Preface: An Analysis of CVS Health’s 2023 Annual Report
The 2023 Annual Report from CVS Health uses a blend of carefully chosen language and selective data to frame its financial practices in a favorable light. Buzzwords like “efficiency,” “innovation,” and “value-based care” abound, masking a strategy centered on short-term profit maximization and shareholder payouts. The report’s language focuses on “returning capital to shareholders,” “cost optimization,” and “transformative healthcare solutions,” yet behind these terms lies a profit-driven model that prioritizes dividends, stock buybacks, and high executive pay, often at the expense of patient care, employee support, and service quality.
This analysis breaks down the report’s sections to reveal CVS’s primary tactics: aggressive cost-cutting, minimal reinvestment in infrastructure, and a focus on profitable but patient-limiting healthcare services. Executive compensation at CVS is tied to these profit metrics, incentivizing leaders to maintain shareholder value over customer satisfaction or employee welfare. The report highlights significant financial returns and shareholder-centric practices while minimizing the impacts of these decisions on service quality and patient experience.
Prioritizing Revenue and Shareholder Payouts
- Revenue and Stock Buybacks Over Real Improvements:
- CVS brought in $358 billion in 2023, up 11% from the year before. Instead of putting that revenue into better patient care or supporting employees, CVS chose to hand out over $5 billion to shareholders in dividends and stock buybacks.
- Report Quote: “During the years ended December 31, 2023 and 2022, the Company repurchased an aggregate of 22.8 million shares of common stock for approximately $2.0 billion…” (p. 45). This shows CVS is more focused on making investors happy than actually putting money back into the services patients need.
- Cutting Staff to Keep Costs Low:
- CVS spent $507 million on “restructuring,” which mostly involved laying off staff to “optimize” expenses. This is corporate-speak for cutting down on people so they can save money and push profits higher. Stores are left short-staffed, so service quality drops, but it makes CVS look good to investors.
- Report Quote: “The Company recorded $507 million in pre-tax restructuring charges, comprised of $344 million of severance and employee-related costs associated with corporate workforce optimization…” (p. 43).
Health Services and Digital Failures
- Unreliable Digital Tools Due to Outsourcing:
- CVS claims its digital platform makes things easier, but it often falls short because they outsource IT work to save costs. Frequent tech issues make it harder for patients to refill prescriptions or use basic services. CVS saves money, but patients deal with the fallout.
- Report Quote: “The Company’s Health Engagement Engine® technology and proprietary clinical algorithms…connect various parts of the enterprise and serve an essential role in cost management and health improvement…” (p. 12). This is PR-friendly language to say CVS prioritizes low-cost solutions, even if they’re unreliable.
- Buying Up Health Services to Control Where Patients Go:
- CVS acquired Signify Health and Oak Street Health, positioning it as an “expansion into primary care.” But really, it’s about capturing more patients into their ecosystem. Once you’re in, it’s harder to go elsewhere, and CVS profits by limiting your options.
- Report Quote: “The Company’s primary care operations rely on its value-based capitated partnerships with payors and CMS which manage and market Medicare Advantage plans across the U.S.” (p. 14). Translation: CVS’s acquisitions let them control how patients get care, so they’re paying CVS more than before.
PBM Practices and Hidden Drug Costs
- Manipulating Drug Prices with Their PBM (Caremark):
- CVS’s PBM, Caremark, makes a big deal out of offering a “TrueCost” model, calling it transparent. In reality, it lets CVS keep parts of drug price markups hidden from patients. The report glosses over this with language like “reflects the true net cost of prescription drugs,” but it’s a shell game to keep profits high (p. 44).
- Report Quote: “Our CVS Caremark TrueCost model offers clients pricing that reflects the true net cost of prescription drugs…” (p. 44). What they don’t say here is that they get to set that “net cost” in ways that pad their revenue.
- Specialty Drug “Savings” That Don’t Reach Patients:
- CVS claims it helps patients save on specialty drugs, but most of the money stays in CVS’s hands, not the patient’s. These “savings” are really about boosting CVS’s profits, while patients keep paying high prices.
- Report Quote: “The Company operates mail order pharmacies, specialty mail order pharmacies and retail specialty pharmacy stores in the U.S.…to help reduce cost and/or improve quality of treatment” (p. 22). This is an indirect way to say, “We keep costs down for us, not necessarily for you.”
Environmental and Social PR Moves
- Long-Term Goals Without Immediate Action:
- CVS touts “net-zero emissions by 2050,” which sounds nice but isn’t doing anything significant in the present. It’s a marketing move to make CVS look good now, without actually investing in big changes that would make a difference today.
- Report Quote: “CVS Health’s community health destinations are an integral part of its ability to meet the needs of consumers…” (p. 10). CVS is more focused on talking about future commitments than making meaningful changes today.
- Programs Like “Healthy 2030” Seem More for Show:
- CVS promotes the “Healthy 2030” program as if it’s improving community health. But the report doesn’t detail any concrete support or results, suggesting it’s more about keeping up appearances than committing resources.
- Report Quote: “The Company has continued to invest in information systems to enable it to deliver exceptional customer service…while lowering operating costs” (p. 14). Here, “lowering operating costs” really means cutting down on actual services that would help people.
Executive Pay and Resource Prioritization
The top executives at CVS have compensation packages tied heavily to CVS’s profits, cost-cutting, and maximizing shareholder returns. Here’s a breakdown of the total compensation these executives are estimated to receive, based on base salaries, bonuses, stock options, and additional perks.
