CVS Health (CVS) 10-K risk factor changes: FY2019 vs FY2018

You should carefully consider each of the following risks and uncertainties and all of the other information set forth in this [removed: Annual Report on] Form 10-K.

These risks and uncertainties and other factors may affect forward-looking statements, including those we make in this [removed: Annual Report on] Form 10-K or elsewhere, such as in news releases or investor or analyst calls, meetings or [removed: presentations.][added: presentations, on our websites or through our social media channels.]

If any of the following risks or uncertainties develops into actual events or if the circumstances described in the risks or uncertainties occur or continue to occur, [removed: these] [added: those] events or circumstances could have a material adverse effect on our businesses, [removed: results of operations,] [added: operating results,] cash [removed: flows and/or] [added: flows,] financial [removed: condition.][added: condition and/or stock price, among other effects on us.]

You should read the following section in conjunction with [removed: “Management’s Discussion and Analysis] [added: the MD&A, included in Item 7] of [removed: Financial Condition] [added: this Form 10-K, our consolidated financial statements] and [removed: Results] [added: the related notes, included in Item 8] of [removed: Operations” (which includes] [added: this 10-K, and] our “Cautionary Statement Concerning Forward-Looking Statements” [removed: at the end of such section)] in [removed: the Annual Report, which is incorporated by reference herein, and our consolidated financial statements and the related notes.][added: this 10-K.]

[removed: Our brand and reputation are two of our most important assets; negative] [added: Negative] public perception of the industries in which we operate, or of our industries’ or our practices, can adversely affect our businesses, [removed: results of operations,] [added: operating results,] cash flows and [removed: prospects.][added: prospects.]

[removed: The industries in which we operate regularly are negatively perceived by the public and subject to negative publicity, including] [added: Negative publicity may come] as a result of adverse media coverage, litigation against us and other industry participants, the ongoing public debates over drug pricing, [added: PBMs,] government involvement in drug pricing and purchasing, [removed: PBMs and] the future of the ACA, [added: “surprise” medical bills,] governmental hearings and/or [removed: investigations and] [added: investigations,] actual or perceived shortfalls regarding our industries’ or our own products and/or business practices (including PBM operations, drug [removed: pricing,] [added: pricing and] insurance coverage [removed: determinations] [added: determinations)] and social media and other media relations [removed: activities).][added: activities.]

[removed: This risk may be increased as the federal government continues] [added: Further changes] to [removed: consider increased involvement in] [added: federal health care and related benefits laws, including the ACA,] drug [removed: reimbursement,] [added: reimbursement and] pricing [added: laws, laws governing PBMs] and/or [removed: purchasing and changes to the] laws [removed: and regulations] governing PBMs’, PDPs’ and/or Managed Medicaid organizations’ interactions with government funded health care programs, [removed: and as states seek to maintain, replace or repeal elements of the ACA such as Public Exchanges and Medicaid expansion within increasingly challenging budget constraints.][added: are probable.]

This risk [removed: also] may [removed: be increased] [added: increase] as we continue to offer products and services that make greater use of data and as our business model becomes more focused on delivering health care to consumers.

Negative public perception and/or publicity of our industries in general, or of us or our key vendors, brokers or product distribution networks in particular, can further increase our costs of doing business and adversely affect our [added: operating] results [removed: of operations] and our stock price by:

| • | [removed: Reducing] [added: reducing] or restricting the [removed: compensation] [added: revenue] we can receive for our products and/or services; and/or |

[removed: Data] [added: Data] governance failures can adversely affect our reputation, businesses and prospects.

We would be adversely affected if we or our business associates or other vendors fail to adequately protect members’, customers’ or other constituents’ sensitive [removed: information.][added: information.]

The use and disclosure of such information is regulated at the federal, state and international levels, and these laws, rules and regulations are subject to change and increased enforcement activity, such as the [added: California Consumer Privacy Act which went into effect January 1, 2020, the] EU’s GDPR which began to apply across the EU during 2018 and the audit program implemented by HHS under HIPAA.

International laws, rules and regulations governing the use and disclosure of such information are generally more stringent than [removed: in the United States,] [added: U.S. laws] and [added: regulations, and] they vary from jurisdiction to jurisdiction.

Noncompliance with any privacy or security laws or regulations, or any security breach, cyber-attack or cybersecurity breach, and any incident involving the theft, misappropriation, loss or other unauthorized disclosure of, or access to, sensitive or confidential [removed: member, customer] [added: customer, member] or other constituent information, whether by us, by one of our [added: business associates or] vendors or by another third party, could require us to expend significant resources to remediate any damage, [added: could] interrupt our operations and [removed: damage] [added: could adversely affect] our brand and reputation, [added: membership] and [removed: could] [added: operating results and] also [removed: result in investigations, regulatory] [added: could expose and/or has exposed us to mandatory disclosure to the media, litigation (including class action litigation), governmental investigations and] enforcement [removed: actions,] [added: proceedings,] material [removed: fines] [added: fines, penalties and/or remediation costs,] and [removed: penalties, loss of customers, litigation or other] [added: compensatory, special, punitive and statutory damages, consent orders, adverse] actions [added: against our licenses to do business and/or injunctive relief, any of] which could [removed: have a material adverse effect on] [added: adversely affect] our [removed: brand, reputation,] businesses, [removed: results of operations and] [added: operating results,] cash [removed: flows.][added: flows or financial condition.]

Our businesses depend on our [removed: customers’ and] [added: customers’,] members’ [added: and other constituents’] willingness to entrust us with their health related and other sensitive personal information.

Events that adversely affect that trust, including inadequate disclosure to our members or customers of our uses of their information, failing to keep our information technology systems and our [removed: members’, customers’] [added: customers’, members’] and other constituents’ sensitive information secure from significant attack, theft, damage, loss or unauthorized disclosure or access, whether as a result of our action or inaction [added: (including human error)] or that of our business associates, vendors or other third parties, could adversely affect our brand and reputation, membership and [added: operating] results [removed: of operations] and also [removed: can] [added: could expose] and/or has exposed us to mandatory disclosure to the media, litigation (including class action litigation), governmental investigations and enforcement proceedings, [added: material fines, penalties and/or remediation costs, and compensatory, special, punitive and statutory damages, consent orders, adverse actions against our licenses to do business and/or injunctive relief, any of which could adversely affect our businesses, operating results, cash flows or financial condition.]

Large scale data breaches at other entities increase the challenge we and our vendors face in maintaining the security of our information technology systems and [added: proprietary information and] of our customers’, members’ and other constituents’ sensitive information.

[removed: We] [added: We] face significant competition in attracting and retaining talented employees.

Further, managing succession for, and retention of, key executives is critical to our success, and our failure to do so could adversely affect our [added: businesses, operating results and/or] future [removed: performance.][added: performance.]

There is no guarantee we will be able to attract and retain such employees or that competition among potential employers will not result in increased [removed: salaries or other benefits.][added: compensation and/or benefits costs.]

If we are unable to retain existing employees or attract additional employees, or we experience an unexpected loss of leadership, we could experience a material adverse effect on our [removed: businesses and] [added: businesses, operating] results [removed: of operations.][added: and/or future performance.]

In addition, our failure to adequately plan for succession of senior management and other key management roles or the failure of key employees to successfully transition into new roles could have a material adverse effect on our [removed: businesses and] [added: businesses, operating] results [removed: of operations.][added: and/or future performance.]

[removed: We] [added: We] are subject to potential changes in public policy, laws and regulations, including reform of the [removed: United States] [added: U.S.] health care system, [removed: that] [added: which] can adversely affect [removed: the markets for] our [removed: products and services and our businesses, operations, results of operations, cash flows and prospects.][added: businesses.]

It is reasonably possible that our business operations and [added: operating] results [removed: of operations] could be materially adversely affected by legislative, regulatory and public policy changes at the federal or state level, increased government involvement in drug reimbursement, [removed: pricing] [added: pricing, purchasing] and/or [removed: purchasing,] [added: importation and/or] increased regulation of PBMs, [added: including:] changes to [removed: Medicare,] [added: the Medicare or] Medicaid [added: programs (including the block grant option outlined by CMS on January 30, 2020)] or the regulatory environment for health care [added: and related] benefits, including the [removed: ACA,] [added: ACA;] changes to [added: laws or regulations governing] drug reimbursement and/or [removed: pricing laws and regulations,] [added: pricing;] changes to the laws and regulations governing PBMs’, PDPs’ and/or Managed Medicaid organizations’ interactions with government funded health care [removed: programs,] [added: programs;] changes to [added: laws and/or regulations governing drug manufacturers’ rebates; changes to laws and/or regulations governing reimbursements paid to pharmacists by and/or reporting required by PBMs; changes to] immigration policies and/or [removed: many] other public policy initiatives.

It is not possible to predict whether or when any such changes will occur or what form any such changes may take (including through the use of [removed: United States] [added: U.S.] Presidential Executive Orders).

Other significant changes to health care [added: and related benefits] system legislation or regulation as well as changes with respect to tax and trade policies, tariffs and other government regulations affecting trade between the United States and other countries [removed: are] also [added: are] possible and could adversely affect [removed: us.][added: our businesses.]

If we fail to respond adequately to such changes, including by implementing strategic and operational initiatives, or do not [removed: do so] [added: respond] as effectively as our competitors, our businesses, operations and [added: operating] results [removed: of operations] may be materially adversely affected.

Potential modification to the ACA, including changes in enforcement and/or funding that further destabilize the Public Exchanges, as well as significant changes to Medicaid funding [added: (including the block grant option outlined by CMS on January 30, 2020)] could impact the number of Americans with health insurance and, consequently, prescription drug coverage.

We cannot predict the effect, if any, that new health care [added: and related benefits] legislation, future changes to the ACA or the implementation [added: of] or failure to implement the outstanding provisions of ACA, may have on our [added: Pharmacy Services,] retail pharmacy, LTC [removed: pharmacy, specialty pharmacy,] pharmacy [removed: services] and/or Health Care Benefits operations and/or [removed: results of operations.][added: operating results.]

The federal and many state governments also are considering changes in the interpretation, enforcement and/or application of existing programs, laws and regulations, including changes to payments under and funding of Medicare and Medicaid [removed: programs.][added: programs and increased regulation of PBMs.]

[removed: In addition, much] [added: Much] of the branded and generic drug product that we sell in our [removed: retail, mail and specialty] pharmacies, and much of the other merchandise we sell, is manufactured in whole or in substantial part outside of the United States.

As a result, significant changes in tax or trade policies, tariffs or trade relations between the United States and other countries, such as the imposition of unilateral tariffs on imported products, could result in significant increases in our costs, restrict our access to suppliers, depress economic activity, and have a material [added: adverse effect on our businesses, operating results and cash flows.]

[added: Future assessments may have an] adverse effect on our [removed: businesses, cash flows and] [added: operating] results [removed: of operations.][added: and cash flows.]

In addition, other countries may change their business and trade policies and such changes, as well as any negative sentiments towards the United States in response to increased import tariffs and other changes in [removed: United States] [added: U.S.] trade regulations, could adversely affect our businesses.

We cannot predict the enactment or content of new legislation [removed: and] [added: or] regulations or changes to existing laws or regulations or their enforcement, interpretation or application, or the effect they will have on our business operations or [removed: results of operations,] [added: operating results,] which could be materially adverse.

Even if we could predict such matters, it is not possible to eliminate the adverse impact of public policy changes that would fundamentally change the dynamics of one or more of the industries in which we [removed: operate.][added: compete.]

Examples of such [removed: change] [added: changes] include: the federal or one or more state governments fundamentally restructuring or reducing the funding available for Medicare, Medicaid, dual eligible or dual eligible special needs plan programs, increasing its involvement in drug reimbursement, [removed: pricing] [added: pricing, purchasing] and/or [removed: purchasing,] [added: importation,] changing the laws and regulations governing PBMs’, PDPs’ and/or Managed Medicaid organizations’ interactions with government funded health care programs, changing the tax treatment of health or related benefits, or repealing or otherwise significantly altering the ACA.

The likelihood of adverse changes remains high due to state and federal budgetary pressures, and our businesses and [added: operating] results [removed: of operations] could be materially and adversely affected by such changes, even if we correctly predict their occurrence.

For more information on these matters, see “Government Regulation” included in Item 1 of this [removed: Annual Report on] Form 10-K.

Each of our segments operates in a highly competitive and evolving business environment; and gross margins in the industries in which we compete may decline.

Each of our segments, Pharmacy Services, which includes our pharmacy benefit management (“PBM”) business, Retail/LTC, and Health Care Benefits, operates in a highly competitive and evolving business environment.

