Logo of jester cap with thought bubble with words 'Fool Transcripts' below it

Image source: The Motley Fool.

CVS Health (NYSE:CVS)
Q3 2017 Earnings Conference Call
Nov. 6, 2017 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to CVS Health Third Quarter 2017 Earnings Call. During the presentation, all participants will be in listen-only mode. Afterwards, we'll conduct a question and answer session, at that time if you have a question please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator you may press the * followed by the zero. As a reminder, this conference is being recorded today, Monday, November 6, 2017. I would now like to turn the conference over to Mike McGuire, Senior Vice President of Investor Relations. Please go ahead, sir.

Mike McGuire -- Senior Vice President, Investor Relations

Thank you, Nelson. Good morning, everyone, and thanks for joining us. I'm here this morning with Larry Merlo, President, and CEO and Dave Denton, Executive Vice President, and CFO. Jon Roberts, Chief Operating Officer; and Helena Foulkes, President of CVS Pharmacy, are also with us today and will participate in the question and answer session following our prepared remarks.

During the Q&A, please keep in mind that it is our policy to not comment on rumors or speculations in the marketplace. Also in order to provide more people with the chance to ask their questions, please limit to no more than one question with a quick follow-up. Please note that we have slide presentation on our website that summarizes the information in our prepared remarks as well as some additional facts and figures regarding our operating performance and guidance. Our Form 10Q will be filed this afternoon and that, too, will be available on our website.

I do have one quick reminder. Our annual Analyst Day is scheduled for Tuesday, December 12 in New York City. During that, you'll have the opportunity to hear from several members of our senior management team, who will provide a compressive update of our strategies for drive long-term growth as well as our 2017 guidance. For those unable to attend, the meeting will be webcast.

Again, that's Tuesday, December 12. Additionally, during this presentation, we will make certain forward-looking statements that reflect our current views related to our future financial performance, future events, and industry and market conditions. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from what may be indicated in the forward-looking statements. We strongly encourage you to review the information in the reports we file with the SEC regarding the specific risks and uncertainties.

In particular, those that are described in the Risk Factors section of our most recently filed Annual Report on Form 10-K and the cautionary statement disclosures in our Form 10-Q. You should also review the section entitled forward-looking statements in our earnings press release. During this call, we will use non-GAAP financial measures when talking about our company's performance. In accordance with SEC regulations, you can find the reconciliations of these non-GAAP measures to comparable GAAP measures on the Investor Relations portion of our website.

And as always, today's call is being webcast on our website, and it will be archived there following the call for one year. Now, we'll turn this over to Larry Merlo.

Larry Merlo -- Chief Executive Officer and President

Okay. Thanks, Mike. Good morning, everyone, and thanks for joining us today. Starting with our third-quarter results.

Total company revenues increased 3.5%, at midpoint of our guidance range. We delivered adjusted earnings per share of $1.50 at the high end of our guidance despite the impact from the devastating hurricanes that swept through Texas, Louisiana, Florida and Puerto Rico, and I'll have more on that in just a few minutes. On an adjusted basis, operating profit was down 13.1%, within expectations, reflecting performance in the PBM business that was in line with expectations, along with performance in the Retail/Long-Term Care segment that was below expectations due to the hurricanes. We generated approximately $2.4 billion of free cash during the quarter and $7 billion year-to-date.

Now given our year-to-date performance and our expectations for the remainder of the year, we are narrowing our full-year adjusted EPS guidance range and raising the midpoint. We currently expect to achieve adjusted earnings per share for 2017 of $5.87 to $5.91 reflecting year-over-year growth of 0.5% to 1.25%. And that compares to our previous range of $5.83 to $5.93, and Dave will discuss the details of both our results and guidance in more detail in his remarks. Now before turning to the business update, I want to provide some color on the hurricanes, not only in regard to the financial impact to our business but also in regard to the recovery efforts.

The considerable damage these storms left in their path cannot be understated and our stores and colleagues were not immune to this destruction. In total, about 925 of our stores were closed for some period of time, and today, 11 remain closed, and we estimate that the financial impact is approximately $55 million, which are cost primarily to cover insurance deductibles. Now the vital part of these communities, we played roles both in advance of the storms and afterward to aid recovery efforts. Our proprietary messaging platform enabled rapid and urgent communications to patients who are in the hurricane's path.

And this helped ensure delivery of specialty and other medications for patients in transition between their homes and safe shelter locations. Additionally, more than $10 million in cash, products, and supplies has been raised and donated to support the impacted communities, and we are incredibly grateful to our colleagues who, while dealing with their own personal challenges, made extraordinary efforts in helping and aiding our customers. The rebuilding process for many of these communities will take a long time, and will continue to do our part in providing support. Now turning to the business update, and I'll start with PBM.

As you're all aware, we signed 5-year agreement with Anthem to provide services to support their new PBM, IngenioRx, beginning in January 2020. As part of the agreement, we'll manage certain services for IngenioRx, including claims processing and prescription fulfillment through our mail order and specialty pharmacies. These services will be private labeled to IngenioRx in order to ensure a seamless experience for Anthem members. And through this relationship, Anthem will have the ability to grow their business and enhance their value proposition as we help them improve their financial performance, execute operationally and optimize IngenioRx's control of critical PBM functions.

Additionally, Anthem is very focused on improving patient health outcomes and will be relying on our expertise in patient messaging and engagement at the point-of-sale through our multiple patient touch points to support IngenioRx in this goal. So we're very excited about this new relationship and look forward to starting the implementation into working with Anthem to provide services to help ensure coordinated, holistic care for their members. Combined with our continuing success in winning new business, we believe that this contract is further validation of the important role that CVS Health's integrated and innovative pharmacy care model plays in today's healthcare system. Now as for the 2018 selling season, we've continued to make a good progress.

With another $600 million in new wins, we currently have gross wins of approximately $6 billion, and net new business of $2.3 billion. As I said, last quarter, these new business numbers include the previously announced loss of the FEP specialty contract but do not include any impact from our individual Med D PDP, which I'll touch on shortly. Today, we've completed more than 90% of our client renewals for '18, and that's roughly in line with where we were at this point last year and our retention rate stands at about 97%. Additionally, we recently announced the new 30,000-store performance-based pharmacy network that will be anchored by CVS Pharmacy and Walgreens, along with up to 10,000 community-based independently owned pharmacies.

The network is designed not only to deliver unit cost savings but also to improve clinical outcomes that will help with our overall healthcare costs for clients and their members. This network is an innovative solution that utilizes a value-based management approach in order to achieve improved outcomes through adherence for five high-impact, highly utilized drug classes. It also helps to provide cost savings through formulary compliance. So we're excited to make this available to our clients for implementation beginning in March of next year, and we look forward to improving overall health and wellness while lowering cost for patients and payers.

