operating income growth to strong performance in higher-margin areas like specialty sales to physicians and health systems. For the international segment, Cleary noted that subdued clinical trial activity has pressured the global specialty logistics and consulting businesses, but he expects sequential improvement and a return to growth in Q4, citing positive leading indicators.

Lisa Gill inquired about the potential financial impact of pharmaceutical tariffs on Cencora's branded and generic businesses, considering potential price inflation.

Answer

CFO Jim Cleary stated that Cencora has not identified any material impact from tariffs, as pharmaceutical manufacturers are the importer of record. He emphasized that the company's primary focus is on ensuring patient access and supporting its partners through any uncertainty.

Lisa Gill of JPMorgan Chase & Co. questioned the U.S. Healthcare Solutions revenue guidance of 9-11% for FY25, given the strong 14% growth in Q1, asking about the drivers of the expected deceleration.

Answer

CFO James Cleary clarified that the guidance assumes GLP-1 growth was higher in Q1 than it will be for the rest of the year, a factor that significantly impacts revenue but has a minimal effect on operating income. He also noted that the newly acquired RCA is a higher-margin, lower-revenue business, and intercompany revenue is eliminated, further explaining the guidance.

Lisa Gill asked new CEO Bob Mauch about his strategic vision for his first year, potential changes given the new leadership, and any observed volume impacts from the Inflation Reduction Act (IRA).

Answer

CEO Bob Mauch stated that Cencora's successful strategy will not change but will be amplified, with a continued focus on execution, talent, and customer-centricity. He affirmed the company's readiness to work with any political administration and navigate policy changes, ensuring they remain a supportive partner for customers.

Lisa Gill inquired about the specifics of Cigna's new rebate-free, delinked pharmacy benefits model, including historical rebate guarantees, the economics of renewal pricing for 2026, and how the transition impacts Evernorth's long-term growth algorithm.

Answer

David Cordani, Chairman and CEO, expressed excitement for the new fee-based, transparent model, confirming Evernorth's long-term growth algorithm remains intact but will not apply in 2026 due to significant investments and proactive contract renewals. Brian Evanko, President and COO, detailed the model's benefits for patients, independent pharmacists, employers, and shareholders, emphasizing that the new model aims for comparable earnings contributions to existing solutions post-transition.

Lisa Gill from JPMorgan Chase & Co. inquired about the 2026 selling season, focusing on PBM client retention, market opportunities, and the company's reaction to the Arkansas PBM ruling and broader legislative landscape.

Answer

President and COO Brian Evanko reported strong PBM client retention tracking at mid-90% or better for 2026, highlighting the Prime Therapeutics renewal and noting affordability remains the top client concern. Chairman and CEO David Cordani stated Cigna was pleased with the temporary restraining order against the Arkansas law, arguing it would restrict access and raise costs, while reaffirming a commitment to public-private partnerships to navigate the active regulatory environment.

Lisa Gill asked about Cigna's strategy for negotiating GLP-1 drug prices, current employer coverage levels for weight loss medications, and the company's perspective on recent PBM legislation in Arkansas.

Answer

President and COO Brian Evanko explained that Cigna's GLP-1 strategy is a comprehensive suite of programs (EnCircleRx, EnreachRx, ENGUIDE) focused on access, affordability, and clinical safety, rather than just formulary placement. He noted over 50% of Evernorth employers and 15-20% of Cigna Healthcare employers cover weight management drugs. Chairman and CEO David Cordani stated that Cigna opposes the Arkansas bill, arguing it limits choice, erodes quality, and increases costs, while noting Arkansas is a small market for the company.

Lisa Gill of JPMorgan Chase & Co. questioned how new Express Scripts offerings that lower costs at the pharmacy counter would impact profitability, particularly concerning rebate retention, and asked about client uptake and preference shifts.

Answer

CEO David Cordani stated the new offerings do not change the company's profit model, emphasizing that the vast majority of rebates are already passed through to clients. Eric Palmer, CEO of Evernorth, added that the new programs, which ensure patients benefit from negotiated discounts, will become the default offering. He noted that while clients retain choice, the value of rebates shared with them continues to increase.