Specifically:

| • | Our retail pharmacy, specialty pharmacy and LTC pharmacy operations have been affected by reimbursement pressure caused by competition, including client demands for lower prices, generic drug pricing, earlier than expected generic drug introductions and network reimbursement pressure. If we are unable to increase our prices to reflect, or otherwise mitigate the impact of, increasing costs, our profitability will be adversely affected. If we are unable to limit our price increases, we may lose customers to competitors with more favorable pricing, adversely affecting our revenues and operating results. |

| • | In our Health Care Benefits segment we are seeking to substantially grow our Medicaid, dual eligible and dual eligible special needs plan membership over the next several years. In many instances, to acquire and retain our government customers’ business, we must bid against our competitors in a highly competitive environment. Winning bids often are challenged successfully by unsuccessful bidders. |

| • | Customer contracts in our Health Care Benefits segment are generally for a period of one year, and our customers have considerable flexibility in moving between us and our competitors. One of the key factors on which we compete for customers, especially in uncertain economic environments, is overall cost. We are therefore under pressure to contain premium price increases despite being faced with increasing health care and other benefit costs and increasing operating costs. If we are unable to increase our prices to reflect, or otherwise mitigate the impact of, increasing costs, our profitability will be adversely affected. If we are unable to limit our price increases, we may lose members to competitors with more favorable pricing, adversely affecting our revenues and operating results. In response to rising prices, our customers may elect to self-insure or to reduce benefits in order to limit increases in their benefit costs. Alternatively, our customers may purchase different types of products from us that are less profitable. Such elections may result in reduced membership in our more profitable Insured products and/or lower premiums for our Insured products, which may adversely affect our revenues and operating results, although such elections also may reduce our health care and other benefit costs. In addition, our Medicare, Medicaid and CHIP products are subject to termination without cause, periodic re-bid, rate adjustment and program redesign, as customers seek to contain their benefit costs, particularly in an uncertain economy, and our exposure to this risk is increasing as we grow our Government products membership. These actions may adversely affect our membership, revenues and operating results. |

| • | We requested significant increases in our premium rates in our Commercial Health Care Benefits business for 2020 (including as a result of the reinstatement for 2020 of the Health Insurer Fee (the “HIF”) imposed by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”) following the temporary suspension of the HIF for 2019) and expect to continue to request increases in those rates for 2021 and beyond in order to adequately price for projected medical cost trends, required expansions of coverage and rating limits, and significant assessments, fees and taxes imposed by the federal and state governments, including as a result of the ACA. Our rates also must be adequate to reflect the risk that our products will be selected by people with a higher risk profile or utilization rate than the pool of participants we anticipated when we established pricing for the applicable products (also known as “adverse selection”), particularly in small group Commercial products, which we expect to continue and potentially worsen in 2020. These rate increases may be significant and thus heighten the risks of adverse publicity, adverse regulatory action and adverse selection and the likelihood that our requested premium rate increases will be denied, reduced or delayed, which could lead to operating margin compression. |

Our brand and reputation are two of our most important assets, and the industries in which we operate have been and are negatively perceived by the public from time to time.

Negative publicity also may come from a failure to meet customer expectations for consistent, high quality and accessible care.

We also face similar risks for the other products we sell in our retail operations, including supply chain and distribution chain disruption risk.

our suppliers and adversely impact certain of our supplier relationships.

We face risks relating to the availability, pricing and safety profiles of prescription drugs that we purchase and sell.

Our revenues, operating results and cash flows may decline if physicians cease writing prescriptions for drugs or the utilization of drugs is reduced due to:

| • | increased safety risk profiles or regulatory restrictions; |

| • | manufacturing or other supply issues; |

| • | inflation in the price of brand name drugs. |

cost of prescription drugs (including specialty pharmacy drugs and ultra-high cost drugs and therapies), direct-to-consumer marketing by drug manufacturers, the increasing influence of social media on our members’ health care utilization and other behaviors, changes in health care practices and general economic conditions (such as inflation and employment levels).

For example, the 2019-2020 influenza season had an earlier than average start and has a higher incidence of influenza than the 2018-2019 influenza season; and influenza related health care costs were higher than Aetna projected in 2017-2018.

An unfavorable, uncertain or volatile economic environment could cause a decline in drug utilization, an

We are subject to assessments under guaranty fund laws existing in all states for obligations of insolvent insurance companies (including long-term care insurers), HMOs, ACA co-ops and other payors to policyholders and claimants.

Guaranty funds are maintained by state insurance commissioners to protect policyholders and claimants in the event that an insurer, HMO, ACA co-op and/or other payor becomes insolvent or is unable to meet its financial obligations.

These funds are usually financed by assessments against insurers regulated by a state.

Such extreme events or the threat of such extreme events also could disrupt our supply chains and/or our distribution chains for the products we sell.

Pharm.

Care Mgmt.

Assoc.*, which is currently pending before the U.S. Supreme Court) or (ii) other legislation and regulations.

PBM, retail pharmacy, mail order pharmacy, specialty pharmacy, LTC pharmacy and health care and related benefits are highly regulated industries whose participants frequently are subject to litigation and other adverse legal proceedings.

We are currently subject to various litigation and arbitration matters, investigations, regulatory audits, inspections, government inquiries, and regulatory and other legal proceedings, both inside and outside the U.S. Outside the U.S., contractual rights, tax positions and applicable regulations may be subject to interpretation or uncertainty to a greater degree than in the U.S. Litigation related to our provision of professional services in our medical clinics, pharmacies and LTC operations is increasing as we expand our services along the continuum of health care.

CMS and the Office of the Inspector General of the U.S. Department of Health and Human Services (the “OIG”) also are auditing the risk adjustment-related data of certain of our Medicare Advantage plans, and the number of such audits continues to increase.

See “Legal and Regulatory Proceedings” in Note 16 “Commitments and Contingencies” included in Item 8 of this 10-K for additional information.

As a result of our transformation program and other innovation initiatives, we are expanding our presence in the health care space and plan to offer new products and services (such as the home hemodialysis device we are developing) which present a different litigation and regulatory risk profile than the products and services that we historically have offered.

We face unique regulatory and other challenges in our Medicare and Medicaid businesses.

We face unique regulatory and other challenges that may inhibit the growth and profitability of those businesses.

| • | CMS regularly audits our performance to determine our compliance with CMS’s regulations and our contracts with CMS and to assess the quality of the services we provide to our Medicare members. As a result of these audits, we may be subject to significant or material retroactive adjustments to and/or withholding of certain premiums and fees, fines, criminal liability, civil monetary penalties, CMS imposed sanctions (including suspension or exclusion from participation in government programs) or other restrictions on our Medicare, Medicaid and other businesses, including suspension or loss of licensure. |

| • | “Star ratings” from CMS for our Medicare Advantage plans will continue to have a significant effect on our plans’ operating results. Since 2015, only Medicare Advantage plans with a star rating of four or higher (out of five) are eligible for a quality bonus in their basic premium rates. CMS continues to change its rating system to make achieving and maintaining a four or higher star rating more difficult. Our star ratings and past performance scores are adversely affected by the compliance issues that arise each year in our Medicare operations. If our star ratings fall below 4 for a significant portion of our Medicare Advantage membership or do not match the performance of our competitors or the star rating quality bonuses are reduced or eliminated, our revenues, operating results and cash flows may be significantly adversely affected. |

| • | We have experienced challenges in obtaining complete and accurate encounter data for our Medicaid products due to difficulties with providers and third-party vendors submitting claims in a timely fashion in the proper format, and with state agencies in coordinating such submissions. As states increase their reliance on encounter data, these difficulties could affect the Medicaid premium rates we receive and how Medicaid membership is assigned to us, which could have a material adverse effect on our Medicaid operating results and cash flows and/or our ability to bid for, and continue to participate in, certain Medicaid programs. |

| • | In the second quarter of 2014, CMS issued a final rule implementing ACA requirements that Medicare Advantage and PDP plans report and refund to CMS overpayments that those plans receive from CMS. However, CMS’s statements in formalized guidance regarding “overpayments” to Medicare Advantage plans appear to be inconsistent with CMS’s prior risk adjustment data validation (“RADV”) audit guidance. These statements appear to equate each Medicare Advantage risk adjustment data error with an “overpayment” without reconciliation to the principles underlying the fee for service adjustment comparison contemplated by CMS’s RADV audit methodology. The precise interpretation, impact and legality of the final rule are not clear and are subject to pending litigation. If Medicare Advantage plans were not paid based on payment model principles that align with the requirements of the Social Security Act or such payments were not implemented correctly, it could have a material adverse effect on our operating results, cash flows and/or financial condition. |

An extended federal government shutdown or a delay by Congress in raising the federal government’s debt ceiling also could lead to a delay, reduction, suspension or cancellation of federal government spending and a significant increase in interest rates that could, in turn, have a material adverse effect on the value of our investment portfolio, our ability to access the capital markets and our businesses, operating results, cash flows and liquidity.

Risks Associated with Mergers, Acquisitions, and Divestitures

In addition, the post-closing integration of the operations of CVS Health and Aetna and related matters may require substantial commitments of management and other resources and management time which could otherwise have been devoted to our ongoing businesses and operations and/or to other opportunities that may have been beneficial to us.

In that case, our stock price could decline materially, among other effects on us.

Overarching Risks

Risks to our brand and reputation, the Aetna Acquisition, data governance risks, effectiveness of our talent management and alignment of talent to our business needs, and potential changes in public policy, laws and regulations present overarching risks to our enterprise in 2019 and beyond.

We expect to face significant business challenges and uncertainties in 2019.

Risks to our brand and reputation, the Aetna Acquisition, data governance risks, effectiveness of our talent management and alignment of talent to our business needs, and potential changes in public policy, laws and regulations present overarching risks to our enterprise in 2019 and beyond.

There can be no assurance regarding our ability to avoid harm to our brand and reputation, our ability to manage the risks inherent in the Aetna Acquisition or our data governance risks, our ability to manage and align our talent to our business needs or our ability to manage the risks presented by changes in public policy, laws or regulations.

In addition, there can be no assurance that the Aetna Acquisition, United States government fiscal policy, changes to the United States health care system (including changes to the ACA, to drug reimbursement and/or drug pricing laws and regulations and/or to laws and regulations governing PBMs’ interactions with government funded health care programs) or other unanticipated risks will not require us to revise the ways in which we conduct business, put us at risk of loss of business or materially adversely affect our businesses, cash flows, financial condition or results of operations.

Reputational risk is inherent in many of the risks we face.

Significant reductions or interruptions in funding for government health programs we serve also may lead us to reduce our exposure to these programs, which could adversely affect our brand and reputation.

material fines, penalties and/or remediation costs, and compensatory, special, punitive and statutory damages, consent orders, adverse actions against our licenses to do business and/or injunctive relief, any of which could adversely affect our businesses, cash flows, results of operations or financial condition.

For example, in January 2019, HHS proposed regulations that would exclude from the current safe harbor under the federal anti-kickback statute manufacturer’s rebates on prescription drugs paid to PBMs, PDPs and Managed Medicaid organizations in connection with federally funded health care programs.

Further changes to federal health care laws, including the ACA, drug reimbursement and pricing laws and/or laws governing PBMs’, PDPs’ and/or Managed Medicaid organizations’ interactions with government funded health care programs, are probable.

Our enterprise strategy may not be an effective response to the changing dynamics in the industries in which we operate, or we may not be able to implement our strategy and related strategic projects.

Our strategy includes effectively investing our capital and human resources in appropriate strategic projects, current operations and acquisitions to transform our businesses in response to the changing dynamics in the industries in which we operate.

Our strategic projects include, among other things: integrating the Aetna Acquisition; significant investments in human and technology resources to expand our consumer-oriented products and services; optimizing our business platforms; managing certain significant technology projects; further improving relations with manufacturers, suppliers and health care providers; negotiating contract changes with customers, manufacturers, suppliers and health care providers and implementing other business process improvements.

Implementing our strategic initiatives will require significant investments of capital and human resources.

Among other things, we will need to simultaneously acquire and develop new personnel, products and systems to serve existing and new customers with existing and new products and to enhance our existing customer service, information technology, control and compliance processes and systems.

The future performance of our businesses will depend in large part on our ability to design and implement our strategic initiatives, some of which will occur over several years.

If these initiatives do not achieve their objectives, our results of operations could be adversely affected.

Our enterprise strategy may not be an effective response to the changing dynamics in the industries in which we operate, and we may fail to recognize and position ourselves to capitalize upon market opportunities.

We may not have sufficient advance notice and resources to develop and effectively implement an alternative strategy.