Turning to our Specialty Business. Revenue growth in the quarter was 10.6%. And the slowdown in revenue growth compared to prior year is being driven by several factors. First, we are seeing lower levels of inflation on specialty drugs consistent with the marketplace; second, we're seeing increase in generic dispensing within specialty, which as you know is a drag on the top line but a benefit the margin; and lastly, the mix of drug within our book is shifting toward lower-priced therapies as well as fewer hep C scripts.

And despite these top-line pressures, overall growth in specialty pharmacy remained strong, and our specialty business continues to expand and gain share. Before turning to retail, let me touch briefly on SilverScript, our Med D PDP. As we reported last quarter, SilverScript qualified in 32 of the 34 regions, which enables us to retain all of the auto-assignees we currently serve, and importantly, receive new auto-assignees in all 32 regions. The 2018 annual enrollment periods currently underway, and for enrollees, we have work to reduce premiums for the majority of SilverScript plans across the country, providing plan beneficiaries continued access to a zero-dollar deductible for drugs an all tiers.

I'm also pleased to note that for the third consecutive years, SilverScript achieved a 4-star performance rating from CMS for 2018, surpassing industry standards and delivering value clinical outcomes and clinical service. And of the Med D lives under Caremark management, 83% achieved a 4 or 5-star ratings, which speaks to the outstanding value we deliver for our health plan clients. Now moving on to third quarter results in the Retail/Long-Term Care segment, total same-store sales decreased 3.2%, slightly better than expectations, with pharmacy same-store sales down 3.4%. Pharmacy sales comps were negatively impacted by approximately 435 basis points due to recent generic introductions.

Same-store prescription volumes increased 0.3% on a 30-day equivalent basis, slightly ahead of expectations and the decisions to restrict CVS Pharmacy from participating in the TRICARE and fully insured prime networks continue to negatively impact pharmacy sales and script comps. The network changes had about a 420 basis point negative impact on volumes, and when adjusting for the network changes, same-store prescription volumes would have been up 4.5% in the quarter, again, on a 30-day equivalent basis. Now as we look to return to healthy growth, we continue to be very focused on partnering with all payers to drive volumes and capture share. And our partnerships with Optum, CIGNA, and Express Scripts have seen some uptake from clients and the pipeline of additional opportunities in the coming years remains promising.

Additionally, CVS Pharmacy will be preferred in several more Med D networks for the 2018 planned year. And these include the SilverScript Choice plan as well as the preferred networks for Aetna/First Health and WellCare, and we believe that being preferred in these networks will help us to further drive prescription volume in the growing Med D market. Now turning to the front store. Comps decreased 2.8%, sequentially in line with Q2 comps after adjusting for the Easter shift.

And has been the case this year, the decline in front store comps reflects a number of factors, including our decision to rationalize our promotional strategies by scaling back on mass promotions and reducing our circular page count. Softer customer traffic was partially offset by the continued increase in the average front door customer basket. Our personalization and promotional strategies have been successfully contributing to growth in front store profitability as has our growth in Store Brands. Our Store Brands represented 23.2% of front-store sales in the quarter, and that's up about 25 basis points from a year ago, and it remains an area of strength and opportunity.

As a result of all of these factors, front store gross margin, once again, improved in the quarter versus last year despite the decline in front store comps. Now before I turn it over to Dave, I would like to say a word about the critical crisis in American healthcare, and that's the alarming and heartbreaking opioid epidemic. As you know, in September, we announced an expansion of our enterprisewide initiatives to fight the epidemic, leveraging the national presence of CVS Pharmacy with the capabilities of CVS Caremark. With this expansion, we are further strengthening our commitment to have providers and patients balance the need for this powerful medication with the risk of abuse and misuse.

Over the past few years, we've been focused on prevention, collection, and partnership. And as a result, we've collected and safely disposed of more than 100 metric tons of unwanted medications. We've also worked with 43 states to expand access without a prescription to the opioid overdose-reversal drug, Naloxone, to help save lives and get people a chance to get the help they need for recovery. And through our pharmacies' Teach Program that connects CVS pharmacists with school in their local communities, we have educated nearly 300,000 students on the dangers of prescription drug abuse.

However, there's more that needs to be done and as a leading provider of pharmacy care, we believe it is time to institute limits on the quantity of opioids dispensed to patients who are receiving an opioid for the first time in the treatment of acute injuries and to ensure that the prescription fits their medical condition. So utilizing our retail pharmacies and our PBM services, we will work with physicians, patients, plan sponsors and other stakeholders to limit the supply of opioids dispensed for certain acute prescriptions to seven days while continuing to ensure patients with critical needs have access to appropriate care. And with that, let me turn it over to Dave for the financial review.

David Denton -- Chief Financial Officer and Executive Vice President

Excluding these non-GAAP items, we remain well on our way to our target of 35% by the end of 2018. During the third quarter, we repurchased approximately five million shares for $400 million. Year-to-date, we repurchased approximately 55 million shares for approximately $4.4 billion, or $78.68 per share. For the full year, our guidance includes the completion of $5 billion of share repurchases, reflecting an increase of approximately 11% versus last year.

So again, between dividends and share repurchases, we've returned nearly $6 billion to our shareholders in the first 9 months of 2017, and we expect to return more than $7 billion for the full year once the repurchases are complete. As Larry mentioned, we have generated nearly $7 billion of free cash in the first 9 months of the year. The strong year-to-date performance is abnormally high due to the buildup of a payable for CMS associated with the current Medicare Part D plan year as well as the timing of receipts. In Q4, we are expecting negative free cash flow for the first time in a long time as we plan to settle the CMS payable associated with the 2016 plan year that was built up last year.

Given this, we are maintaining our prior guidance for the full year and continue to expect to produce free cash up between $6 billion and $6.4 billion in 2017. Now turning to the income statement. We delivered adjusted earnings per share of $1.50 per share at the high end of our guidance range. These results are on a comparable basis and the reconciliation of GAAP to adjusted earnings per share can be found in the press release as well as in the Investor Relations portion of our website.

As Larry noted, the PBM segment delivered profit within our expectations while the Retail/Long-Term Care segment's profit declined more than expected, primarily driven by the effects of the recent hurricanes. Excluding the impact of the hurricanes, Retail/Long-Term Care's profit was within our expectations. Our effective tax rate beat our forecast, allowing us to deliver adjusted earnings per share at the high end of our guidance. GAAP diluted EPS was $1.26 per share, above our expectations, with the negative impact of the hurricanes, offset by the lower-than-expected loss on the settlement of the defined benefit pension plan as well as the better tax rate.