Lisa Gill asked about the 2025 PBM selling season, whether biosimilars are changing contract economics, and for an update on potential PBM-related legislation at the state or federal level.

Answer

Evernorth CEO Eric Palmer described the 2025 selling season as good, with retention rates in the mid-to-high 90s, and noted no wholesale changes in contract structures. CEO David Cordani stated that Cigna disagrees with the FTC's assertions, sees no mature legislation that appears likely to be put forward currently, and remains confident in the durability of the PBM model.

Lisa Gill asked about the anticipated financial headwinds for the PBM segment, specifically the $240 million impact, as CVS Health transitions to a "true cost" model, and how future PBM economics will evolve for both CVS Health and plan sponsors under this new transparent model.

Answer

David Joyner, President and CEO, emphasized the strength of CVS Health's diversified business and confidence in Caremark's future, citing $6 billion in new wins. Brian Newman, CFO, clarified that historical market basket-based guarantees and differing drug mix caused pressure, leading to a Q3 miss. Prem Shah, EVP, Chief Pharmacy Officer, and President, Pharmacy and Consumer Wellness, highlighted the PBM's focus on lowering branded drug costs, Cordavis's $1 billion savings, GLP-1 formulary adjustments, and the deliberate launch of True Cost to drive transparency, noting 25 million members benefit from point-of-sale rebates.

Lisa Gill of JPMorgan Chase & Co. asked for more visibility into the underlying assumptions and conviction for the Health Care Benefits (HCB) segment's performance in the second half of the year, given the strong Q2 results and multiple moving parts.

Answer

CEO David Joyner expressed satisfaction with the Aetna business's recovery. CFO Brian Newman detailed the Q2 results, noting a $300M favorable risk adjustment and a $470M group MA PDR, with the underlying beat driven by Medicare Part D and supplementals. EVP & President - Aetna, Steve Nelson, highlighted operational improvements, strong 2025 STARS ratings, and a disciplined approach to repricing the group MA business, half of which is up for renewal in 2026.

Lisa Gill asked about the new partnership with Novo Nordisk for Wegovy, seeking details on the number of lives on the preferred formulary, current employer coverage levels for weight loss drugs, the economic value of the associated clinical services, and whether the negotiated PBM price is superior to the announced retail price.

Answer

President and CEO David Joyner framed the deal as a key innovation for clients. Prem Shah, EVP and Chief Pharmacy Officer, explained that the partnership makes Wegovy preferred on CVS's largest commercial template, covering tens of millions of lives, to improve affordability and access, as about one-third of clients currently do not cover GLP-1s due to cost. He highlighted the value of the integrated CVS weight management program and the new retail access through the NovoCare Pharmacy network, which will drive value for clients and members.

Lisa Gill asked about new CEO David Joyner's key observations and strategic priorities during his first 100 days, and inquired about the confidence level in the 2025 guidance, particularly the potential for outperformance.

Answer

President and CEO David Joyner highlighted his focus on stabilizing Aetna's operations, advancing pharmacy transformation through models like CostVantage and TrueCost, and establishing the right leadership team. CFO Tom Cowhey added that the 2025 guidance is an achievable baseline with the most significant opportunity for upside residing in the Health Care Benefits segment, contingent on the moderation of medical cost trends.

Lisa Gill asked about the company's confidence in its 2025 Medicare Advantage bids, whether early disenrollment trends match expectations, and the impact of the Inflation Reduction Act on pharmacy trends.

Answer

Tom Cowhey, CFO, stated that early indicators suggest a 5% to 10% membership decline, in line with guidance. He expressed confidence in the 2025 bids, citing an approximate $800 million tailwind from improved Star ratings and deliberate benefit design changes. CEO J. Joyner added that the company anticipated pharmacy cost shifts and is focused on better integrating medical and pharmacy benefits to manage costs.

Lisa Gill asked about the updated revenue guidance, specifically the breakdown between currency and acquisitions, and whether increased utilization from the exchange population was contributing to volume growth.