If our existing competitors and/or new entrants (whether vertical, horizontal or online/digital/e-commerce) into one or more of our businesses create new disruptive business models and/or develop new offerings that customers, members and/or health care providers prefer to our offerings, we may lose customers, members and/or providers, and our results of operations, cash flows and/or prospects may be adversely affected.

In addition, our results of operations, cash flows and/or prospects may be adversely affected by consolidation among the participants in the industries in which we operate and/or our customer base.

Our businesses and results of operations could be materially and adversely affected by such changes, even if we correctly predict their occurrence.

Efforts to reduce reimbursement levels and alter health care financing practices could adversely affect our businesses.

The continued efforts of HMOs, MCOs, PBMs, government entities, and other third party payors to reduce prescription drug costs and pharmacy reimbursement rates, as well as litigation and other legal proceedings relating to how drugs are priced, may adversely affect our profitability.

Historically, the effect of this trend on generic profitability has been mitigated by the introduction of new multi-source generic drugs as well as inflation on brand name drugs and by our efforts to negotiate reduced acquisition costs of generic drugs with manufacturers.

Any inability to offset increased brand name or

In addition, during the past several years, the United States health care industry has been subject to an increase in governmental regulation and audits at both the federal and state levels.

Efforts to control health care costs, including prescription drug costs, are continuing at the federal and state government levels.

Changing political, economic and regulatory influences may significantly affect health care financing and reimbursement practices.

For example, we anticipate that federal and state governments will continue to review and assess alternative health care delivery systems, payment methodologies and operational requirements for health care providers, including LTC facilities and pharmacies, and participants in government funded health care programs.

A change in the composition of pharmacy prescription volume toward programs offering lower reimbursement rates could adversely affect our profitability.

Any action taken to repeal or replace all or significant parts of ACA also could adversely affect our profitability, though it is unclear at this time what the full effects of any such changes would be.

The ACA made several significant changes to Medicaid rebates and to reimbursement rates.

This change has adversely affected the reimbursements we receive when we dispense prescription drugs to Medicaid recipients.

In addition, the ACA made other changes that affect the coverage and plan designs that are or will be provided by many of our health plan clients, including the requirement for health insurers to meet a minimum MLR to avoid having to pay rebates to enrollees.

These ACA changes may not affect our businesses directly, but they could indirectly impact our services, business practices and/or results of operations.

Gross margins in the industries in which we operate may decline.

The PBM industry has been experiencing margin pressure as a result of competitive pressures and increased client demands for lower prices, increased revenue sharing, enhanced service offerings and/or higher service levels.

*The following discussion and analysis should be read in conjunction with the audited consolidated financial statements and related notes included in Item 8 of this 10-K, “Risk Factors” included in Item 1A of this 10-K and the “Cautionary Statement Concerning Forward Looking Statements” in this 10-K.*

Overview of Business

CVS Health Corporation (“CVS Health”), together with its subsidiaries (collectively, the “Company,” “we,” “our” or “us”), is the nation’s premier health innovation company helping people on their path to better health.

Whether in one of its pharmacies or through its health services and plans, CVS Health is pioneering a bold new approach to total health by making quality care more affordable, accessible, simple and seamless.

CVS Health is community-based and locally focused, engaging consumers with the care they need when and where they need it.

The Company has approximately 9,900 retail locations, approximately 1,100 walk-in medical clinics, a leading pharmacy benefits manager with approximately 105 million plan members, a dedicated senior pharmacy care business serving more than one million patients per year and expanding specialty pharmacy services.

CVS Health also serves an estimated 37 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”).

The Company believes its innovative health care model increases access to quality care, delivers better health outcomes and lowers overall health care costs.

On November 28, 2018 (the “Aetna Acquisition Date”), the Company acquired Aetna Inc. (“Aetna”) for a combination of cash and CVS Health stock (the “Aetna Acquisition”).

The Company acquired Aetna to help improve the consumer health care experience by combining Aetna’s health care benefits products and services with CVS Health’s retail locations, walk-in medical clinics and integrated pharmacy capabilities with the goal of becoming the new, trusted front door to health care.

Under the terms of the merger agreement, Aetna shareholders received $145.00 in cash and 0.8378 CVS Health shares for each Aetna share.

The transaction valued Aetna at approximately $212 per share or approximately $70 billion.

Including the assumption of Aetna’s debt, the total value of the transaction was approximately $78 billion.

The Company financed the cash portion of the purchase price through a combination of cash on hand and by issuing approximately $45 billion of new debt, including senior notes and term loans (see “Liquidity and Capital Resources” later in this MD&A).

The consolidated financial statements reflect Aetna’s results subsequent to the Aetna Acquisition Date.

On October 10, 2018, the Company and Aetna entered into a consent decree with the U.S. Department of Justice (the “DOJ”) that allowed the Company’s proposed acquisition of Aetna to proceed, provided Aetna agreed to sell its individual standalone PDPs.

As part of the agreement reached with the DOJ, Aetna entered into a purchase agreement with a subsidiary of WellCare Health Plans, Inc. (“WellCare”) for the divestiture of Aetna’s standalone PDPs effective December 31, 2018.

On November 30, 2018, the Company completed the sale of Aetna’s standalone PDPs.

The Company provided administrative services to, and retained the financial results of, the divested plans through 2019.

Subsequent to 2019, the Company will no longer retain the financial results of the divested plans.

Aetna’s standalone PDPs had an aggregate of 2.5 million members as of December 31, 2019.

As a result of the Aetna Acquisition, the Company added the Health Care Benefits segment.

Certain aspects of Aetna’s operations, including products for which the Company no longer solicits or accepts new customers, such as large case pensions and long-term care insurance products, are included in the Company’s Corporate/Other segment.

Effective for the first quarter of 2019, the Company realigned the composition of its segments to correspond with changes to its operating model and reflect how its Chief Operating Decision Maker (the “CODM”) reviews information and manages the business.

As a result of this realignment, the Company’s SilverScript® PDP moved from the Pharmacy Services segment to the Health Care Benefits segment.

In addition, the Company moved Aetna’s mail order and specialty pharmacy operations from the Health Care Benefits segment to the Pharmacy Services segment.

Segment financial information has been retrospectively adjusted to reflect these changes.

See Note 17 ‘‘Segment Reporting’’ included in Item 8 of this 10-K for segment financial information.

The Company has four reportable segments: Pharmacy Services, Retail/LTC, Health Care Benefits and Corporate/Other, which are described below.

Overview of the Pharmacy Services Segment

The Pharmacy Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, including plan design offerings and administration, formulary management, retail pharmacy network management services, mail order pharmacy, specialty pharmacy and infusion services, clinical services, disease management services and medical spend management.

The Pharmacy Services segment’s clients are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, plans offered on public health insurance exchanges and private health insurance exchanges, other sponsors of health benefit plans and individuals throughout the United States.

The Pharmacy Services segment operates retail specialty pharmacy stores, specialty mail order pharmacies, mail order dispensing pharmacies, compounding pharmacies and branches for infusion and enteral nutrition services.

During the year ended December 31, 2019, the Company’s PBM filled or managed 2.0 billion prescriptions on a 30-day equivalent basis.

Overview of the Retail/LTC Segment

The Retail/LTC segment sells prescription drugs and a wide assortment of general merchandise, including over-the-counter drugs, beauty products, cosmetics and personal care products, provides health care services through its MinuteClinic® walk-in medical clinics and conducts long-term care pharmacy (“LTC”) operations, which distribute prescription drugs and provide related pharmacy consulting and other ancillary services to chronic care facilities and other care settings.

As of December 31, 2019, the Retail/LTC segment operated approximately 9,900 retail locations, approximately 1,100 MinuteClinic® locations as well as online retail pharmacy websites, LTC pharmacies and onsite pharmacies.

During the year ended December 31, 2019, the Retail/LTC segment filled 1.4 billion prescriptions on a 30-day equivalent basis.

For the year ended December 31, 2019, the Company dispensed approximately 26.6% of the total retail pharmacy prescriptions in the United States.

Overview of the Health Care Benefits Segment

The information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report, which includes the “Cautionary Statement Concerning Forward-Looking Statements” at the end of such section, is incorporated by reference herein.

The Company’s earnings and financial condition are exposed to interest rate risk, credit quality risk, market valuation risk, foreign currency risk, commodity risk and operational risk.

Evaluation of Interest Rate and Credit Quality Risk

The Company manages interest rate risk by seeking to maintain a tight match between the durations of assets and liabilities when appropriate.

The Company manages credit quality risk by seeking to maintain high average credit quality ratings and diversified sector exposure within its debt securities portfolio.

In connection with its investment and risk management objectives, the Company also uses derivative financial instruments whose market value is at least partially determined by, among other things, levels of or changes in interest rates (short-term or long-term), duration, prepayment rates, equity markets or credit ratings/spreads.

The Company’s use of these derivatives is generally limited to hedging risk and has principally consisted of using interest rate swaps, treasury rate locks, forward contracts, futures contracts, warrants, put options and credit default swaps.

These instruments, viewed separately, subject the Company to varying degrees of interest rate, equity price and credit risk.

However, when used for hedging, the Company expects these instruments to reduce overall risk.

*Investments*

The Company’s investment portfolio supported the following products at December 31, 2019 and 2018:

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | |

| In millions | 2019 | | | | 2018 | | |

| Experience-rated products | $ | 1,100 | | | $ | 1,063 | |

| Remaining products | 18,587 | | | | 17,191 | | |

| Total investments | $ | 19,687 | | | $ | 18,254 | |

Investment risks associated with experience-rated products generally do not impact the Company’s operating results.

The risks associated with investments supporting experience-rated pension and annuity products in the large case pensions business in the Company’s Corporate/Other segment are assumed by the contract holders and not by the Company (subject to, among other things, certain minimum guarantees).

Assets supporting experience-rated products may be subject to contract holder or participant withdrawals.

The debt securities in the Company’s investment portfolio had an average credit quality rating of A at both December 31, 2019 and 2018 with approximately $4.4 billion and $3.9 billion rated AAA at December 31, 2019 and 2018, respectively.

The debt securities that were rated below investment grade (that is, having a credit quality rating below BBB-/Baa3) were $1.2 billion and $1.1 billion at December 31, 2019 and 2018, respectively (of which 4% and 6% at December 31, 2019 and 2018, respectively, supported experience-rated products).

At December 31, 2019 and 2018, the Company held $333 million and $373 million, respectively, of municipal debt securities that were guaranteed by third parties, representing 2% of total investments at both December 31, 2019 and 2018.

These securities had an average credit quality rating of AA and AA- at December 31, 2019 and 2018, respectively, with the guarantee.

These securities had an average credit quality rating of A+ and A- at December 31, 2019 and 2018, respectively, without the guarantee.

The Company does not have any significant concentration of investments with third party guarantors (either direct or indirect).

The Company generally classifies debt securities as available for sale, and carries them at fair value on the consolidated balance sheets.

At both December 31, 2019 and 2018, less than 1% of debt securities were valued using inputs that reflect the Company’s assumptions (categorized as Level 3 inputs in accordance with accounting principles generally accepted in the United States of America).

See Note 4 ‘‘Fair Value’’ included in Item 8 of this 10-K, for additional information on the methodologies and key assumptions used to determine the fair value of investments.

For additional information related to investments, see Note 3 ‘‘Investments’’ included in Item 8 of this 10-K.

The Company regularly reviews debt securities in its portfolio to determine whether a decline in fair value below the cost basis or carrying value is other-than-temporary.

When a debt security is in an unrealized capital loss position, the Company monitors the duration and severity of the loss to determine if sufficient market recovery can occur within a reasonable period of time.

If a decline in fair value is considered other-than-temporary, the cost basis or carrying value of the debt security is written down.

The write down is then bifurcated into its credit and non-credit related components.

The amount of the credit-related component

is included in net income, and the amount of the non-credit related component is included in other comprehensive income (loss), unless the Company intends to sell the debt security or it is more likely than not that the Company will be required to sell the debt security prior to its anticipated recovery of the debt security’s amortized cost basis.

Accounting for other-than-temporary impairment (“OTTI”) of debt securities is considered a critical accounting policy.

See “Critical Accounting Policies - Other-Than-Temporary Impairment of Debt Securities” in the MD&A included in Item 7 of this 10-K for additional information.

Evaluation of Market Valuation Risks

The Company regularly evaluates its risk from market-sensitive instruments by examining, among other things, levels of or changes in interest rates (short-term or long-term), duration, prepayment rates, equity markets and/or credit ratings/spreads.

The information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Quantitative and Qualitative Disclosures About Market Risk” in the Annual Report is incorporated by reference herein.