Let me quickly walk down the P&L to provide some additional color. On a consolidated basis, revenues in the third quarter increased 3.5% to $46.2 billion. In the PBM segment, revenues increased 8.1% to $32.9 billion. PBM growth in the quarter was 40 basis points below the low end of guidance range.

This is primarily driven by lower-than-expected volumes. The year-over-year growth was driven largely by increases in the pharmacy network claims, brand inflation, and growth in specialty pharmacy. Partially offsetting this growth was approximate 100 basis point increase in our generic dispensing rate versus the same quarter of LY to 87%. In our Retail/Long-Term Care business, revenues decreased 2.7% in the quarter to $19.6 billion, beating our expectations.

This was driven primarily by stronger-than-expected pharmacy same-store sales and script growth despite the network changes we've been discussing. Retail/Long-Term Care's generic dispensing rate increased approximately 140 basis points to 87.2%. Turning to gross profit. Gross margin, operating expenses, operating profit and the tax rate, the numbers that I'll cite reflect non-GAAP adjustments in both current and prior periods when applicable, which have been reconciled on our website.

Keep in mind that our guidance for the third quarter also reflected these adjustments. This consolidated company gross margin was 15.4% in the quarter, a contraction of approximately 135 basis points compared to Q3 of '16. In addition to each segment's performance, the decline is to due in part to a mixed shift in our business as the lower-margin PBM business continues to grow faster than our Retail/Long-Term Care business. Gross profit dollars decreased 4.9% versus the same quarter of last year, primarily due to the loss of scripts in the Retail/Long-Term Care segment from the network changes we have previously discussed as well as the continued pricing reimbursement pressures across the enterprise.

Within the PBM segment, gross margin declined 90 basis points from Q3 of '16 to 5%. This was primarily driven by the ongoing timing of profits within Medicare Part D operations as members work through their benefits more slowly this year versus last year. This was primarily offset by the improvement in GDR as well as sable purchasing economics. Gross profit dollars were down 8.4%, also primarily due to the shift in the timing of Medicare Part D profits into the fourth quarter.

Gross margin in the Retail/Long-Term Care segment was 29%, down approximately 25 basis points from last year. The decline in gross margin rate was primarily driven by lower reimbursement rates that continue to pressure pharmacy margins. This pressure was partially offset by an increasing generic dispensing rate as well as the increased front store margin that Larry mentioned earlier. Gross profit dollars decreased 3.6% year-over-year, mainly due to the loss of scripts from the network changes as well as the continued reimbursement pressures.

Consolidated operating expenses as a percent of revenues improved approximately 35 basis points to 10% compared to Q3 of '16, primarily driven by expense leverage from the PBM's growth of revenues during the quarter. We saw consolidated operating profit decline, which was consistent with our expectations. Operating margin for the total enterprise declined by 105 basis points in the quarter to 5.4%. Operating margin at PBM declined approximately 70 basis points to 4.1% while operating margin and Retail/Long-Term Care declined by approximately 110 basis points to 8% on an adjusted basis.

For the quarter, operating profit for the PBM was within expectations while operating profit for Retail/LongTerm Care was less than expected. The PBM segment posted an operating profit decline of 7.2%, reflecting the shift in Medicare Part D profits to Q4 of this year compared to '16. If the Medicare PDP business was excluded from all periods, PBM year-over-year growth in Q3 was more in line with the growth that we saw in Q2 as I've mentioned last quarter. And we expect a similar cadence in Q4.

The Retail/Long-Term Care segment posted an operating profit decline of 14.3%, which includes the impact of the recent hurricanes. Excluding the hurricane costs, the operating profit decline for Retail/LongTerm Care would have been within our expectations. Now going below the line of the consolidated income statement, net interest expense in the quarter decreased approximately $8 million from last year to $245 million, due primarily to paying down debt in the fourth quarter of '16 and a lower average interest rate on the debt that remains outstanding. Our effective tax rate in the quarter was 37.9%, which was better than expected.

This was driven in part by the delta between our estimates of the discrete tax benefits we'd see from share-based payment accounting and what we actually experienced during the quarter. As we discussed in prior earnings call, the increased tax rate volatility is caused by changes in both share price and the discretionary actions employees they can exercise vested options. Our weighted average share count was just over 1 billion shares, in line with our expectations. So with that, let me now turn to our 2017 guidance, and I'll start with our revised guidance for this year.

We currently expect to achieve adjusted EPS for 2017 of $5.87 to $5.91, reflecting year-over-year growth of 0.5% to up 1.25%, while narrowing the previous range of $5.83 to $5.93, we've also raised the midpoint by $0.01 per share. This takes into account the third quarter results at the top of expectations despite the impact of the hurricanes as well as favorability in the tax rate for the remainder of this year. GAAP diluted EPS from continuing operations is expected to be in the range of $4.98 to $5.02 and includes the lower than anticipated defined-benefit pension plan settlements. You can find a reconciliation of GAAP to adjusted EPS in our press release and on the Investor Relations portion of our website.

Now with only a few months left in the year, we are updating our revenue and operating profit guidance to better reflect our current expectations. In the PBM segment, we are lowering the top end of the revenue guidance to a range of 8% to 8.5%, reflecting lower drug price inflation and slightly lower claims growth of 1.77 billion to 1.79 billion claims. In the Retail/Long-Term Care segment, we are narrowing and raising guidance for revenues due to higher script volume expectations. We now expect Retail/Long-Term Care revenues to decline 2.25% to 2.75%, total comps to decline 2.75% to 3.25% and script comps of flat to up 0.25%.

These changes result in a narrowing of our consolidated net revenue growth range to 3.25% to 3.75%. Turning to operating profit. We are narrowing the PBM's operating profit guidance range to 6% to 6.5%, to better reflect current volume expectations and changes in the drug mix. We are lowering the Retail/ Long-Term Care operating profit guidance range to down 9.5% to 10.25% to reflect the impact of the hurricanes.

Taking these changes into account, we'd lower the top end of the consolidated operating profit guidance range and now expect operating profit to decrease 5% to 5.75%. This change in operating profit was offset by the improved outlook on the effective tax rate for the full year '17, allowing us to take the midpoint of our adjusted EPS range up by $0.01. Before moving to the fourth quarter guidance, let me quickly remind you of the timing factor affecting Q3/Q4 profit cadence. In '17, we are seeing Medicare Part D members move more slowly through their benefits that we did in 2016.