Answer

Chairman and CEO Adam Schechter clarified that $13 million of the revenue impact was from foreign exchange, with the remainder due to timing-related acquisition delays. He noted strong organic volume growth of 3.5% driven by demographics and market share gains, not concerns about ACA changes. EVP and CFO Julia Wang provided additional details on the financial impacts.

Lisa Gill of JPMorgan Chase & Co. inquired about the updated revenue guidance, seeking a breakdown of the 40 basis point reduction between currency and acquisition timing, and whether increased utilization from the exchange population was a factor.

Answer

Chairman and CEO Adam Schechter clarified that $13 million of the reduction was due to foreign exchange, with the remainder attributed to the timing of acquisitions, which are expected to close later or in 2026. He noted strong organic volume growth of 3.5% driven by demographics and market share gains, not specifically by concerns over ACA benefits. EVP and CFO Julia Wang affirmed the strong quarter.

Lisa Gill of JPMorgan Chase & Co. inquired about the managed care contracting environment, asking about any large contract renewals scheduled for 2026 and any shifts in LabCorp's contracting strategy.

Answer

President, CEO, and Chairman Adam Schechter stated that LabCorp renews 20-25% of its managed care contracts annually and continues to see relatively flat unit pricing. He expressed confidence in securing renewals on reasonable terms that support the company's guidance. He also noted that hospital acquisition deals strengthen their position with payers by demonstrating value and helping to lower overall healthcare costs.

Lisa Gill asked about the potential impact of FDA policy changes regarding animal testing on the early development business, requesting details on the current exposure and financial implications.

Answer

Chairman and CEO Adam Schechter explained that Labcorp is actively developing non-animal testing models. He noted that the specific area of monoclonal antibodies, which has been a focus of discussion, represents only 10-15% of the Biopharma Laboratory Services segment's revenue. He concluded that the total enterprise impact would be very small and that no significant financial effect is expected this year.

Lisa Gill of JPMorgan Chase & Co. sought clarification on the components of the 3.5% organic growth forecast for Diagnostics, questioning the mix between high-growth esoteric testing and normalized routine utilization. She also asked about the potential financial impact of the proposed LDT rule.

Answer

CEO Adam Schechter clarified that high growth (3x normal) is concentrated in specific esoteric areas like oncology and women's health. He believes Labcorp is gaining market share, allowing for growth above the historical 1-2% market rate. Regarding the LDT rule, Schechter stated that while he believes it's bad for the industry, the direct financial impact to Labcorp is not significant as the company already complies with similar standards for New York State approval.

Lisa Gill asked for details on the margin progression for the Invitae acquisition into 2025 and the specific drivers behind the better-than-expected price/mix in the Diagnostics business.

Answer

CEO Adam Schechter confirmed the Invitae integration is on track and is expected to be slightly accretive in 2025. CFO Glenn Eisenberg elaborated that margins will improve sequentially but remain a year-over-year headwind through H1 2025 before becoming a tailwind. He attributed the strong 3% organic price/mix growth to lab management agreements, an increase in tests per accession, and esoteric testing growing faster than routine testing.

Lisa Gill of JPMorgan Chase & Co. inquired about the drivers behind the 100-basis-point guidance increase for the Pharmaceutical and Specialty Solutions division, seeking to understand the split between an NCI accounting change and underlying operational performance.

Answer

CFO Aaron Alt clarified that the $0.20 EPS guidance increase for the year was driven roughly equally by two factors: about half from the liability classification of the minority interest and the other half from higher operational expectations for both the Pharma and Other business segments, reflecting strong underlying demand.

Lisa Gill inquired about the primary drivers of the strong brand and specialty pharmaceutical sales growth seen in the quarter and questioned its sustainability into fiscal 2026, considering factors like the Inflation Reduction Act (IRA).

Answer

CEO Jason Hollar explained that the growth was broad-based, stemming from continued strength in specialty distribution, BioPharma Solutions, and the initial positive impact from the GI Alliance and ION acquisitions. He noted that GLP-1s accounted for approximately 7 percentage points of the 20% underlying revenue growth. CFO Aaron Alt added that for fiscal 2026, the company assumes a continued positive utilization environment and strong specialty growth.