[removed: Overview][added: Overview]

CVS Health [removed: Corporation,] [added: Corporation (“CVS Health”),] together with its subsidiaries (collectively, [removed: “CVS Health,”] the “Company,” “we,” “our” or “us”), is the nation’s premier health innovation company helping people on their path to better health.

The Company has [removed: more than] [added: approximately] 9,900 retail locations, approximately 1,100 walk-in medical clinics, a leading pharmacy benefits manager with approximately [removed: 92] [added: 105] million plan members, a dedicated senior pharmacy care business serving more than one million patients per [removed: year,] [added: year and] expanding specialty pharmacy [removed: services, and a leading stand-alone Medicare Part D prescription drug plan.][added: services.]

CVS Health also serves an estimated [removed: 38] [added: 37] million people through traditional, voluntary and consumer-directed health insurance products and related services, including [removed: rapidly] expanding Medicare Advantage [removed: offerings.][added: offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”).]

The Company acquired Aetna to help improve the consumer health care experience by combining Aetna’s health care benefits products and services with CVS Health’s [removed: more than 9,900] retail locations, [removed: approximately 1,100] walk-in medical clinics and integrated pharmacy capabilities with the goal of becoming the new, trusted front door to health care.

The Company financed the cash portion of the purchase price through a combination of cash on hand and by issuing approximately [removed: $45.0] [added: $45] billion of new debt, including senior notes and term loans.

On October 10, 2018, the Company and Aetna entered into a consent decree with the [removed: United States] [added: U.S.] Department of Justice (the “DOJ”) that allowed the Company’s proposed acquisition of Aetna to proceed, provided Aetna agreed to sell its individual standalone [removed: Medicare Part D prescription drug plans.][added: PDPs.]

As part of the agreement reached with the DOJ, Aetna entered into a purchase agreement with a subsidiary of WellCare Health Plans, Inc. (“WellCare”) for the divestiture of Aetna’s standalone [removed: Medicare Part D prescription drug plans] [added: PDPs] effective December 31, 2018.

On November 30, 2018, [removed: Aetna] [added: the Company] completed the sale of [removed: its] [added: Aetna’s] standalone [removed: Medicare Part D prescription drug plans.][added: PDPs.]

[removed: Aetna will provide] [added: The Company provided] administrative services to, and [removed: will retain] [added: retained] the financial results of, the divested plans through 2019.

As a result of the Aetna Acquisition, the Company added the Health Care Benefits [removed: segment, which is the equivalent of the former Aetna Health Care] segment.

The Company [removed: now] has four reportable segments: Pharmacy Services, Retail/LTC, Health Care Benefits and Corporate/Other.

[removed: Business Strategy][added: Business Strategy]

[removed: Pharmacy] [added: Pharmacy] Services [removed: Segment][added: Segment]

The Pharmacy Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, including plan design offerings and administration, formulary management, retail pharmacy network management services, mail order pharmacy, specialty pharmacy and infusion services, [removed: Medicare Part D services,] clinical services, disease management services and medical spend management.

The [added: Company’s] Pharmacy Services [removed: segment’s] clients are primarily employers, insurance companies, unions, government employee groups, health plans, Medicare Part D [removed: prescription drug plans (“PDPs”), Medicaid managed care (“Managed Medicaid”)] plans, [added: Managed Medicaid] plans [added: and plans] offered on [removed: public health insurance exchanges (“Public Exchanges”) and private health insurance exchanges (“Private Exchanges” and together with Public] [added: Insurance] Exchanges, [removed: “Insurance Exchanges”),] other sponsors of health benefit plans and individuals [added: located] throughout the United States.

During the year ended December 31, [removed: 2018,] [added: 2019,] the Company’s PBM filled or managed [removed: approximately 1.9] [added: 2.0] billion prescriptions on a 30-day equivalent basis.

[removed: PBM Services][added: PBM Services]

These systems provide essential features and functionality to allow [removed: a] plan [removed: member] [added: members] to utilize their prescription drug benefits.

[removed: Plan] [added: *Plan] Design Offerings and [removed: Administration][added: Administration*]

[removed: Formulary Management][added: *Formulary Management*]

To help improve clinical outcomes for members and clients, the Company conducts ongoing, independent reviews of all drugs, [removed: including, but not limited to,] [added: including] those appearing on the formularies and generic equivalent products.

Beginning in 2018, [added: PBM] clients [removed: had] [added: were given] new capabilities to offer real time benefits information for a member’s specific plan design, provided digitally at the point of prescribing, at the pharmacy and directly to members.

[removed: Retail] [added: *Retail] Pharmacy [removed: Network Management Services][added: Network* *Management Services*]

The Company maintains a national network of more than 68,000 retail pharmacies, consisting of approximately 41,000 chain pharmacies (which includes CVS Pharmacy locations) and [added: approximately] 27,000 independent pharmacies, in the United States, including Puerto Rico, the District of Columbia, Guam and the [removed: United States] [added: U.S.] Virgin Islands.

This data interfaces with the Company’s proprietary prescription management systems, which verify relevant plan member data and eligibility, while also performing a drug utilization review to help evaluate clinical appropriateness and safety and confirming that the [removed: pharmacy will receive payment for the prescription.]

[removed: Mail] [added: *Mail] Order Pharmacy [removed: Services][added: Services*]

Plan members or their prescribers submit prescriptions or refill requests, primarily for maintenance medications, to these [removed: pharmacies via mail, telephone, fax, e-prescribing or the Internet,] [added: pharmacies,] and staff pharmacists review these prescriptions and refill requests with the assistance of the Company’s prescription management systems.

The Company’s mail order dispensing pharmacies have been awarded Mail [removed: Order] [added: Service] Pharmacy accreditation from [removed: Utilization Review Accreditation Commission (“URAC”),] [added: URAC,] a health care accrediting organization that establishes quality standards for the health care industry.

[removed: Specialty] [added: *Specialty] Pharmacy and Infusion [removed: Services][added: Services*]

Substantially all of the Company’s [removed: mail service] specialty mail order pharmacies also have been accredited by the Joint Commission, which is an independent, not-for-profit organization that accredits and certifies health care programs and organizations in the United States.

[removed: Clinical Services][added: *Clinical Services*]

These programs are primarily designed to promote better health [removed: outcomes,] [added: outcomes] and to help target inappropriate medication utilization and non-adherence to medication, each of which may result in adverse medical events that negatively affect member health and client pharmacy and medical spend.

To help address [removed: the] [added: prescription] opioid [removed: epidemic,] [added: abuse and misuse,] the Company introduced an industry-leading UM approach that limits to seven days the supply of opioids dispensed for certain acute prescriptions for patients who are new to [removed: therapy;] [added: therapy,] limits the daily dosage of opioids dispensed based on the strength of the [removed: opioid;] [added: opioid] and requires the use of immediate-release formulations of opioids before extended-release opioids are dispensed.

The Company’s Pharmacy [removed: Advisor] [added: Advisor®] program facilitates pharmacist counseling, both face-to-face and over the telephone, to help participating plan members with certain chronic diseases, such as diabetes and cardiovascular conditions, to identify gaps in care, adhere to their prescribed medications and manage their health conditions.

[removed: Disease] [added: *Disease] Management [removed: Programs][added: Programs*]

The [removed: majority of these integrated programs are] [added: Company’s utilization management program covers diseases such as rheumatoid arthritis, Parkinson’s disease, seizure disorders and multiple sclerosis and is] accredited by the National Committee for Quality Assurance (“NCQA”), a private, not-for-profit organization that evaluates, accredits and certifies a wide range of health care organizations.

[removed: Medical] [added: *Medical] Benefit [removed: Management][added: Management*]

[removed: Pharmacy] [added: Pharmacy] Services Information [removed: Systems][added: Systems]

This capability transforms pharmacy data into actionable interventions at key points of [removed: care] [added: care,] such as mail and specialty [removed: pharmacists] [added: pharmacists,] to help provide quality care.

For additional information, see Note 2 ‘‘Acquisitions and Divestitures’’ included in Item 8 of this 10-K.

Subsequent to 2019, the Company will no longer retain the financial results of the divested plans.

Aetna’s standalone PDPs had an aggregate of 2.5 million members as of December 31, 2019.

Effective for the first quarter of 2019, the Company realigned the composition of its segments to correspond with changes to its operating model and reflect how its Chief Operating Decision Maker reviews information and manages the business.

As a result of this realignment, the Company’s SilverScript® PDP moved from the Pharmacy Services segment to the Health Care Benefits segment.

In addition, the Company moved Aetna’s mail order and specialty pharmacy operations from the Health Care Benefits segment to the Pharmacy Services segment.

Segment financial information has been retrospectively adjusted to reflect these changes.

See Note 17 ‘‘Segment Reporting’’ included in Item 8 of this 10-K for segment financial information.

CVS Health’s purpose of helping people on their path to better health guides the Company’s approach to transforming the consumer health experience.

The Company is working to create the most consumer-centric health company by being consumer obsessed and pursuing its three strategic goals: be local, make it simple and improve health.

These goals are embedded in the Company’s four Enterprise priorities: growing and differentiating our businesses, delivering transformational products and services, creating a consumer-centric technology infrastructure and modernizing Enterprise functions and capabilities.

The

Company believes its strategy of putting the consumer at the center of care will drive long-term sustainable value and place the Company at the forefront of the evolution of health care.

pharmacy will receive payment for the prescription.

The Company also offers a Performance program for non-Medicare customers.

The Performance program may be applied to any network.

It can be implemented with either the Company’s broad, national network or with a managed network (as allowed by applicable laws and regulations).

Under the program, high performing pharmacies are eligible to receive an incremental positive performance payment.

The program aligns with key Healthcare Effectiveness Data Information Set measures and is funded by client fees.

For the year ended December 31, 2019, the Company dispensed approximately 26.6% of the total retail pharmacy prescriptions in the United States.

The Company also offers a subscription-based membership program, CarePass®, under which members are entitled to a suite of benefits delivered over the course of the subscription period, as well as a promotional reward that can be redeemed for future goods and services.

HealthHUBs are stores with a redesigned format that provide enhanced services, offer a care concierge and focus on health and wellness products.

HealthHUBs are designed to meet consumer needs and improve the customer experience by providing care that complements physician practices and hospital systems, enabling improved health outcomes and reducing overall health care costs.

The Company expects to continue HealthHUB conversions through 2021.

The Company also competes with

For periods prior to November 28, 2018 (the Aetna Acquisition Date), the Health Care Benefits segment was comprised of the Company’s SilverScript PDP business.

| *•* | *Medicare PDP:* The Company is a national provider of drug benefits under the Medicare Part D prescription drug program. All Medicare eligible individuals are eligible to participate in this voluntary prescription drug plan. Members typically receive coverage for certain prescription drugs, usually subject to a deductible, co-insurance and/or co-payment. On November 30, 2018, the Company completed the sale of Aetna’s standalone PDPs to WellCare effective December 31, 2018. The Company provided administrative services to, and retained the financial results of, the divested plans through 2019. Subsequent to 2019, the Company will no longer retain the financial results of the divested plans. |

coinsurance amounts.

The Company offered a wide selection of Medicare Supplement products in 49 states and Washington, D.C. in 2019.

The Company is making concerted investments in emerging technology capabilities such as voice, artificial intelligence and robotics to further automate and improve the experience for all of its constituents.

The Health Care Benefits segment is integrating with the Retail/LTC and Pharmacy Services segments to build Enterprise technology assets that will help guide our members through their health care journey, provide them a high level of service, enable healthier outcomes and encourage them to take next best actions to lead healthier lives.

In 2019, Health Care Benefits segment revenues from the federal government accounted for approximately 13% of the Company’s consolidated total revenues.

Contracts with CMS for coverage of Medicare-eligible individuals accounted for approximately 95% of the Company’s revenues from the federal government in 2019.

No single Health Care Benefits customer accounted for 10% or more of the Company’s consolidated total revenues in 2018 or 2017.

Premium rates and fees

The HIF applies for 2020 and was temporarily suspended for 2019 and 2017.

In December 2019, the HIF was repealed for calendar years after 2020.

For periods prior to the Aetna Acquisition Date, the Health Care Benefits segment was comprised of the Company’s SilverScript PDP business.

Utilization of services each plan

The Company cannot predict whether pending or future federal or state legislation or court proceedings, including fundamental changes to the dynamics of one or more of the industries in which it competes, such as the federal or one or more state governments fundamentally restructuring the Commercial, Medicare or Medicaid marketplace or reducing payments to the Company under or financing for Medicare, Medicaid, dual eligible or special needs programs, increasing its involvement in drug reimbursement, pricing, purchasing, and/or importation or changing the laws governing PBMs, will change various aspects of the industries in which it competes or the health care industry generally or the impact those changes will have on the Company’s businesses, operating results, cash flows and/or stock price, but the effects could be materially adverse.