As I said earlier, this negatively affected Q3 profitability in '17, we expect it to positively affect Q4. So on the fourth quarter, excluding certain non-GAAP items described on our website, we expect adjusted earnings per share to be in the range of $1.88 to $1.92, up 10% to 12.5% from Q4 of '16. GAAP diluted EPS from continuing operations is expected to be in the range of $1.75 per share to $1.79 per share. You can find the details of guidance in the slides that we posted online before this call, but let me take a moment to point out a few items.

For the fourth quarter, we expect enterprise revenues to be up 2.5% to 4.25%, driven primarily by PBM growth. Total same-store sales at retail are expected to be down 1% to 2.75%, and adjusted script comps are expected to increase by 1% to 2%. Additionally, enterprise operating profit is expected to grow by 5.75% to 8%, again, driven primarily by PBM growth and the shift in timing of Medicare Part D profitability. And as Mike said, we'll provide 2018 guidance at our Analyst Day in December.

Our results in the third quarter and our expectations for the remainder of this year are evidence of our ability to execute on the plans that we've provided earlier this year. We are committed to returning to healthy earnings growth and continuing to drive shareholder value. The steps we have taken over the past year position as well for the opportunities that lie ahead in the healthcare marketplace. We continue to work diligently toward the long-term targets that we provided at last year's Analyst Day.

And with that, I will now turn it back over to Larry Merlo.

Larry Merlo -- Chief Executive Officer and President

Okay. Thanks, Dave, and before we move into the Q&A, I do want to spend a few minutes talking about the evolving consumer expectations and what that may mean in being a convenient and affordable pharmacy destination. We have always been focused on making pharmacy and everyday healthcare better for patients. It has been and continues to be, for us, point of differentiation.

At the same time, we know there's more to be done. In terms of convenience, consumers want their medications on their schedules, and we've built a comprehensive network to serve those patients with a combination of 9,700 retail pharmacies in local communities all across the country and sophisticated mail order facilities. All of this powered by more than 30,000 clinical professionals. Our mail order services provide a convenience that meets the needs of certain patients on maintenance medications.

However, some patients prefer to get their medications immediately. And for this group, there's no faster way than by walking into a CVS Pharmacy. Our pharmacists are readily available to provide counseling, answer questions and get a prescription in a patient's hands in 15 minutes. It's also important to remember that 1 in 5 prescriptions have some type of clinical intervention that requires pharmacists' involvement.

And with that in mind, despite the complexity and variation of regulations across all states, we built streamline connections, utilizing both people and technology with insurance companies, PBMs and providers to significantly and safely reduce the amount of time consumers have to wait for these issues to be resolved. But there are also those with an immediate need who are unable to make it to a CVS, either because of time, transportation or mobility issues. And today, we are announcing that starting next year, we will bring the pharmacy to our patients' doorsteps, with nationwide next-day delivery from our stores. And in select metro areas, we will even offer same-day delivery.

Additionally, we're also announcing that will offer free same-day delivery for pharmacy and a curated selection of front store products in Manhattan starting on December 4. And with nearly 70% of the U.S. population living within 3 miles of one of our stores, CVS Pharmacy is the most convenient choice for delivery to your doorstep. We also recognize that medication costs are a concern for all patients.

And it's important to know that more than 50% of the prescriptions we fill in our stores cost patients $4 or less. And 75% of those prescriptions cost patients $10 or less. We use our deep connections with PBMs and insurance providers to help patients maximize their insurance benefit using our clinical expertise to find the lowest-cost, therapeutically equivalent option on their plans. And we are investing in tools to make it easier for patients to navigate the confusing healthcare market and improve the understanding of their benefit designs.

And we apply manufacturer coupons to help further reduce the cost. On average, our patients are realizing $55 in savings on each prescription that is coupon-eligible. In addition, we aggressively source generic alternatives for consumers and use our scale to make care more affordable as we did with Adrenaclick, a lower-cost alternative to EpiPen. We also continue to invest in our digital properties, including our highly rated retail mobile app.

It helps patients manage when and how they want to receive their medications, set reminders and manage medications for their families all in one place. And to-date, the CVS Pharmacy app has been downloaded more than 21 million times. At the same time, we currently have 50 million people enrolled in our text message program, which enables them to easily refill their prescriptions through their mobile devices, and it's as simple as typing yes when prompted. So I think you can see, we have a solid foundation that's been built on compelling scale, unsurpassed reach and extensive pharmacy expertise.

And we have a plan for how to do even more to make pharmacy an everyday healthcare even better. And we look forward to sharing this in more detail with you at our December 12 Analyst Day. So with that, let's go ahead and open it up for your questions.

Questions and Answers

Operator

Thank you. Ladies and gentlemen if you like to register a question please press the 1 followed by the 4 on your telephone. You'll hear a three tone prompt to acknowledge a request. If your question has been asked by another and you'd like to withdraw your registration, you may press the 1 followed by the 3.

If using a speakerphone, please lift our handset before entering your request. Once again, press the 1 followed by the 4 on your telephone to register a question. Our first question comes from the line of Mohan Naidu with Oppenheimer. Please proceed.

Mohan Naidu -- Oppenheimer -- Analyst

Thanks for taking my question. Larry, can you comment a little bit on what do you think of vertical integration to leverage your physical store location, it can possibly influence the plan design in such a way that you can actually use the stores to deliver more care? Thanks.

Larry Merlo -- Chief Executive Officer and President

Yes, Mohan, we have always been very thoughtful in terms of how we can improve access, OK, and at the same time, ensure that the care that we're providing meets our quality standards. And you put those two together, it results in improving outcomes and lowering cost. And I think we've demonstrated capabilities of doing that, whether it's the rolled it MinuteClinic place or the rolled it home infusion place. And it's something that we continue to evaluate and something that's always on our radar screen for evaluating and deciding what's next.

Mohan Naidu -- Oppenheimer -- Analyst

Just to follow up on that, around the MinuteClinic, do you have an immediate plant to add more services than what you do right now? Thanks.

Larry Merlo -- Chief Executive Officer and President

Yes, Mohan. We have been -- I think you've seen over the last couple of years where we have added services. And we have in partnership with some of the health system affiliations that we have, we have begun to triage patients, where we are actively managing patients who have been diagnosed with some type of chronic care condition in an effort to ensure that they're following the regimens of care, in an effort to keep them healthy.

Mohan Naidu -- Oppenheimer -- Analyst

Thanks, Larry.

Larry Merlo -- Chief Executive Officer and President

Thank you.

Operator

Thank you. Our next question comes from a line of George Hill with RBC. Please proceed.