Lisa Gill asked for details on the Pharmaceutical segment's strong performance, questioning the margin contribution from COVID-19 vaccines and the potential impact of the Inflation Reduction Act (IRA) on specialty drug volumes.

Answer

CEO Jason Hollar explained that the segment's strength was broad-based across brand, specialty, consumer health, and generics, not driven by any single factor. He clarified that the COVID-19 vaccine provided only a 'slight tailwind' in Q1 and is still expected to be a modest headwind for the full year. While specialty growth was strong, he noted it was part of the overall robust utilization trend rather than a specific IRA-driven event.

Lisa Gill of JPMorgan Chase & Co. asked for an update on GoodRx's Integrated Savings Program (ISP), inquiring about new partnerships, the timeline for its recovery to positive contribution, and the strategy for engaging employers directly.

Answer

CEO Wendy Barnes acknowledged that while PBM partnerships provide the fastest access to commercial lives, the company has metered expectations due to inconsistent surfacing of GoodRx's pricing. She emphasized that adding brand drugs is a key value-add for PBMs and confirmed new contracts have been signed. CFO Chris McGinnis added that while ISP is strategically important, significant upside from new partners and direct-to-employer initiatives is more likely a 2026 opportunity.

Lisa Gill from JPMorgan Chase & Co. inquired about GoodRx's Integrated Savings Program (ISP), asking about new partnerships, the potential for a direct-to-employer model, and the timeline for the program to become a positive contributor again.

Answer

CEO Wendy Barnes explained that while ISP is a key channel, its performance can be inconsistent within PBM systems. She highlighted that adding brand drugs is a significant value-add driving PBM engagement and confirmed new partnerships have been signed. CFO Chris McGinnis added that while the program has strategic merit, significant upside from new partners, brand drugs, and a direct-to-employer model is more likely a 2026 opportunity.

Lisa Gill asked about the key high-impact initiatives that could drive performance to the upper end of the guidance range and inquired about the historical recapture rate for consumers when a retail partner, like Rite Aid, undergoes significant store closures.

Answer

CEO Wendy Barnes identified three key initiatives: deepening partnerships with retail pharmacies through direct contracting and e-commerce, expanding brand partnerships with pharma manufacturers via point-of-sale cash buydowns, and enhancing engagement with healthcare professionals (HCPs). CFO Chris McGinnis addressed the Rite Aid situation, explaining that the bankruptcy sale process is different from past closures and that GoodRx is actively working with potential bidders to ensure a smooth transition of prescriptions. Wendy Barnes added that GoodRx's relationships with pharmacies and its ability to directly contact users are materially stronger than in the past.

Lisa Gill asked about the most significant high-impact initiatives that could drive revenue to the upper end of guidance and inquired about the historical recapture rate for consumers when a retail partner, like Rite Aid, undergoes store closures.

Answer

CEO Wendy Barnes identified closer partnerships with retail pharmacies (direct contracting and e-commerce), expanding manufacturer point-of-sale cash buydowns, and enhancing engagement with healthcare professionals (HCPs) as key initiatives. CFO Chris McGinnis addressed the Rite Aid bankruptcy, noting it's a unique situation involving an asset sale, and stated GoodRx is actively working with potential bidders to ensure a smooth transition of prescriptions. Wendy Barnes added that GoodRx's ability to directly communicate with its users is materially higher than in the past, aiding in these transitions.

Lisa Gill of JPMorgan Chase & Co. inquired about which new initiatives, including the ISP wrap program, are factored into the 2025 financial guidance and asked for details on the performance and expectations for ISP.

Answer

CEO Wendy Barnes explained that the guidance includes expected growth from manufacturer programs, particularly brand expansion, and benefits from enhanced retailer partnerships that have improved pharmacy profitability. Regarding the Integrated Savings Program (ISP), she noted solid traction and a significant opportunity with the 'ISP wrap' for non-covered brands, adding that GoodRx is in active discussions to add new PBM partners to the program.