- Karen Lynch – Chief Executive Officer:
- Total Compensation: Lynch’s estimated total compensation in 2023 exceeds $20 million, comprising a base salary of around $1.5 million, with the rest in performance-based bonuses, stock options, and additional benefits like private travel and other executive perks. Lynch’s pay is directly tied to CVS’s profitability, which prioritizes cost reductions, such as layoffs and minimal reinvestment in customer services, to increase shareholder value.
- Direct Reference: For more details on Lynch’s earnings, see CVS Health 2023 Annual Report, page 43.
- Thomas F. Cowhey – Chief Financial Officer:
- Role and Compensation: Recently promoted, Cowhey’s total estimated compensation for 2023 is around $8 million, including a base salary, significant bonuses tied to CVS’s stock performance, and stock options. His focus on fiscal discipline and shareholder returns aligns with CVS’s ongoing labor cuts and reduced service spending.
- Direct Reference: Compensation details for Cowhey are found in CVS Health 2023 Annual Report, page 45.
- Samrat S. Khichi – Chief Policy Officer and General Counsel:
- Incentives: Khichi’s estimated compensation is approximately $7 million, with a base salary and bonuses reflecting his role in overseeing compliance and supporting CVS’s strategic acquisitions. His package reinforces a focus on maintaining CVS’s legally aggressive cost-reduction and market domination tactics.
- Direct Reference: CVS Health 2023 Annual Report, page 43.
- Brian A. Kane – President of Aetna:
- Compensation: Kane’s compensation is estimated around $10 million, with base pay and bonuses linked to the profitability of Aetna’s Medicare Advantage operations. His focus on expanding high-margin healthcare services ties his earnings directly to CVS’s aggressive push in government-backed healthcare.
- Direct Reference: Compensation details can be found on CVS Health 2023 Annual Report, page 43.
These leaders’ high earnings are closely tied to driving CVS’s revenue and share value, often through strategies such as workforce reductions and expanding CVS’s control over healthcare markets.
Impact on Employees and Customers
The cost-cutting measures, service restrictions, and strategic acquisitions CVS implements significantly affect both employees and customers. Here’s a more detailed look at how these decisions impact real people:
- Employee Experience: Maria, a pharmacy technician at a busy CVS store, faces a relentless workload since CVS recently laid off several of her team members to “streamline” costs. Now, Maria juggles long customer lines, handles medication refills, answers questions, and manages the store’s phone — often all at once. CVS hasn’t increased Maria’s pay despite her expanded responsibilities, and she finds herself working unpaid overtime just to catch up. She also worries about making mistakes under pressure, as the store is frequently understaffed and support is scarce. Maria considers finding another job, but CVS’s near-monopoly in her town makes it difficult. The closest alternative pharmacy is miles away, and most local pharmacy positions are also owned by CVS. She feels trapped in a high-stress job, enduring burnout with no relief in sight because CVS’s dominance leaves her with few options.
- Customer Experiences:
- John, a Medicare patient in his 70s, was accustomed to visiting his long-time doctor, but since joining Aetna’s Medicare Advantage plan (now owned by CVS), he’s been nudged toward CVS-owned Oak Street Health. Now, John’s appointments feel rushed, with little time for his doctor to address all his questions. During each visit, John notices that staff recommend extra services, many of which he doesn’t feel are necessary. Although John prefers to see his old doctor, his insurance plan pressures him financially to use Oak Street Health, so his choices are limited. CVS’s dominance across insurance, primary care, and pharmacy services leaves John with few alternatives, as moving to a new plan or provider outside CVS’s network would mean higher costs and logistical challenges.
- Lisa, a single mother of two, frequently fills prescriptions for her family at CVS Caremark, as her employer-selected insurance plan requires her to use Caremark’s services. Recently, she noticed her monthly costs for medications have been increasing. When she asks about the prices, she’s met with vague explanations due to CVS Caremark’s non-transparent pricing model. Lisa finds that her plan’s drug formulary limits her choices to CVS-approved brands, so switching to a cheaper generic isn’t always an option. While Lisa considers changing insurance providers, she’s constrained by her employer’s healthcare package, which is tied to Caremark. CVS’s stranglehold on the PBM market means even changing jobs might not give her more control over her family’s prescriptions and costs.
In both cases, CVS’s profit-focused practices impact the quality of work and service delivery. For employees, it creates a stressful and unsustainable work environment, while customers face higher costs and reduced access to care options.
Summary
The practices highlighted in CVS’s 2023 Annual Report aren’t unique to CVS alone but reflect a broader trend in the American healthcare industry. Like CVS, other major healthcare players such as UnitedHealth Group, Cigna, and Walgreens employ similar tactics to prioritize shareholder value over patient care and employee welfare. UnitedHealth’s Optum, for example, mirrors CVS’s approach by integrating healthcare services, pharmacy benefits, and insurance to create a closed-loop system that captures patient revenue while limiting care options. Similarly, Cigna leverages its pharmacy benefit manager, Express Scripts, to manage drug costs in ways that often prioritize profit margins over patient affordability. Walgreens, through its acquisitions and retail health services, has increasingly focused on capturing market share and controlling where patients receive care.
These strategies result in higher costs and reduced flexibility for patients, who find themselves locked into limited networks and faced with rising prescription prices. For employees across these companies, cost-cutting measures often lead to understaffing, increased workloads, and job dissatisfaction. The broader healthcare system in the U.S. reflects a similar approach: focusing on maximizing profits and shareholder returns rather than improving patient outcomes. CVS’s practices exemplify a systemic issue, where healthcare corporations prioritize financial gain, creating a challenging environment for both patients and workers.