George Hill -- RBC -- Analyst

Good morning. Thank you, guys, for taking my question. I'm going to follow up on Mohan's question, Larry, a little bit, and there's obviously been a lot of talk about vertical integration. Can you talk about what you've seen in your non-pharmacy businesses as it relates to beneficiaries where you partner with payers? I'm sure you see the information for people who walk into MinuteClinics or who use the home infusion business.

I guess, from plans that you are more tightly aligned with, for systems that you are less tightly aligned with, and I guess, there's a lot of us sitting here and thinking about the vertical integration stories that played out in the market. I guess, can you just walk through how you've seen in between -- different partnerships and different segments in the book of business, how much the beneficiaries storage capability kind of enhances the offering?

Larry Merlo -- Chief Executive Officer and President

Well, George, listen, I'll start, and I'm sure others will jump in. But when you refer to storage, we think about the role that plan design plays, OK? If you look at MinuteClinic as an example, that's an offering that's available to our PBM clients, OK? And there are many examples out there whereas you look at the overall healthcare costs adjusted for age and health status, you see overall healthcare savings anywhere from 8% to 12% lower. And in some respects, it's a simple as some of those, some of the treatment and visits migrating out of the emergency room and into the retail clinics. I think one of the other elements that we focus on is how the site of care becomes a variable, OK, recognizing that there's a cost delta when you look at where that care is being administered.

So if you jump over to infusion, we know that providing that care in the home versus in ambulatory infusion site or perhaps in outpatient segment of the hospital, there is a pretty dramatic cost differential there. And so I think we have been able to demonstrate that our local presence, the fact that, that can lead to direct engagement with customers and patients and as a result, produce better outcomes at a reduced cost.

David Denton -- Chief Financial Officer and Executive Vice President

George, it's Dave. I'll just add to that. If you think about moving members into one of our channels because we touch many elements of healthcare given all the assets that we have, when those members move in our channel, typically, what we have been able to prove quantitatively is we deliver better outcomes in totality to those members. So there's an incentive to do that, number one, just from an outcomes perspective.

And then secondly, it's not always about care delivery in the MinuteClinic, it's really about patient engagement to the degree that we engage with those patients, we can educate them of where is the best site of care or how best can they engage in the healthcare system at the most cost-effective point of entry. I think those 2 components, really, demonstrate our ability to improve outcomes and engage with that member to advance their journey on improving their healthcare.

Jon Roberts -- Chief Operating Officer and Executive Vice President

Hey, George, this is Jon. The only other thing I would say is that we see our clients offering an X or a range of plan designs that allow us to move patients into our channel. So one can simply be access to the patient where we explained to them that they don't need to get to hospital for infusion, but they can actually get it done at home, and so we see a lot of patients not even realizing they can do that, so that becomes an incentive. We see plans creating incentives to move them into one of our channels, which is, Larry talked about that with MinuteClinic and the reduction of copays.

And finally, there's the actual narrowing of the network so we can see for both quorum and some of our other assets.

George Hill -- RBC -- Analyst

That's super helpful. And I guess, from a quick follow-up, Larry or Dave. I guess we're scratching our head a little bit on the macro Rx. If you guys are trying to pick one drive that is attributed to it, is it benefit design, is it copay design, is it payer mix, are you seeing a tick in abandonment? Just intrigue like volumes across the phase continuum would be pretty helpful.

Larry Merlo -- Chief Executive Officer and President

Yes, George, we're not seeing anything that would tell us that patients are not taking their prescriptions as prescribed. And I mean I think if you look in the quarter, we've talked a little bit about the hurricanes, and I think that was tremendously disruptive, OK, because you see boluses of activity leading up. During the peak periods, you see -- you certainly see some unevenness in volume. And I would say that as you look at the say, the scripts, people are getting their flu shots, but we're certainly not seeing any incidence of the cold and flu season at this point in time.

So that may be contributing a little bit to some of what we're seeing currently.

George Hill -- RBC -- Analyst

Appreciate the color, thanks.

Larry Merlo -- Chief Executive Officer and President

Thanks.

Operator

Thank you. Our next question comes from the line of Charles Rhyee with Cowen and Company. Please proceed.

James Auh -- Cowen & Co. -- Analyst

Hi, this is James Auh for Charles, you know it seems our sales this quarter were better than expected despite the hurricane. Can you give some insight into what drove that performance?

David Denton -- Chief Financial Officer and Executive Vice President

Hey, James, this is Dave. I think what we continue to do is I'll say rationalize our promotional spend kind of across the channel. And I think what's important as you look at same-store sales is probably more important to look at the gross profit yield on those. You're seeing our gross profit certainly in the front continue to improve on a sequential basis and a year-over-year basis, and that's really the focus that we have.

I would say, we were slightly better than expected, but I don't think our performance was kind of out of line, any major respects.

James Auh -- Cowen & Co. -- Analyst

Okay, great. And also, it seems like the uptake on the PBM side for Part Ds more in 4Q compared to last year. Could you just explain why the shift in compared to last year?

David Denton -- Chief Financial Officer and Executive Vice President

Yes. So mostly this is driven by the rate of beneficiaries using their Medicare Part D policy. And so they're moving through that benefit this year more slowly than what they move through last year. And as you know, as the insurance company hits certain reinsurers corridors, the insurance company, either earns I'll say higher profits during that period or actually can even be in a loss position during the timing.

Given that cadence of beneficiary utilization, profits this year are being shifted out of Q3 and into Q4. And so we have very good line of sight to that.

Jon Roberts -- Chief Operating Officer and Executive Vice President

And this is Jon. Just to add a couple of more specifics. So additional coverage limits was raised this year by $400 million so that means members got to the donut hole a little slower and then we're seeing less inflation. I think those two factors are exactly what's causing what Dave explained.

James Auh -- Cowen & Co. -- Analyst

Okay, great. Thank you.

Larry Merlo -- Chief Executive Officer and President

Thank you.

Operator

Thank you. Our next question comes from a line of Lisa Gill with JPMorgan please proceed.

Lisa Gill -- JPMorgan Chase -- Analyst

Thanks and good morning. Larry, I just want to talk about the business model, and listening to what you had to say earlier being paid for better outcomes, Dave talking about patient engagement, education getting paid around that. How do you get paid? I mean, do you have to own the vertical integration to truly be paid for that? Or do you see a shift in the model where you start to take more risk like you do with other risk products where the dollar amount that you're paid is based on some outcomes? Or your pharmacist is getting paid for that incremental patient engagement? Or is it just simply, the scripts versus the MinuteClinic visits?