For additional information, see Note 2 ‘‘Acquisition of Aetna’’ contained in the “Notes to Consolidated Financial Statements” in the Annual Report, which is incorporated by reference herein.

Aetna’s standalone Medicare Part D prescription drug plans had an aggregate of approximately 2.3 million members as of December 31, 2018.

The combined company expects to transform the consumer health care experience and build healthier communities through a new innovative health care model that is local, easier to use, less expensive and puts consumers at the center of their care.

The Company believes that improving the consumer’s health care experience will improve consumer engagement with their health which will lead to improved health outcomes and lower total health care costs.

The Company believes there are three imperatives to accomplishing this transformation: be local, make it simple and improve health.

These imperatives also guide the Company’s five key strategies for delivering medical cost savings for its customers: improve common chronic disease management, reduce unnecessary hospital readmissions, improve the efficiency of the sites at which medical members receive care, optimize primary care delivery and improve the Company’s complex chronic disease management capabilities.

In addition, the Company is a national provider of drug benefits to eligible beneficiaries under the Medicare Part D prescription drug program.

The Pharmacy Services segment operates retail specialty pharmacy stores, specialty mail order pharmacies, mail order dispensing pharmacies, compounding pharmacies and branches for infusion and enteral nutrition services.

The Company is also able to build client-specific pharmacy networks and

managed pharmacy network solutions to further drive savings for clients.

These include a performance-based pharmacy network with approximately 30,000 stores that is anchored by CVS Pharmacy and Walgreens, along with up to 10,000 independent pharmacies across the United States.

The performance-based network is designed to deliver unit cost savings and to improve clinical outcomes in order to help to lower overall health care costs for participating payors and their members.

Medicare Part D Services

The Company participates in the administration of the Medicare Part D prescription drug program through the provision of PBM services to those health plan clients and other clients that have qualified as a PDP or as a Medicare Advantage prescription drug plan and by offering Medicare Part D pharmacy benefits through its SilverScript subsidiary that is a PDP that has contracted with the United States Centers for Medicare & Medicaid Services (“CMS”).

The Company also assists employer, union and other health plan clients that qualify for the retiree drug subsidy made available under Medicare Part D by collecting and submitting eligibility and/or drug cost data to CMS in order for such clients to obtain the subsidy and offers Medicare Part D pharmacy benefits to such clients’ retirees through Employer Group Waiver Plans (“EGWPs”) sponsored by SilverScript.

The Company’s integrated disease management programs cover diseases such as rheumatoid arthritis, Parkinson’s disease, seizure disorders and multiple sclerosis.

References to competitors and other companies throughout this Annual Report on Form 10-K, including the information incorporated by reference herein, are for illustrative or comparison purposes only and do not indicate that these companies are the Company’s or any segment’s only competitors or closest competitors.

Prior to January 2, 2018, the Retail/LTC segment also provided commercialization services under the name RxCrossroads®.

The Company divested its RxCrossroads subsidiary on January 2, 2018.

on a 30-day equivalent basis.

In December 2018, the Company held approximately 26% of the United States retail pharmacy market.

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | |

| | | | | | | | | |

| | | | | | | | | |

References to competitors and other companies throughout this Annual Report on Form 10-K, including the information incorporated by reference herein, are for illustrative or comparison purposes only and do not indicate that these companies are the Company’s or any segment’s only competitors or closest competitors.

coverage for certain prescription drugs, usually subject to a deductible, co-insurance and/or co-payment.

On November 30, 2018, Aetna completed the sale of all of its standalone Medicare Part D prescription drug plans to WellCare effective on December 31, 2018.

Aetna will provide administrative services to, and retain the financial results of, the divested plans through 2019.

For certain qualifying employer groups, the Company offers Medicare PPO products nationally.

When combined with the Company’s PDP product, these national PPO plans form an integrated national Insured Medicare product for employers that provides medical and pharmacy benefits.

| • | Pharmacy: The Company offers PBM services and specialty and home delivery pharmacy services. The Company also performs various PBM services for Aetna pharmacy customers consisting of: product development, Commercial formulary management, pharmacy rebate contracting and administration, sales and account management and precertification programs. The Pharmacy Services segment performs the administration of selected functions for retail pharmacy network contracting and claims administration; home delivery and specialty pharmacy order fulfillment and inventory purchasing and management; and certain administrative services. Other suppliers also provide certain PBM services. |

Capabilities available to members include digital wallet, provider search, cost transparency and behavioral monitoring.

The Health Care Benefits segment care management solution supports the Company’s clinicians with data and recommendations.

The Company continues to scale its clinical platform and its local personalized care model.

The Company aims to build an integrated 360 degree view of the member to ensure that it can guide them through their healthcare journey and provide them a high level of service.

Through its analytics platform the Company is beginning to harness the power of data to help drive healthier outcomes and proactive care and enable consumers to take the next best action for their health.

See Note 17 ‘‘Segment Reporting’’ contained in the “Notes to Consolidated Financial Statements” in the Annual Report, which is incorporated by reference herein, for additional information on foreign customers.

The following table presents total medical membership by United States and other geographic region and funding arrangement at December 31, 2018:

Legal [removed: Proceedings][added: Proceedings]

[removed: II.][added: II.]

Environmental [removed: Matters][added: Matters]

[removed: The Company is in the process of negotiating with the New York State Department of Environmental Conservation to resolve claims of] alleged historical noncompliance with hazardous waste regulations in connection with LTC pharmacies in the State of New York.

I.

The information contained in Note 16 ‘‘Commitments and Contingencies’’ included in Item 8 of this 10-K is incorporated herein by reference.

The Company is in the process of negotiating with the New York State Department of Environmental Conservation to resolve claims of

I.

The information contained in Note 16 ‘‘Commitments and Contingencies’’ of the “Notes to Consolidated Financial Statements” in the Annual Report is incorporated by reference herein.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

[removed: þ Annual Report Pursuant to Section] [added: ☑ ANNUAL REPORT PURSUANT TO SECTION] 13 [removed: or] [added: OR] 15(d) [removed: of the Securities Exchange Act of 1934][added: OF THE SECURITIES EXCHANGE ACT OF 1934]

[removed: For] [added: For] the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2018][added: 2019]

[removed: o Transition Report Pursuant to Section] [added: ☐ TRANSITION REPORT PURSUANT TO SECTION] 13 [removed: or] [added: OR] 15(d) [removed: of the Securities Exchange Act of 1934][added: OF THE SECURITIES EXCHANGE ACT OF 1934]

[removed: For] [added: For] the transition period from _________ [removed: to_________][added: to_________]

[removed: Commission] [added: Commission] file [removed: number 001-01011][added: number: 001-01011]

[removed: ][added: ]

[removed: CVS] [added: CVS] HEALTH [removed: CORPORATION][added: CORPORATION]

| [removed: Delaware] (State or other jurisdiction of incorporation or organization) | [removed: | | | | 05-0494040] (I.R.S. Employer Identification No.) | [removed: | | | |]

| [removed: One] [added: One] CVS [removed: Drive, Woonsocket, Rhode Island (Address of principal executive offices) | | | | | 02895 (Zip Code) |] [added: Drive,] | [added: Woonsocket,] | [added: Rhode Island] | [added: 02895] |

| [removed: (Registrant’s] [added: Registrant’s] telephone number, including area [removed: code) | | | | | | |] [added: code:] | [added: (401)] | [added: 765-1500] |

| Securities registered pursuant to Section 12(b) of the Act: | | | [removed: | | | | | | |]

| Common Stock, par value $0.01 per share [removed: Title of each class] | [removed: | | |] [added: CVS] | New York Stock Exchange [removed: Name of each exchange on which registered] | [removed: | | | |]

| Securities registered pursuant to Section 12(g) of the Act: | | [removed: | | | None | | | |] [added: None] |

| Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. | | | | [removed: | |] [added: ☑] | [added: Yes] | [added: ☐] | [removed: þ Yes o] No |

| Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. | | | | [removed: | |] [added: ☐] | [added: Yes] | [added: ☑] | [removed: o Yes þ] No |

| Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | | | | [removed: | |] [added: ☑] | [added: Yes] | [added: ☐] | [removed: þ Yes o] No |

| Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). | | | | [removed: | |] [added: ☑] | [added: Yes] | [added: ☐] | [removed: þ Yes o] No |

| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting [removed: company] [added: company,] or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | | | | | | | | [removed: | |]

| Large accelerated filer [removed: þ] | [removed: | |] [added: ☑] | | [added: Accelerated filer] | | | [removed: Accelerated filer o] | [added: ☐] |

| Non-accelerated filer [removed: o] | [removed: | | | | |] [added: ☐] | | Smaller reporting company [removed: o] | | [added: | | ☐ |]

| | | | [removed: | | | | |] Emerging growth company [removed: o] | | [added: | | ☐ |]

| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [removed: o] | | | | | | | [removed: | |] [added: ☐] |

| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). | | | | [removed: | |] [added: ☐] | [added: Yes] | [added: ☑] | [removed: o Yes þ] No |

The aggregate market value of the registrant’s common stock held by non-affiliates was approximately [removed: $65,262,991,789] [added: $70,617,679,934] as of June [removed: 30, 2018,] [added: 28, 2019,] based on the closing price of the common stock on the New York Stock Exchange.

For purposes of this calculation, only executive officers and directors are deemed to be [removed: the] affiliates of the registrant.

As of February [removed: 19, 2019,] [added: 12, 2020,] the registrant had [removed: 1,297,082,165] [added: 1,304,159,680] shares of common stock [removed: issued and] outstanding.

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Information contained in the definitive proxy statement for CVS Health Corporation’s [removed: 2019] [added: 2020] Annual Meeting of Stockholders, to be filed [removed: on or about April 5,] [added: with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31,] 2019 (the “Proxy Statement”), is incorporated by reference in [removed: response to Items 10 through 14 of Part] [added: Parts] III [added: and IV] to the extent described therein.

[removed: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]

| | | [removed: Page] [added: Page] |

| [removed: Part I] [added: Part I] | | |

| Item 1: | [removed: [Business](#s818286CA50D457899B0F48E82F4F2C61)] [added: [Business](#s1cd14bb447b64f8fb85299c11228c546)] | [removed: [1](#s818286CA50D457899B0F48E82F4F2C61)] [added: [2](#s1cd14bb447b64f8fb85299c11228c546)] |

| Item 1A: | [Risk [removed: Factors](#s2EBDAD10671A57C7BCC63B8D4926BD71)] [added: Factors](#s7569003a9d7a41c5a26e8114b5c0067c)] | [removed: [28](#s2EBDAD10671A57C7BCC63B8D4926BD71)] [added: [29](#s7569003a9d7a41c5a26e8114b5c0067c)] |

| Item 1B: | [Unresolved Staff [removed: Comments](#sCE12717B247E546FB9F1B84A9E6B1405)] [added: Comments](#s3653e460421043ff92eeeb9a7c8a67d5)] | [removed: [59](#sCE12717B247E546FB9F1B84A9E6B1405)] [added: [52](#s3653e460421043ff92eeeb9a7c8a67d5)] |

| Item 2: | [removed: [Properties](#s019F552D9BEC54F884952E4BA3558484)] [added: [Properties](#s087f1f6c48ed44bcb0465820aa88bb21)] | [removed: [59](#s019F552D9BEC54F884952E4BA3558484)] [added: [52](#s087f1f6c48ed44bcb0465820aa88bb21)] |

| Item 3: | [Legal [removed: Proceedings](#sD010ADD8AE1E5AB9AA9C8F6E9AE598AD)] [added: Proceedings](#sfce30239f6f041629e07af2d8555097a)] | [removed: [60](#sD010ADD8AE1E5AB9AA9C8F6E9AE598AD)] [added: [52](#sfce30239f6f041629e07af2d8555097a)] |

(Mark One)

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| --- | --- |

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| Delaware | 05-0494040 |

| | | | |

| --- | --- | --- | --- |

| | | | |

| (Address of principal executive offices) | | | (Zip Code) |

| --- | --- | --- |

| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | |

| --- | --- | --- |

| | [Information about our Executive Officers](#s970f62f816bf4b90acfa246a103dbcbc) | [54](#s970f62f816bf4b90acfa246a103dbcbc) |

| | | |

| | | |

| | | |

| | [Signatures](#s0d65bd21dc8144f4a82258dd489b58c5) | [178](#s0d65bd21dc8144f4a82258dd489b58c5) |

Unless the context otherwise requires, references to the terms “we,” “our” or “us” used throughout this Annual Report on Form 10-K (this “10-K”) refer to CVS Health Corporation (a Delaware corporation) (“CVS Health”) and its subsidiaries (collectively, the “Company”).