Lisa Gill of JPMorgan Chase & Co. inquired about the visibility of Integrated Savings Program (ISP) contract uptake for 2025 and sought clarification if the 2025 outlook implies very low single-digit growth for the core prescriptions business.

Answer

CFO Karsten Voermann confirmed that Pharma Manufacturer Solutions will form the majority of growth in 2025. He noted that the outlook for the prescriptions marketplace is wider and more conservative due to pharmacy uncertainty. He also expressed excitement for the new ISP "wrap" program for off-formulary brands but noted its newness makes it difficult to predict the exact rollout trajectory.

Lisa Gill of JPMorgan Chase & Co. sought clarification on the trend of cash-pay patients moving to commercial insurance and asked about Lifestance's capacity to absorb this potential increase in volume.

Answer

CEO David Bourdon clarified that the shift from cash-pay to insured care is a broad industry tailwind that benefits their model. He affirmed that Lifestance has existing capacity and is focused on improving clinician productivity to meet this demand, carefully balancing hiring with patient volume.

Lisa Gill questioned the visibility into the 2026 rate improvement forecast and asked about the current M&A environment, including potential targets and competition from private equity.

Answer

Incoming CEO Dave Bourdon clarified that the 2026 rate outlook is based on the conclusion of a significant, unique payer rate decrease that is pressuring 2025 results, not on pre-signed contracts. Outgoing CEO Ken Burdick stated that the M&A strategy is expanding beyond tuck-ins to include new capabilities and customer segments. He noted the environment is more favorable for acquisitions now, as the market demands earnings, not just revenue growth, which pressures less-profitable competitors.

Lisa Gill of JPMorgan Chase & Co. asked about the company's cash position and whether it has sufficient liquidity to fund operations through the potential turnaround in 2026.

Answer

CFO Jeff Schwaneke confirmed the company ended the quarter with $327 million in cash and securities, plus $176 million in off-balance-sheet cash held by ACO entities. He expressed confidence that this liquidity provides the flexibility needed to navigate the current challenges and is sufficient to get through 2026, excluding any additional cash flow improvement initiatives.

Lisa Gill inquired about medical cost trends, particularly in inpatient and Part B, asking about claims visibility, trend progression during the quarter, and any observed increase in Part D utilization.

Answer

CEO Steven Sell clarified that medical cost trends were in line with their elevated expectations. He highlighted that a new financial data pipeline went live in Q1, significantly improving visibility. He noted inpatient census was high in Jan/Feb but declined in March. CFO Jeffrey Schwaneke added that Part D exposure is under 30% and not a significant driver of financial results.

Lisa Gill inquired about the 2025 contract repricing, asking for specifics on the improvements for the 40% of the business up for renewal and the status of the remaining 60%.

Answer

CEO Steven Sell explained that the 40% of membership up for renewal is seeing improved percentage-of-premium terms and new upside incentives for quality performance. He added that for Part D risk, which spans more than just that 40%, over half the membership will have risk mitigation structures like carve-outs or corridors in 2025. Sell also noted that new Year 1 partners are being offered alternative economic arrangements, such as no-downside care management fees, to ensure proper data integration before taking on full risk.

Lisa Gill of JPMorgan Chase & Co. asked about the biggest opportunities for Teladoc to help bend the healthcare cost curve, leveraging the CEO's managed care background, and for key takeaways from the recent Teladoc Health Forum.

Answer

CEO Charles Divita identified continued improvements in access and partnering more closely with local delivery systems as key opportunities. He emphasized extending longitudinal care to complement the existing system. Regarding the forum, he noted clients are concerned about affordability and provider shortages, and there was strong interest in Teladoc's strategic direction and deepening partnerships.

Lisa Gill of JPMorgan Chase & Co. inquired about the evolution of Teladoc's contracts toward visit-based models, the drivers of Integrated Care member growth, and recent utilization trends, including the impact of the flu season.

Answer

CEO Chuck Divita confirmed a gradual market shift toward visit-based contracts, highlighting visit volume as a key engagement metric. CFO Mala Murthy added that utilization trends are stable, noting that 6% visit volume growth in 2024 translated to high single-digit visit revenue growth, a momentum she expects to continue into 2025.