Larry Merlo -- Chief Executive Officer and President

Well, Lisa, it's Larry. Listen, when you think about our business model, you think about the fact that we have over several years now, we've assembled a series of assets that create countless touch points with which we can engage with the patient, with the consumer in an effort not just improve access to care, but create better outcomes. And in doing so, reduce costs. So from an economics point of view, if we're not providing that fulfillment, then there's not an opportunity to do those other things.

So we benefit from that share of going through one of our distribution channels. I think you've heard us begin to talk about the next evolution of that taking element of risk. And Jon can touch on the Transform Care programs, which we are in the process of marketing at least beginning with diabetes and going from there.

Lisa Gill -- JPMorgan Chase -- Analyst

Okay, that's helpful. And then just as a follow-up. Larry, your comment around CVS heal value proposition sounds like it's really geared toward all of the talk around Amazon and why CVS is well positioned even in the face of potentially Amazon coming into this market. Is there anything that you think you could do better? Or how do you think about the Amazon's threat as it pertains to CVS?

Larry Merlo -- Chief Executive Officer and President

Well, Lisa, listen, I'll start and maybe I'll ask Helena jump in well. In our organization and in our culture, we're never done, OK? So we're always listening to our customers. And I think being good listeners help us understand where they have friction points that we need to work to eliminate. So we think we do a good job.

We think we've got a lot of ways in which we can serve the customer, and we're always looking for ways in which we can do that better.

Helena Foulkes -- Executive Vice President, CVS Health and President, CVS Pharmacy

I would agree. I think, Lisa, what we spend a lot of time talking about is serving the customer wherever, whenever and, however, she wants. And as Larry said earlier, getting a prescription in 15 minutes or less is super convenient, but we wanted to add on to that. And so that's why you see as announcing what we did today.

But we're also doing even more just to make the in-store experience grade, adding clinical programs, so we keep pushing ourselves very hard to sell the customer paying points.

Lisa Gill -- JPMorgan Chase -- Analyst

Great. Thanks so much.

Larry Merlo -- Chief Executive Officer and President

Thanks, Lisa

Operator

Thank you. Our next question comes from the line of Robert Jones with Goldman Sachs, Please proceed.

Bob Jones -- Goldman Sachs -- Analyst

Great. Thanks for the questions. I guess, just a follow-up on some of the announcements with the next day delivery for all products and same day for some. Is there anything you can share as far as what you would expect the potential impact to be from this -- from the same-store basis and how it might impact the front-end? I know it's early, but just curious if this -- you guys see this as potentially a needle mover on either of those brands.

And then any costs you would highlight that would be needed to accomplish these accelerated timelines?

Helena Foulkes -- Executive Vice President, CVS Health and President, CVS Pharmacy

Sure. Let me just start by saying that we have had 1,600 stores who's been doing home delivery for a long time. And part of what we did is we really looked at that experience and, said how do make it even better there. It's still fairly small there even in those stores, and I would say that's because ultimately, we think the best experience for the consumer is one where she can toggle back and forth and decide someday she wants to come into the stores and some days, you just can't get out of the house, and we need her to do it, we need to get those prescriptions to her.

So whether it's our drive-through locations, it's our curbside pickup, we've been actively involved with Instacart, which we're now delivering from 2,800 stores. We're pushing the envelope on basically serving the patient wherever she is. And so it's too soon to know exactly what the impact will be, but we do know it's this holistic experience that the consumer is looking for, and I think we've got a set of experiences that gives us confidence this is an addon to her holistic experience. In terms of the cost side of it, we do know that the cost per market can vary, but we've been able to use our scale to negotiate a low-cost competitive option that we think consumers will be willing to pay for, both in same and next-day delivery.

And we've been piloting, as I said, different options. We have a good sense for the U.S. price, but we'll also be looking at options where there will be free delivery with the purchase of some front store items. So we think it's that holistic review, again or wherever, whenever and, however, she wants.

Bob Jones -- Goldman Sachs -- Analyst

Got it. And I guess just a quick follow-up. In the last two years, you guys used 3Q as an opportunity to give a preliminary outlook for the following year. I think in both cases, it seemed that The Street maybe was a little bit of the initial guide came out.

This year, I'm assuming we'll have to wait till December for guidance. But could you share maybe the major swing factors that we should be thinking about as we look out into '18 on a year-over-year basis?

Larry Merlo -- Chief Executive Officer and President

Well, Bob, it's Larry. Maybe I'll start, and Dave will jump in. And Bob, just for our clarity, goal has always been to provide guidance for the following year in December at our Analyst Day. And as you heard from both Mike and Dave, that's what we'll be doing next month, and you shouldn't read anything into that.

In terms of what you would think about as, I'll say, headwinds, tailwinds for '18, I'll start with some of the tail work -- the tailwinds. A lot of the network arrangements that we've been talking about, that certainly will drive retail share next year. As you heard this morning, we've had another strong PBM selling season, and the enterprise streamlining initiative that we began earlier this year will be in year two, and the savings will outweigh the costs. On the headwinds side, we've talked -- we'll continue to see the reimbursement pricing pressures.

And I think when you think about what are the offsets to that, obviously, generic introductions play a role in that. And at least at this point in time, we see '18 contributing, but probably, to a lesser extent than what we've seen in the last couple of years.

Bob Jones -- Goldman Sachs -- Analyst

Great. Thanks for all that. Appreciate it.

Larry Merlo -- Chief Executive Officer and President

You bet.

Operator

Thank you. Our next question comes from The line of John Heinbockel with Guggenheim Securities. Please proceed.

John Heinbockel -- Guggenheim -- Analyst

So, Larry, I want to start with, you're obviously doing a lot of partnerships with competitors, maybe people yet you haven't partnered with in the past. Maybe talk a little bit what's changed the last year or two on you're doing it successfully, managing conflicts? And then are there natural limitations to working with those partners?

Larry Merlo -- Chief Executive Officer and President

Yes, John, listen, I think that we have -- the capabilities that we have created and the guiding principle of partnering with individuals or entities that as they grow, we grow, OK, I think that has helped to create a real partnership where we can create a win-win scenario with that most important win being the clients and customers that we serve, OK? And so we have, whether you're talking about health plans or we've got relationships with more than 70 health plans, and we've talked a lot about how in the Med D space, how we've created of great offering where SilverScript can be a competitor in the market, but we can also support the Med D products for other health plans and how we've seen in the market that through that relationship, they're growing faster than the overall market. And I think the opportunities that we continue to see for innovation, I think gives us the comfort level that even on the retail side, we can partner with, as you pointed out, within a differentiated way from perhaps how we thought about that in the past. So I think we're pleased with the capabilities that we're able to offer and the value that, that can create in the marketplace.

