CVS Caremark’s first-quarter net income jumped 23 percent to top Wall Street’s expectations, as generic drugs continued to improve profitability even though those prescriptions hurt revenue.
Generic drugs, which are cheaper, copycat versions of brand-name medicines, help a drugstore’s bottom line because they provide a wider margin between the cost for the pharmacy to purchase the drugs and the reimbursement received. But they hurt stores’ revenue because generics cost less than brand-name drugs.
Drugstores and pharmacy benefits managers, which run prescription drug plans for employers and other customers, have reaped gains for several quarters now from a wave of patent expirations that have hit top-selling drugs.
CVS runs the second-largest drugstore chain with 7,400 locations and one of the nation’s largest PBMs. It has benefited from the trend so much so that generic drugs now make up more than 81 percent of the prescriptions filled at its retail pharmacies, up from 78.1 percent in last year’s first quarter.