References to competitors and other companies throughout this 10-K, including the information incorporated herein by reference, are for illustrative or comparison purposes only and do not indicate that these companies are the Company’s or any segment’s only competitors or closest competitors.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

*The Private Securities Litigation Reform Act of 1995 (the “Reform Act”) provides a “safe harbor” for forward-looking statements, so long as (1) those statements are identified as forward-looking, and (2) the statements are accompanied by meaningful cautionary statements that identify important factors that could cause actual results to differ materially from those discussed in the statement.

We want to take advantage of these safe harbor provisions.*

*Certain information contained in this 10-K is forward-looking within the meaning of the Reform Act or SEC rules.

This information includes, but is not limited to: “Outlook for 2020” of Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included in Item 7, “Quantitative and Qualitative Disclosures About Market Risk” included in Item 7A, “Government Regulation” included in Item 1, and “Risk Factors” included in Item 1A.

In addition, throughout this 10-K and our other reports and communications, we use the following words or variations or negatives of these words and similar expressions when we intend to identify forward-looking statements:*

| *·* | *Anticipates* | *·* | *Believes* | *·* | *Can* | *·* | *Continue* | *·* | *Could* |

| *·* | *Estimates* | *·* | *Evaluate* | *·* | *Expects* | *·* | *Explore* | *·* | *Forecast* |

| *·* | *Guidance* | *·* | *Intends* | *·* | *Likely* | *·* | *May* | *·* | *Might* |

| *·* | *Outlook* | *·* | *Plans* | *·* | *Potential* | *·* | *Predict* | *·* | *Probable* |

| *·* | *Projects* | *·* | *Seeks* | *·* | *Should* | *·* | *View* | *·* | *Will* |

*All statements addressing the future operating performance of CVS Health or any segment or any subsidiary and/or future events or developments, including statements relating to corporate strategy; revenue or adjusted revenue; operating income or adjusted operating income; earnings per share or adjusted earnings per share; Pharmacy Services segment business, sales results and/or trends and/or operations; Retail/LTC segment business, sales results and/or trends and/or operations; Health Care Benefits segment business, sales results and/or trends, medical cost trends, medical membership, Medicare Part D membership, medical benefit ratios and/or operations; incremental investment spending; interest expense; effective tax rate; weighted-average share count; cash flow from operations; net capital expenditures; cash available for debt repayment; integration synergies; net synergies; integration costs; enterprise modernization; transformation; leverage ratio; cash available for enhancing shareholder value; inventory reduction, turn rate and/or loss rate; debt ratings; the Company’s ability to attract or retain customers and clients; store development and/or relocations; new product development; and the impact of industry and regulatory developments, as well as statements expressing optimism or pessimism about future operating results or events, are forward-looking statements within the meaning of the Reform Act.*

*Forward-looking statements rely on a number of estimates, assumptions and projections concerning future events, and are subject to a number of significant risks and uncertainties and other factors that could cause actual results to differ materially from those statements.

Many of these risks and uncertainties and other factors are outside our control.

Certain of these risks and uncertainties and other factors are described under “Risk Factors” included in Item 1A of this 10-K; these are not the only risks and uncertainties we face.

There can be no assurance that the Company has identified all the risks that affect it.

Additional risks and uncertainties not presently known to the Company or that the Company currently believes to be immaterial also may adversely affect the Company’s businesses.

If any of those risks or uncertainties develops into actual events, these events or circumstances could have a material adverse effect on the Company’s businesses, operating results, cash flows, financial condition and/or stock price, among other effects.*

10-K 1 cvs-2018231x10k.htm FORM 10-K

| (401) 765-1500 | | | | | | | | | |

| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. | | | | | | | | | o |

Portions of the Annual Report to Stockholders for the fiscal year ended December 31, 2018 (the “Annual Report”) are incorporated by reference in response to Items 1, 1A, 2 and 3 of Part I and Items 5, 6, 7, 7A, 8 and 9A of Part II, in each case to the extent described therein.

| | [Signatures](#sED9C9D24545A5438A592CDA3AF364B6C) | [71](#sED9C9D24545A5438A592CDA3AF364B6C) |

[removed: Pharmacy] [added: Pharmacy] Services [removed: Segment][added: Segment]

[removed: | • | Approximately 40] [added: The Pharmacy Services segment includes owned or] leased [added: mail service dispensing pharmacies, call centers,] on-site pharmacy stores, [removed: approximately 25 leased] retail specialty pharmacy stores, [removed: approximately 20] specialty mail [removed: order] [added: service] pharmacies and [removed: approximately 90] branches for infusion and enteral [removed: services. |][added: services throughout the United States.]

[removed: Retail/LTC Segment][added: Retail/LTC Segment]

As of December 31, [removed: 2018,] [added: 2019,] the Retail/LTC segment [removed: had] [added: operated] the following properties:

| • | Approximately [removed: 8,200] [added: 8,170] retail stores, of which approximately [removed: 4%] [added: 5%] were owned. Net selling space for retail stores was approximately [removed: 80.5] [added: 80.3] million square feet as of December 31, [removed: 2018.] [added: 2019.] Approximately [removed: 25%] [added: 45%] of the store base was opened or significantly remodeled within the last five years; |

| • | Approximately [removed: 1,700] [added: 1,725] retail pharmacies and approximately 80 clinics in Target stores; |

| • | [removed: Nine owned] [added: Owned] distribution centers [removed: located in eight states] and [removed: 13] leased distribution facilities [removed: located in twelve additional states and Brazil. The 22 distribution centers totaled] [added: throughout the U.S. totaling] approximately [removed: 10.4] [added: 10.5] million square [removed: feet as of December 31, 2018;] [added: feet;] and |

| • | [removed: Six owned LTC pharmacies, approximately 150] [added: Owned and] leased LTC pharmacies [removed: in 46 states] [added: throughout the U.S.] and [removed: one] [added: an] owned LTC repackaging facility. |

In connection with certain business dispositions completed between [removed: 1991] [added: 1995] and 1997, the Company continues to guarantee lease obligations for [removed: approximately 85] [added: 79] former stores.

The Company is indemnified for these guarantee obligations by the respective [added: initial] purchasers.

For additional information on these guarantees, see “Lease Guarantees” in Note 16 [removed: “Commitments] [added: ‘‘Commitments] and [removed: Contingencies” contained in the “Notes to Consolidated Financial Statements”] [added: Contingencies’’ included] in [removed: the Annual Report, which is incorporated by reference herein.][added: Item 8 of this 10-K.]

[removed: Health] [added: Health] Care Benefits [removed: Segment][added: Segment]

The Health Care Benefits segment’s principal office is an owned building complex [removed: that is] [added: located in Hartford, Connecticut, which totals] approximately 1.7 million square [removed: feet in size and is located in Hartford, Connecticut.][added: feet.]

The Health Care Benefits segment also owns or leases [removed: other] [added: office] space in [removed: the greater Hartford area, Maryland, Pennsylvania, and various field] [added: other] locations in the United States and several other countries.

At the end of the existing lease terms, management believes the leases can be renewed or replaced by [added: alternative space.]

The Company also leases office space in other locations in the United States.

For additional information on the amount of right-of-use assets and lease liabilities for the Company’s leases, see Note 6 ‘‘Leases’’ included in Item 8 of this 10-K.

In addition, the Company leases corporate offices in Arizona, Illinois, Ohio, Pennsylvania, Texas, and Brazil.

As of December 31, 2018, the Pharmacy Services segment had the following properties:

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| --- | --- |

| • | An owned mail service dispensing pharmacy located in Texas; |

| | |

| --- | --- |

| • | Leased mail order dispensing pharmacies located in Hawaii, Illinois and Pennsylvania; |

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| --- | --- |

| • | Leased call centers located in California, Missouri, Pennsylvania, Tennessee and Texas; |

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| --- | --- |

alternative space.

For additional information on the amount of rental obligations for the Company’s leases, see Note 6 ‘‘Leases’’ contained in the “Notes to Consolidated Financial Statements” in the Annual Report, which is incorporated by reference herein.

[removed: PART II][added: PART II]

Information about our Executive Officers

The following sets forth the name, age and biographical information for each of the Registrant’s executive officers as of February 18, 2020.

In each case the officer’s term of office extends to the date of the meeting of the CVS Health Board of Directors (the “Board”) following the next annual meeting of stockholders of CVS Health.

Previous positions and responsibilities held by each of the executive officers over the past five years or more are indicated below:

*Lisa G.

Bisaccia*, age 63, Executive Vice President of CVS Health Corporation since March 2016 and Chief Human Resources Officer of CVS Health Corporation since January 2010; Senior Vice President of CVS Health Corporation from January 2010 through February 2016.

Ms. Bisaccia is also a member of the board of directors of Aramark, a leading global provider of food, facilities and uniform services.

*Eva C.

Boratto*, age 53, Executive Vice President and Chief Financial Officer of CVS Health Corporation since November 2018; Executive Vice President - Controller and Chief Accounting Officer of CVS Health Corporation from March 2017 through November 2018; Senior Vice President - Controller and Chief Accounting Officer of CVS Health Corporation from July 2013 through February 2017.

*Troyen A.

Brennan, M.D*., age 65, Executive Vice President and Chief Medical Officer of CVS Health Corporation since November 2008; Executive Vice President and Chief Medical Officer of Aetna Inc. from February 2006 through November 2008.

*James D.

Clark*, age 55, Senior Vice President - Controller and Chief Accounting Officer of CVS Health Corporation since November 2018; Vice President - Finance and Accounting of CVS Pharmacy, Inc. from September 2009 through October 2018.

*Joshua M.

Flum*, age 50, Executive Vice President, Enterprise Strategy and Digital of CVS Health Corporation since November 2018; Executive Vice President, Corporate Strategy and Business Development of CVS Pharmacy, Inc. from June 2016 through October 2018; Executive Vice President - Pharmacy Services of CVS Pharmacy, Inc. from March 2015 through May 2016; Senior Vice President of Retail Pharmacy of CVS Pharmacy, Inc. from December 2010 through February 2015.

Mr. Flum is a member of the board of directors of CreditRiskMonitor.com, Inc., a company that facilitates the analysis of corporate financial risk, mostly in the context of the extension of trade credit from one business to another.

*Alan M.

Lotvin, M.D*., age 58, served as Executive Vice President - Transformation of CVS Health Corporation from June 2018 through February 2020, and will serve as Executive Vice President of CVS Health Corporation and President of CVS Caremark following the departure of Mr. Rice.

Dr. Lotvin served as Executive Vice President - Specialty Pharmacy, CVS Caremark from November 2012 through May 2018.

*Karen S.

Lynch*, age 57, Executive Vice President of CVS Health Corporation since November 2018; President of Aetna since January 2015; Executive Vice President, Local and Regional Businesses of Aetna from February 2013 through December 2014.

Ms. Lynch is a member of the board of directors of U.S. Bancorp, a banking and financial services company.

*Larry J.

Merlo*, age 64, President and Chief Executive Officer of CVS Health Corporation since March 2011; and a director of CVS Health Corporation since May 2010.

*Thomas M.

Moriarty*, age 56, Executive Vice President and General Counsel of CVS Health Corporation since October 2012; Chief Policy and External Affairs Officer since March 2017; Chief Strategy Officer from March 2014 through February 2017.

*Derica W.

Rice*, age 54, Executive Vice President of CVS Health Corporation and President of CVS Caremark since March 2018; Executive Vice President of Global Services and Chief Financial Officer of Eli Lilly & Company from May 2006 through December 2017.

Mr. Rice is a director of The Walt Disney Company since March 2019 and was a director of Target Corporation from September 2007 until January 2018.

Mr. Rice will be leaving the Company effective March 1, 2020.

*Jonathan C.

Roberts*, age 64, Executive Vice President and Chief Operating Officer of CVS Health Corporation since March 2017 and Interim President of CVS Pharmacy since January 2020; Executive Vice President of CVS Health Corporation and President of CVS Caremark from September 2012 through February 2017.

[removed: Market information][added: Market information]

[removed: The Company’s] [added: CVS Health’s] common stock is listed on the New York Stock Exchange under the symbol “CVS.”

[removed: Holders] [added: Holders] of common [removed: stock][added: stock]

[removed: Dividends][added: Dividends]

Future dividends will depend on the Company’s earnings, capital requirements, financial condition and other factors considered relevant by [removed: the Board.][added: CVS Health’s Board of Directors.]