John Heinbockel -- Guggenheim -- Analyst

Just as a follow-up, one of those partnerships to a degree, I guess, is this performance preferred plan with Walgreens. Where do you think that specific plan goes and more offering like that go? Because I think you probably agree that the two of you are probably the lowest cost providers out there. So is this a way to get maybe one of the lowest-cost networks in the market?

Larry Merlo -- Chief Executive Officer and President

Well, John, let me start, and then I'll flip it over to Jon. I mean, you've heard us say for a while now that the market has been focused on network constructs with CVS or Walgreens, pick one, OK? And we've been talking about as healthcare migrates to more value-based care or outcomes that the market may not be thinking about it in the right way that the networks are not going to be based simply on unit cost, they're going to be based on unit cost and the ability to affect outcomes through clinical performance measures. So at the end of the day, that's what this network is all about.

Jon Roberts -- Chief Operating Officer and Executive Vice President

And John, this is Jon. If you just think about diabetes, and we have all the pharmacies that are serving clients diabetic numbers, working on adherence and if they can lower the A1C by 1%, that actually saves $5,800 over the course of the year. So the power of being able to lower overall help your cost I think really has been underappreciated by the market. And so yes, this network with -- what we're calling high-performance network with CVS, Walgreens and independents does deliver unit cost savings.

But I think even more importantly, it delivers clinical outcomes. And part of the reimbursement to these pharmacies won't be based on their ability to deliver clinical outcomes, so we selected providers that we believe have the best capability. And as I go out in the market talking to clients, we have not seen as much penetration in narrow networks as we historically have seen because it was historically unit cost savings. But as we add this clinical component, we're seeing much more interest in moving down this path.

John Heinbockel -- Guggenheim -- Analyst

Thank you.

Operator

Thank you. Our next question comes from the line of Eric Percher with Nephron Research. Please proceed.

Eric Percher -- Nephron Research -- Analyst

Thank you. So maybe combining those questions around partnership and profit, it seems very clear that the relationships you've created have come based on clinical outcomes in part and that also we've seen change in market pricing and there's ability to deliver lower cost. How should we think about the impact next year? You spoke about reimbursement. Is there a change in the way that you've looked at the returns required in order to enter these contracts and any type of material impacts for '18 or even looking out further, what's the balance between partnership and profit?

David Denton -- Chief Financial Officer and Executive Vice President

Yes, Eric, it's Dave. We can't give you a ton of color at this point in time, I'll be certain we'll discuss it at Analyst Day. I will say that our -- conceptually, intellectually, how we thought about this does not change Obviously, we underwrite each one of these -- I'll say underwrite we've looked financially at each one of these relationships to make sure that is both good for the client, good for the member and good for us, both short-term and long-term. So I think our approach to this is pretty disciplined.

Eric Percher -- Nephron Research -- Analyst

Thank you.

Operator

Thank you. Our next question comes from the line of Alvin Concepcion with Citi. Please proceed

Alvin Concepcion -- Citigroup -- Analyst

Thanks for taking my question. Generally, could you -- just wondering if you could reach your vision of improving outcomes, creating holistic experience, driving share to your distribution channels. Can you do that with your current business? I know you've been doing more partnerships to improve those, But down the road, is it becoming harder to win-win scenario as there's more in coach in your PBM business, for example? And with that backdrop, do you view M&A as more of a necessity to accelerate that vision?

David Denton -- Chief Financial Officer and Executive Vice President

Hey, Alvin, this is Dave. I think our business model -- as we think about how it stands today when I think about the evolving marketplace and landscape, I think we're very nicely positioned here. The assets that we've assembled, really, engage members and lower cost and provides a really a robust access point into healthcare, and I think if you look for the next 3, 5, 10 years, those elements are really critical. So we do like our business model.

M&A, and continuing to supplement our business model, has always been at the core of our business, and we will continue to do that as we think -- going forward.

Alvin Concepcion -- Citigroup -- Analyst

Thank you.

Operator

Thank you. Our next question comes from the line of Ricky Goldwasser with Morgan Stanley. Please proceed.

Ricky Goldwasser -- Morgan Stanley -- Analyst

Yes. Hi, can you hear me?

Larry Merlo -- Chief Executive Officer and President

We can hear you. Good morning.

Ricky Goldwasser -- Morgan Stanley -- Analyst

Great. Good morning we have a new phone system here. Thank you, folks, for all the commentary. One follow up on the -- just the Amazon question.

I mean, you've talked about the steps you're taking on the retail side and really kind of bringing pharma to your doorstep. But how should we think about an Amazon initial entry to the drug supply side from a PBM perspective? If you can just talk about kind of how you think about including an Amazon and PBM networks or potentially kind of like partnering with them, get a lot of questions on this topic.

Larry Merlo -- Chief Executive Officer and President

Well, Ricky, it's Larry. When you look -- when you think about it partnering, you sit here, and you ask the question if somebody is able to do something that perhaps doesn't exist in the marketplace, we're certainly open to understanding and working with them in that regard. I think that you've heard this morning from us and quite frankly, from others in terms of some of the -- whether you're talking about capabilities or some of the challenges to entry that we're sitting here saying there's a lot that we're doing today and there's more that can be done, OK? So you would never close the door on any type of partnership, but you have to look at what those capabilities may bring that are being met in the marketplace today.

Ricky Goldwasser -- Morgan Stanley -- Analyst

Okay. And then a follow-up on what you're seeing for the 2018-19 selling season just in terms of opportunities and mix between kind of like health plan, commercial and government.

David Denton -- Chief Financial Officer and Executive Vice President

Hey, Ricky, this is Dave. It's probably something that we'll cover in more depth at Analyst Day. So I'm going to ask you to hold that question until then, we'll go through that in some detail.

Ricky Goldwasser -- Morgan Stanley -- Analyst

Okay. Thank you.

David Denton -- Chief Financial Officer and Executive Vice President

Thank you.

Operator

Thank you. Our next question comes from one of Kevin Caliendo with Needham & Company. Please proceed.

Kevin Callendo -- Needham & Co. -- Analyst

Hi, guys. Thanks for taking my question. I know it's preliminary, but have you done any sort of analysis on the initial Republican tax plan and how it might impact CVS in the future?

Larry Merlo -- Chief Executive Officer and President

Well, Kevin, it's Larry. We've talked a lot about tax, and the fact that our effective tax rate is over 39% or around there, OK, that any type of meaningful comprehensive reform should be beneficial to our business. And we've got our folks going through the house version that was released last week. And listen, they'll be a lot more to say about that in the coming days and weeks as it goes through ways and means and then decides when.