Lisa Gill inquired about the 2025 selling season for the Integrated Care segment, seeking clarity on the preliminary revenue growth outlook of flat to 2.5%. She asked for reasons behind the slightly lower client retention rate, details on the 'land and expand' opportunity, and whether the lower bookings were concentrated in the Chronic Care business.

Answer

Chief Executive Officer Chuck Divita explained that the primary headwind for bookings is from the health plan space, which is undergoing significant belt-tightening. He confirmed that the majority of bookings are in the Chronic Care Management (CCM) space, so the trends apply there as well. Chief Financial Officer Mala Murthy added that while the selling season is ongoing, the company has other levers for revenue growth beyond bookings, including driving member enrollment, increasing visit volume, and surgical pricing adjustments.

Lisa Gill inquired about the 2025 selling season, seeking details on why client retention is slightly lower, where business is being lost, and whether the slowdown in bookings is specific to the Chronic Care segment.

Answer

CEO Chuck Divita identified the health plan space as the primary source of headwinds due to market pressures and significant 'belt tightening,' which affects bookings across the board, including for Chronic Care Management. CFO Mala Murthy noted the selling season is ongoing and that revenue growth has multiple levers beyond bookings, such as driving enrollment, visit volume, and strategic pricing.

Lisa Gill questioned the visibility into the guided mid-single-digit medical cost trend and asked about the expected cadence of earnings throughout 2025, particularly concerning the impact of the IRA.

Answer

CFO Celeste Mellet confirmed that trends are developing as expected, with data through April showing no cause for concern. Regarding cadence, she explained that earnings will be front-loaded due to the IRA, with Q1 being the highest. She also noted that the full-year guidance anticipates a 'dock 6' impact in late Q3 or Q4, which is factored into the outlook.

Lisa Gill asked about the updated 2025 guidance, questioning why the full-year forecast was not raised more significantly after a strong Q1 beat and whether this reflected conservatism or other underlying concerns. She also inquired about the impact of Medicare Advantage plan changes on patient utilization, particularly for chronic therapies.

Answer

CFO Michael Shapiro explained that Q1 can be unpredictable and cautioned against extrapolating the results. He noted that while acute growth was robust, a significant negative impact from the Stelara pricing reset is still expected in subsequent quarters. CEO John Rademacher added that while it's early, he expects changes to patient out-of-pocket costs to be a net benefit later in the year by potentially reducing bad debt.

Lisa Gill of JPMorgan Chase & Co. inquired about the implied margins of the newly acquired Intramed Plus, based on the guidance update, and the potential to improve them. She also asked for details on the company's M&A strategy, including acquisition targets, deal capacity, and the current pricing environment.

Answer

CFO Michael Shapiro explained that while Intramed was acquired at a mid-teens multiple, Option Care Health is confident it can improve this to a low double-digit multiple by applying its superior procurement leverage, technology, and operational efficiencies. On M&A strategy, Shapiro and CEO John Rademacher stated they are not capital constrained but are highly disciplined, focusing on acquisitions that add sustainable strategic value or unique capabilities, like Intramed's advanced practitioner model. They view share repurchases as a strong alternative for capital deployment.

Lisa Gill asked why management believes the STELARA pricing situation is unique and not a new industry norm. She also sought confirmation that the updated 2024 EBITDA guidance reduction was solely due to the IV solution shortage and hurricane impacts.

Answer

CEO John Rademacher explained the uniqueness stems from STELARA being part of the Inflation Reduction Act's (IRA) first drug negotiation cohort, creating a different dynamic. He noted most of the company's portfolio is already generic or biosimilar. CFO Michael Shapiro confirmed that the IV bag shortage and disruptions from recent hurricanes were the primary variables affecting the Q4 guidance.

Lisa Gill asked for more detail on the new reimbursement structures for calendar 2025 contracts and inquired about the specific script retention rate from recent store closures.