[removed: Issuer] [added: Issuer] purchases of equity [removed: securities][added: securities]

The following share repurchase programs [removed: were] [added: have been] authorized by the Board:

| [removed: In billions] [added: In billions] | | | | | [removed: Remaining] [added: Remaining] as [removed: of] [added: of] | | |

| [removed: Authorization Date] [added: Authorization Date] | [removed: Authorized] [added: Authorized] | | | | [removed: December] [added: December] 31, [removed: 2018] [added: 2019] | | |

The [removed: share] [added: 2016] Repurchase [removed: Programs, each of which was effective immediately, permit] [added: Program permits] the Company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase transactions, and/or other derivative transactions.

During the three months ended December 31, [removed: 2018] [added: 2019,] the Company did not repurchase any shares of common stock.

See Note 12 ‘‘Shareholders’ Equity’’ [removed: of the “Notes to Consolidated Financial Statements”] [added: included] in [removed: the Annual Report, which is incorporated by reference herein,] [added: Item 8 of this 10-K] for additional information regarding the Company’s share repurchases.

On February 3, 2020, the Company announced that Richard J.

Swift, Richard M.

Bracken and Mark T.

Bertolini would not stand for re-election at the Company’s upcoming Annual Meeting of Stockholders (the “2020 Annual Meeting”).

On February 7, 2020, Mr. Bertolini informed the Company of his decision to resign from the Board, effective immediately.

On February 10, 2020, the Board reduced the size of the Board from 16 to 15 members effective immediately and further reduced the size of the Board to 13 members effective at the time of the 2020 Annual Meeting.

See Note 12 ‘‘Shareholders’ Equity’’ included in Item 8 of this 10-K for information regarding CVS Health’s dividends.

As of February 12, 2020, there were 26,656 registered holders of the registrant’s common stock according to the records maintained by the registrant’s transfer agent.

Each of the share Repurchase Programs was effective immediately.

The 2014 Repurchase Program has been completed.

Stock Performance Graph

The following graph compares the cumulative total shareholder return on CVS Health’s common stock (assuming reinvestment of dividends) with the cumulative total return on the S&P 500 Index, the S&P 500 Food and Staples Retailing Industry Group Index and the S&P 500 Healthcare Sector Group Index from December 31, 2014 through December 31, 2019.

The graph assumes a $100 investment in shares of CVS Health’s common stock on December 31, 2014.


| | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | |

| | December 31, | | | | | | | | | | | | | | | | | | | | | | |

| | 2014 | | | | 2015 | | | | 2016 | | | | 2017 | | | | 2018 | | | | 2019 | | |

| CVS Health Corporation | $ | 100 | | | $ | 103 | | | $ | 85 | | | $ | 80 | | | $ | 74 | | | $ | 87 | |

| S&P 500 (1) | 100 | | | | 101 | | | | 113 | | | | 138 | | | | 132 | | | | 174 | | |

| S&P 500 Food & Staples Retail Group Index (2) | 100 | | | | 98 | | | | 98 | | | | 111 | | | | 112 | | | | 143 | | |

| S&P 500 Health Care Group Index (1) (3) | 100 | | | | 107 | | | | 104 | | | | 127 | | | | 135 | | | | 163 | | |

_____________________________________________

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| --- | --- |

| (1) | Includes CVS Health. |

| | |

| --- | --- |

| (2) | Includes 5 companies (COST, KR, SYY, WBA, WMT). |

| | |

| --- | --- |

| (3) | Includes 61 companies. |

The year-ended values of each investment shown in the preceding graph are based on share price appreciation plus dividends, with the dividends reinvested as of the last business day of the month during which such dividends were ex-dividend.

The calculations exclude trading commissions and taxes.

Total shareholder returns from each investment can be calculated from the year-end investment values shown beneath the graph.

The information under the heading “Holders of Common Stock” in the Annual Report is incorporated by reference herein.

The quarterly cash dividend declared by the Company’s Board of Directors (the “Board”) was $0.50 per share in 2018 and 2017.

| | | | | | | | |

| | | | | | | | |

The selected consolidated financial data of CVS Health Corporation as of and for the periods indicated in the five-year period ended December 31, [removed: 2018, have] [added: 2019, has] been derived from the consolidated financial statements of CVS Health [removed: Corporation and is incorporated herein by reference to the information contained in the Annual Report under the heading “Five-Year Financial Summary.” The selected consolidated financial data should be read in conjunction with the consolidated financial statements and the audit reports of Ernst & Young LLP, which are incorporated by reference elsewhere in this Annual Report on Form 10-K.][added: Corporation.]

The selected consolidated financial data should be read in conjunction with the MD&A included in Item 7 of this 10-K and the audited consolidated financial statements and related notes included in Item 8 of this 10-K.

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| | | | | | | | | | | | | | | | | | | | |

| In millions, except per share amounts | 2019 | | | | 2018 (1) | | | | 2017 | | | | 2016 | | | | 2015 | | |

| Statement of operations data: | | | | | | | | | | | | | | | | | | | |

| Total revenues | $ | 256,776 | | | $ | 194,579 | | | $ | 184,786 | | | $ | 177,546 | | | $ | 153,311 | |

| Operating income | 11,987 | | | | 4,021 | | | | 9,538 | | | | 10,386 | | | | 9,496 | | |

| Income (loss) from continuing operations | 6,631 | | | | (596 | | ) | | 6,631 | | | | 5,320 | | | | 5,230 | | |

| Net income (loss) attributable to CVS Health | 6,634 | | | | (594 | | ) | | 6,622 | | | | 5,317 | | | | 5,237 | | |

| Per common share data: | | | | | | | | | | | | | | | | | | | |

| Basic earnings (loss) per common share: | | | | | | | | | | | | | | | | | | | |

| Income (loss) from continuing operations attributable to CVS Health | $ | 5.10 | | | $ | (0.57 | ) | | $ | 6.48 | | | $ | 4.93 | | | $ | 4.65 | |

| Income (loss) from discontinued operations attributable to CVS Health | $ | — | | | $ | — | | | $ | (0.01 | ) | | $ | — | | | $ | 0.01 | |

| Net income (loss) attributable to CVS Health | $ | 5.10 | | | $ | (0.57 | ) | | $ | 6.47 | | | $ | 4.93 | | | $ | 4.66 | |

| Diluted earnings (loss) per common share: | | | | | | | | | | | | | | | | | | | |

| Income (loss) from continuing operations attributable to CVS Health | $ | 5.08 | | | $ | (0.57 | ) | | $ | 6.45 | | | $ | 4.91 | | | $ | 4.62 | |

| Income (loss) from discontinued operations attributable to CVS Health | $ | — | | | $ | — | | | $ | (0.01 | ) | | $ | — | | | $ | 0.01 | |

| Net income (loss) attributable to CVS Health | $ | 5.08 | | | $ | (0.57 | ) | | $ | 6.44 | | | $ | 4.90 | | | $ | 4.63 | |

| Dividends per common share | $ | 2.00 | | | $ | 2.00 | | | $ | 2.00 | | | $ | 1.70 | | | $ | 1.40 | |

| Balance sheet and other data: | | | | | | | | | | | | | | | | | | | |

| Total assets | $ | 222,449 | | | $ | 196,456 | | | $ | 95,131 | | | $ | 94,462 | | | $ | 92,437 | |

| Long-term debt, less current portion | $ | 64,699 | | | $ | 71,444 | | | $ | 22,181 | | | $ | 25,615 | | | $ | 26,267 | |

| Total shareholders’ equity | $ | 64,170 | | | $ | 58,543 | | | $ | 37,695 | | | $ | 36,834 | | | $ | 37,203 | |

| Number of stores (at end of year) | 9,941 | | | | 9,967 | | | | 9,846 | | | | 9,750 | | | | 9,681 | | |

_____________________________________________

| | |

| --- | --- |

| (1) | On November 28, 2018, the Company acquired Aetna. Aetna’s operations are included in the Company’s consolidated financial statements subsequent to the Aetna Acquisition Date. See Note 2 ‘‘Acquisitions and Divestitures’’ included in Item 8 of this 10-K for additional information. |

Index to Consolidated Financial Statements

| | |

| --- | --- |

| | |

| | Page |

| [Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017](#s07669AC5CAF05721BC439C70A8159B1B) | [91](#s07669AC5CAF05721BC439C70A8159B1B) |

| | |

| [Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2019, 2018 and 2017](#sBDD36ED7549A598EB6EE42F151568D2D) | [92](#sBDD36ED7549A598EB6EE42F151568D2D) |

| | |

| [Consolidated Balance Sheets as of December 31, 2019 and 2018](#s6C8AD780A658531F9232A1FC9324C490) | [93](#s6C8AD780A658531F9232A1FC9324C490) |

| | |

| [Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017](#sC58EA9D8B86E51FAA2B1748EC7F1FB61) | [94](#sC58EA9D8B86E51FAA2B1748EC7F1FB61) |

| | |

| [Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2019, 2018 and 2017](#s0DEA84317B2C5813B86A33CF48D70F14) | [96](#s0DEA84317B2C5813B86A33CF48D70F14) |

| | |

| [Notes to Consolidated Financial Statements](#s66894430CA1755C2A77059E7EABCCCBC) | [97](#s66894430CA1755C2A77059E7EABCCCBC) |

| | |

| [Reports of Independent Registered Public Accounting Firm](#s79E4DC93159A5F69805356EA3CA6E4EC) | [164](#s79E4DC93159A5F69805356EA3CA6E4EC) |

| | |

| [Quarterly Financial Information (Unaudited)](#sE00AEC132FA5556F9EE9E6167CE0F2EB) | [168](#sE00AEC132FA5556F9EE9E6167CE0F2EB) |

[Index to Consolidated Financial Statements](#s4d0cd8443c3d45a29aae0f0716b4cae6)

Consolidated Statements of Operations

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | |

| | For the Years Ended December 31, | | | | | | | | | | |

| In millions, except per share amounts | 2019 | | | | 2018 | | | | 2017 | | |

| Revenues: | | | | | | | | | | | |

| Products | $ | 185,236 | | | $ | 183,910 | | | $ | 180,063 | |

| Premiums | 63,122 | | | | 8,184 | | | | 3,558 | | |

| Services | 7,407 | | | | 1,825 | | | | 1,144 | | |

| Net investment income | 1,011 | | | | 660 | | | | 21 | | |

| Total revenues | 256,776 | | | | 194,579 | | | | 184,786 | | |

| Operating costs: | | | | | | | | | | | |

| Cost of products sold | 158,719 | | | | 156,447 | | | | 153,448 | | |

| Benefit costs | 52,529 | | | | 6,594 | | | | 2,810 | | |

| Goodwill impairments | — | | | | 6,149 | | | | 181 | | |

| Operating expenses | 33,541 | | | | 21,368 | | | | 18,809 | | |

| Total operating costs | 244,789 | | | | 190,558 | | | | 175,248 | | |

| Operating income | 11,987 | | | | 4,021 | | | | 9,538 | | |

The information contained in “Consolidated Statements of Operations,” “Consolidated Statements of Comprehensive Income (Loss),” “Consolidated Balance Sheets,” “Consolidated Statements of Shareholders’ Equity,” “Consolidated Statements of Cash Flows,” “Notes to Consolidated Financial Statements,” and “Report of Independent Registered Public Accounting Firm” in the Annual Report, is incorporated by reference herein.

[removed: Evaluation] [added: Evaluation] of disclosure controls and [removed: procedures][added: procedures]

The Company’s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15 (f) and 15d-15(f) under the Securities Exchange Act of 1934) as of December 31, [removed: 2018,] [added: 2019,] have concluded that as of such date the Company’s disclosure controls and procedures were adequate and effective at a reasonable assurance level and designed to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to such officers on a timely basis.

[removed: Internal] [added: Changes in internal] control over financial [removed: reporting][added: reporting]

[removed: Changes in] [added: Management’s report on] internal control over financial [removed: reporting][added: reporting]

[removed: The] [added: During the fourth quarter ended December 31, 2019, the] Company [removed: is in] [added: completed] the process of integrating the [removed: historical] internal control over financial reporting of Aetna with the rest of the Company.

Other than the foregoing, there has been no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that occurred during the fourth quarter ended December 31, [removed: 2018] [added: 2019] that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting.

The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the Company’s consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements.

In order to ensure the Company’s internal control over financial reporting is effective, management regularly assesses such control and did so most recently for its financial reporting as of December 31, 2019.

Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the criteria established in *Internal Control-Integrated Framework* issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework).

This evaluation included review of the documentation, evaluation of the design effectiveness and testing of the operating effectiveness of controls.