David Denton -- Chief Financial Officer and Executive Vice President

I just think that at the end of the day, given our profile from being a really high taxpayer that most scenarios will have us benefiting at the end of the day.

Kevin Callendo -- Needham & Co. -- Analyst

Understood that CVS is clearly positioned to be one of the beneficiaries. Just looking at some of the things that they're talking about in terms of deductions may be less so on interest and depreciation and more so on CapEx. Is that in any way looking at that, would you potentially change business practices or are there ways to work through this might be even more beneficial versus what the company is doing now?

David Denton -- Chief Financial Officer and Executive Vice President

It's probably too early to tell on that. I will say though that to the degree that we have relief, there's a lot of investments that we think we can make within our business model that can more rapidly expand our business model across the country and deliver better care and higher quality and lower costs. So we would look to take the benefit of that and invest it clearly.

Kevin Callendo -- Needham & Co. -- Analyst

Great. Thanks, guys.

David Denton -- Chief Financial Officer and Executive Vice President

You're welcome.

Larry Merlo -- Chief Executive Officer and President

We'll go ahead and take two more questions.

Operator

Okay. Thank you, our next question comes from the line of Scott Mushkin with Wolfe Research. Please proceed.

Scott Mushkin -- Wolfe Research -- Analyst

Hey, guys. Lot has been asked. I just have kind of odd demands so I'm trying to fire them off here a little bit. The partially reserved receivable, the relinquishment of that.

Dave, what was that? Was that one time on the cost side?

David Denton -- Chief Financial Officer and Executive Vice President

Yes, it is one time. It's one of our states has a receivable that was essentially factored, think about that.

Scott Mushkin -- Wolfe Research -- Analyst

Okay, there's one time gain in the third quarter?

David Denton -- Chief Financial Officer and Executive Vice President

It is, it is.

Scott Mushkin -- Wolfe Research -- Analyst

Okay. And then I know, I think this is kind of a combination question here, so the clinics, you guys have been really adding that many and I think the growth rate was at 0.7%. So I wonder if you can give us any some thoughts there on what's going on. I know it's pretty small part of the business but there's been talk about vertical integration on the call.

And then the last one is your comfort level regarding leverage, and then I'll yield.

David Denton -- Chief Financial Officer and Executive Vice President

Yes. Hey, Scott, it's Dave. A couple of things. One is from a clinic perspective, we took a somewhat costs on expanded clinics geographically only really due to 2 things.

One is we wanted to make sure that we have the epic system fully up and running across our enterprise. We've done that. And two, as we purchase within the clinic's target premises, we want to make sure the target locations, we want to make sure that we fully integrated from that perspective. We'll get back on the growth trajectory going forward, there's no doubt about that.

And then from a leverage perspective, as you know, at this point in time, our balance sheet and our ratings are very important to us, we've been very focused on that. We've been very committed to managing that. At the moment, we're a bit, I'll say, over leverage in a sense of our target at 2.7x, we hover around 3. Our objective, obviously, is to begin to deliver over time, we'll grow our way out of that over the next several periods.

Scott Mushkin -- Wolfe Research -- Analyst

Will you ever do a deal that made you subject to a downgrade?

David Denton -- Chief Financial Officer and Executive Vice President

Besides really big speculatory kind of question, we would make the right investments in our business model to do what's best for us long-term. And we would evaluate it on each transaction point at a time.

Scott Mushkin -- Wolfe Research -- Analyst

And then the size of that one time charge, and then I'll definitely yield.

David Denton -- Chief Financial Officer and Executive Vice President

It's immaterial.

Scott Mushkin -- Wolfe Research -- Analyst

Perfect. Thank you.

Operator

Thank you. Our last question comes from the line of Priya Ohri-Gupta with Barclays. Please proceed.

Priya Ohri-Gupta -- Barclays -- Analyst

Thank you so much for squeezing me in. I guess, Dave, picking out on the last question a little bit. In the past, you talked about how important that the high BBB rating is in the context of your [indiscernible] market as well as the commercial paper market. If you were to think just more strategically around the flexibility you have within the BBB spectrum, would there be a willingness to trade off say Tier two commercial paper access for a short time as they gave you sort of greater access in the long term markets?

David Denton -- Chief Financial Officer and Executive Vice President

Yes. We're not focused on that, Priya. We're focused on maintaining our high BBB rating, and that's consistent with our leverage targets that we've established in two, seven. That's not what we're focusing as of this point.

Priya Ohri-Gupta -- Barclays -- Analyst

Okay. And then just a quick follow-up. Can you talk about how you've been funding your sale-leasebacks because it looks like you've been absent from the one 44 A market for a little bit. Have you been primarily using the private market?

David Denton -- Chief Financial Officer and Executive Vice President

We have -- we've been a little low on the sale-leaseback offering at this point in time. Keep in mind that with the Target pharmacy acquisition, we kind of scale back, if you will, our organic store development program just to tag. So because of that business decision, the sale-leaseback offerings has been relatively anemic.

Priya Ohri-Gupta -- Barclays -- Analyst

Thank you so much.

David Denton -- Chief Financial Officer and Executive Vice President

You're welcome

Larry Merlo -- Chief Executive Officer and President

Okay. So just wrapping up. We appreciate everybody's time. I'll break early on a Monday morning.

And if anyone has any follow-up items, Mike McGuire is available for that as well. So thanks, everyone, and we'll see you next month.

And ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.

Duration: 87 minutes

Call Participants:

Mike McGuire -- Senior Vice President, Investor Relations

Larry Merlo -- Chief Executive Officer and President

David Denton -- Chief Financial Officer and Executive Vice President

Mohan Naidu -- Oppenheimer -- Analyst

George Hill -- RBC -- Analyst

Jon Roberts -- Chief Operating Officer and Executive Vice President

James Auh -- Cowen & Co. -- Analyst

Lisa Gill -- JPMorgan Chase -- Analyst

Helena Foulkes -- Executive Vice President, CVS Health and President, CVS Pharmacy

Bob Jones -- Goldman Sachs -- Analyst

John Heinbockel -- Guggenheim -- Analyst

Eric Percher -- Nephron Research -- Analyst

Alvin Concepcion -- Citigroup -- Analyst

Ricky Goldwasser -- Morgan Stanley -- Analyst

Kevin Calliendo -- Needham & Co. -- Analyst

Scott Mushkin -- Wolfe Research -- Analyst

Priya Ohri-Gupta -- Barclays -- Analyst

More CVS analysis

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.