Answer

CEO Tim Wentworth explained that new reimbursement contracts, covering a meaningful portion of their business, involve rebalancing brand and generic drug reimbursements and creating new categories for high-cost drugs like GLP-1s to better align with acquisition costs. He noted that while they have made progress, about two-thirds of contracts remain to be addressed over time. Regarding script retention from the 70 stores closed in the quarter, Wentworth confirmed it was better than internal assumptions but did not provide a specific number, attributing the success to an improved patient transfer process.

Lisa Gill asked for details on the restructuring of pharmacy reimbursement contracts, including the 80% visibility for 2025, the potential for leaving networks, and the expected cadence of earnings throughout fiscal 2025.

Answer

CEO Tim Wentworth explained that WBA is in a multi-year process to reframe PBM relationships, resulting in less reimbursement pressure in fiscal 2025. He confirmed WBA is willing to exit unprofitable network contracts to protect margins. Global CFO Manmohan Mahajan added that the earnings cadence for 2025 will be similar to recent years, with benefits from store closures scaling up in the second half.

Lisa Gill from JPMorgan Chase & Co. asked for clarity on the restructuring of pharmacy reimbursement contracts, questioning if the 80% visibility for 2025 implies improving rates or just less pressure, and what 'difficult decisions' regarding network participation might entail. She also inquired about the expected earnings cadence for fiscal 2025.

Answer

CEO Tim Wentworth explained that while reimbursement pressure is lessening in 2025, it's part of a multi-year reset of PBM relationships. He confirmed Walgreens is willing to exit unprofitable networks to ensure fair compensation. CFO Manmohan Mahajan added that the FY25 earnings cadence would likely follow trends from the past couple of years, with benefits from store closures scaling up through the year.

Lisa Gill of JPMorgan Chase & Co. inquired about Walgreens' vision for the future of pharmacy, the specifics of conversations with payers and PBMs regarding new reimbursement models, and the ongoing financial impact of NADAC pricing fluctuations.

Answer

CEO Tim Wentworth outlined a future pharmacy model with a rationalized store footprint, deeper brand partnerships, and an enhanced loyalty program. Mary Langowski, President of U.S. Healthcare, added that discussions with payers focus on fair compensation for the value pharmacists provide, as the current model is outdated. CFO Manmohan Mahajan clarified the $20 million NADAC impact was for a partial quarter and its volatility contributes to the wider guidance range.

Lisa Gill asked about the future of retail pharmacy, the specifics of ongoing reimbursement model discussions with payers and PBMs, and the materiality of the $20 million NADAC pricing impact.

Answer

CEO Tim Wentworth outlined a future for pharmacy focused on a rationalized store footprint, deeper brand partnerships, an enhanced loyalty program, and back-end automation. President of U.S. Healthcare Mary Langowski added that current reimbursement playbooks are dated and they are focused on being paid fairly. Global CFO Manmohan Mahajan clarified the $20 million NADAC impact was for a partial quarter and its volatility contributes to the wider Q4 guidance range.

Lisa Gill asked for follow-up details on the LifeLabs acquisition, seeking clarification on why Canadian demographics are considered more favorable and requesting information on LifeLabs' current margin profile.

Answer

CEO Jim Davis explained that Canada's demographics are favorable due to higher population growth and an older average population compared to the U.S., both of which drive higher lab utilization. He reiterated that LifeLabs' operating margin rate is currently below Quest's average but is expected to reach the company average within a few years through synergies.

Lisa Gill asked for quantification of the benefit from the Kroger-ESI dispute, insights on front-end sales challenges between macro trends and company-specific issues, an update on the financial impact of shrink, and current trends in generic drug procurement pricing.

Answer

Matt Schroeder, Executive VP and CFO, did not quantify the Kroger dispute's impact but noted Rite Aid is getting its 'fair share' of scripts. He acknowledged it's difficult to separate macro from internal front-end issues but highlighted company initiatives in assortment and pricing. He quantified the quarterly shrink headwind at approximately $9 million year-over-year and confirmed the company is seeing stabilization in generic pricing, which contributed to better-than-expected drug purchasing costs.