The Company’s system of internal control over financial reporting is enhanced by periodic reviews by the Company’s internal auditors, written policies and procedures and a written Code of Conduct adopted by CVS Health’s Board of Directors, applicable to all employees of the Company.

In addition, the Company has an internal Disclosure Committee, comprised of management from each functional area within the Company, which performs a separate review of disclosure controls and procedures.

There are inherent limitations in the effectiveness of any system of internal control over financial reporting.

Based on management’s assessment, management concluded that the Company’s internal control over financial reporting is effective and provides reasonable assurance that assets are safeguarded and that the financial records are reliable for preparing financial statements as of December 31, 2019.

Ernst & Young LLP, the Company’s independent registered public accounting firm, is appointed by CVS Health’s Board of Directors and ratified by CVS Health’s stockholders.

They were engaged to render an opinion regarding the fair presentation of the Company’s consolidated financial statements as well as conducting an audit of internal control over financial reporting.

Their reports included in Item 8 of this Form 10-K are based upon audits conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States).

The “Management’s Report on Internal Control Over Financial Reporting” and “Report of Independent Registered Public Accounting Firm” sections of the Annual Report are incorporated by reference herein.

These sections contain management’s report on the Company’s internal control over financial reporting and the Independent Registered Public Accounting Firm’s report with respect to the effectiveness the Company’s internal control over financial reporting.

In conducting its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018, management has elected to exclude Aetna from that assessment, as permitted under SEC rules.

Aetna’s operations are included in the Company’s 2018 consolidated financial statements for the period from November 28, 2018 to December 31, 2018 and represented 21% of the Company’s consolidated total assets as of December 31, 2018 and 3% of the Company’s consolidated total revenues for the year ended December 31, 2018.

No events have occurred during the fourth quarter ended December 31, [removed: 2018] [added: 2019] that would require disclosure under this item.

[removed: PART III][added: PART III]

The sections of the Proxy Statement under the captions “Committees of the [removed: Board,”] [added: Board as of the Annual Meeting,”] “Code of Conduct,” “Audit Committee Report,” [added: and] “Biographies of our Incumbent Board [removed: Nominees,” and “Section 16(a) Beneficial Ownership Reporting Compliance”] [added: Nominees”] are incorporated [added: herein] by [removed: reference herein.][added: reference.]

Information concerning the Executive Officers of CVS Health Corporation is included in Part I of this 10-K pursuant to General Instruction G to Form 10-K.

Executive Officers of the Registrant

The following sets forth the name, age and biographical information for each of the Registrant’s executive officers as of February 28, 2019.

In each case the officer’s term of office extends to the date of the board of directors meeting following the next annual meeting of stockholders of the Company.

Previous positions and responsibilities held by each of the executive officers over the past five years or more are indicated below:

Lisa G.

Bisaccia, age 62, Executive Vice President of CVS Health Corporation since March 2016 and Chief Human Resources Officer of CVS Health Corporation since January 2010; Senior Vice President of CVS Health Corporation from January 2010 through February 2016; Vice President, Human Resources of CVS Pharmacy, Inc. from September 2004 through December 2009.

Ms. Bisaccia is also a member of the board of directors of Aramark, a leading global provider of food, facilities and uniform services.

Eva C.

Boratto, age 52, Executive Vice President and Chief Financial Officer of CVS Health Corporation since November 2018; Executive Vice President - Controller and Chief Accounting Officer of CVS Health Corporation from March 2017 through November 2018; Senior Vice President - Controller and Chief Accounting Officer of CVS Health Corporation from July 2013 through February 2017; Senior Vice President of PBM Finance from July 2010 through June 2013.

Troyen A.

Brennan, M.D., age 64, Executive Vice President and Chief Medical Officer of CVS Health Corporation since November 2008; Executive Vice President and Chief Medical Officer of Aetna Inc. from February 2006 through November 2008.

James D.

Clark, age 54, Senior Vice President - Controller and Chief Accounting Officer of CVS Health Corporation since November 2018; Vice President - Finance and Accounting of CVS Pharmacy, Inc. from September 2009 through October 2018.

Joshua M.

Flum, age 49, Executive Vice President, Enterprise Strategy and Digital since November 2018; Executive Vice President, Corporate Strategy and Business Development of CVS Pharmacy, Inc. from June 2016 through October 2018; Executive Vice President - Pharmacy Services of CVS Pharmacy, Inc. from March 2015 through May 2016; Senior Vice President of Retail Pharmacy of CVS Pharmacy, Inc. from December 2010 through February 2015.

Mr. Flum is a member of the board of directors of CreditRiskMonitor.com, Inc., a company that facilitates the analysis of corporate financial risk, mostly in the context of the extension of trade credit from one business to another.

Kevin P.

Hourican, age 45, Executive Vice President of CVS Health Corporation and President of CVS Pharmacy since April 2018; Executive Vice President - Retail Pharmacy and Supply Chain of CVS Pharmacy, Inc. from June 2016 through March 2018; Senior Vice President, Field Operations and Supply Chain of CVS Pharmacy, Inc. from June 2014 through May 2016; Senior Vice President, Field Operations of CVS Pharmacy, Inc. from June 2012 through May 2014.

Alan M.

Lotvin, M.D., age 57, Executive Vice President - Transformation of CVS Health Corporation since June 2018; Executive Vice President - Specialty Pharmacy, CVS Caremark from November 2012 through May 2018.

Karen S.

Lynch, age 56, Executive Vice President of CVS Health Corporation and President of Aetna since November 2018; President of Aetna from January 2015 to the present; Executive Vice President, Local and Regional Businesses of Aetna from February 2013 through December 2014; Executive Vice President, Head of Specialty Products of Aetna from July 2012 through January 2013.

Ms. Lynch is a member of the board of directors of U.S. Bancorp, a banking and financial services company.

Larry J.

Merlo, age 63, President and Chief Executive Officer of CVS Health Corporation since March 2011; President and Chief Operating Officer of CVS Health Corporation from May 2010 through March 2011; President of CVS Pharmacy from January 2007 through August 2011; Executive Vice President of CVS Health Corporation from January 2007 through May 2010; also a director of CVS Health Corporation since May 2010.

Thomas M.

Moriarty, age 55, Executive Vice President and General Counsel of CVS Health Corporation since October 2012 and Chief Policy and External Affairs Officer since March 2017; Chief Strategy Officer from March 2014 through February 2017.

Derica W.

Rice, age 54, Executive Vice President of CVS Health Corporation and President of CVS Caremark since March 2018; Executive Vice President of Global Services and Chief Financial Officer of Eli Lilly & Co. from May 2006 through December 2017.

Mr. Rice was formerly a director of Target Corporation from September 2007 until January 2018, and is a candidate for election to the board of directors of The Walt Disney Company in March 2019.

Jonathan C.

Roberts, age 63, Executive Vice President and Chief Operating Officer of CVS Health Corporation since March 2017; Executive Vice President of CVS Health Corporation and President of CVS Caremark from September 2012 through February 2017; Executive Vice President of CVS Health Corporation and Chief Operating Officer of CVS Caremark from October 2010 through August 2011.

The sections of the Proxy Statement under the captions “Non-Employee Director Compensation” and “Executive Compensation and Related Matters,” including [removed: “Compensation Discussion and Analysis,”] “Letter from the Management Planning and Development Committee,” “Compensation Committee [removed: Report”] [added: Report,” “Compensation Discussion] and [removed: “Executive Compensation Tables”] [added: Analysis” and “Compensation of Named Executive Officers”] are incorporated [added: herein] by [removed: reference herein.][added: reference.]

The sections of the Proxy Statement under the captions “Share Ownership of Directors and Certain Executive Officers” and “Share Ownership of Principal Stockholders” are incorporated [added: herein] by [removed: reference herein.][added: reference.]

The following table summarizes information about the [removed: Company’s] [added: registrants] common stock that may be issued upon the exercise of options, warrants and rights under all of [added: the Company’s] equity compensation plans as of December 31, [removed: 2018.][added: 2019:]

| Equity compensation plans approved by stockholders (3) | [removed: 27,102] [added: 32,237] | | | $ | [removed: 77.51] [added: 73.32] | | | [removed: 25,927] [added: 17,152] | |

| Equity compensation plans not approved by stockholders [removed: (4)(5)] [added: (4) (5)] | [removed: 5,136] [added: 4,518] | | | [removed: 43.01] [added: 43.46] | | | | [removed: 31,633] [added: 26,849] | |

| (2) | Consists of: (i) [removed: 18,597] [added: 21,184] shares of common stock underlying outstanding options, (ii) [removed: 1,435] [added: 1,110] shares of common stock issuable upon the exercise of outstanding stock appreciation rights (“SARs”) and (iii) [removed: 12,206] [added: 14,461] shares of common stock issuable on the vesting of outstanding restricted stock units, deferred stock units and performance stock units, assuming target level performance in the case of performance stock units. The number of shares included with respect to [added: outstanding SARs is the number of shares of CVS Health common stock that would have been issued had the SARs been exercised based on the closing price per share of CVS Health common stock on December 31, 2019, as reported on the NYSE, which was $74.29.] |

| (5) | Amount in column (c) consists of the maximum number of shares of [removed: the Company’s] [added: CVS Health] common stock available for future issuance under the Aetna Stock Plan as of December 31, [removed: 2018.] [added: 2019.] |

The Aetna Stock Plan is designed to promote the Company’s interests and those of its stockholders and to further align the interests of stockholders and employees by tying awards to total return to stockholders, enabling plan participants to acquire additional equity interests in the Company and providing compensation opportunities [removed: dependent upon the Company’s performance.]

Under the Aetna Stock Plan, eligible participants can be granted stock options to purchase shares of [removed: the Company’s] [added: CVS Health] common stock, SARs, [removed: time vesting] [added: time-vesting] and/or [removed: performance vesting] [added: performance-vesting] incentive stock or incentive units and other stock based awards.

As of December 31, [removed: 2018,] [added: 2019,] the maximum number of shares of [removed: the Company’s] [added: CVS Health] common stock that may be issued under the awards outstanding under the Aetna Stock Plan was [removed: 5.1] [added: 4.5] million shares, subject to adjustment for corporate transactions and [removed: 31.6] [added: 26.8] million shares remained available for future awards.

| | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) (2) (a) | | | Weighted average exercise price of outstanding options, warrants and rights (b) | | | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column) (1) (c) | |

| Total | 36,755 | | | $ | 71.83 | | | 44,001 | |

dependent upon the Company’s performance.

| | | | | | | | | | |

| | | | | | | | | | |

| | Number of | | | | | | | Number of securities | |

| | securities to be | | | Weighted | | | | remaining available for | |

| | issued upon | | | average exercise | | | | future issuance under | |

| | exercise of | | | price of | | | | equity compensation | |

| | outstanding | | | outstanding | | | | plans (excluding | |

| | options, warrants | | | options, warrants | | | | securities reflected in | |

| | and rights (1)(2) | | | and rights | | | | first column) (1) | |

| | (a) | | | (b) | | | | (c) | |

| Total | 32,238 | | | $ | 75.04 | | | 57,560 | |

outstanding SARs is the number of shares of the Company’s common stock that would have been issued had the SARs been exercised based on the closing price per share of the Company’s common stock on December 31, 2018, as reported on the NYSE, which was $65.52.

The sections of the Proxy Statement under the captions “Independence Determinations for Directors” and “Related Person Transaction Policy” are incorporated [added: herein] by [removed: reference herein.][added: reference.]

The section of the Proxy Statement under the caption “Item 2: Ratification of Appointment of Independent Registered Public Accounting [removed: Firm”] [added: Firm for 2020”] is incorporated [added: herein] by [removed: reference herein.][added: reference.]

[removed: PART IV][added: PART IV]

The following documents are filed as part of this [removed: Annual Report on Form] 10-K:

| 3. | Exhibits. The exhibits listed in the “Index to Exhibits” in this Item 15 are filed or incorporated by reference as part of this [removed: Annual Report on Form] 10-K. Exhibits marked with an asterisk (*) are management contracts or compensatory plans or arrangements. Exhibits other than those listed are omitted because they are not required to be listed or are not applicable. Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Registrant hereby agrees to furnish to the Securities and Exchange Commission a copy of any omitted instrument that is not required to be listed. |

[removed: INDEX] [added: INDEX] TO [removed: EXHIBITS][added: EXHIBITS]

| [removed: Exhibit] [added: Exhibit] | | [removed: Description] [added: Description] |

| [removed: 2] [added: 2] | | [removed: Plan] [added: Plan] of acquisition, reorganization, arrangement, liquidation or [removed: succession] [added: succession] |

| 2.1 | | [Agreement and Plan of Merger, dated as of May 20, 2015, among CVS Pharmacy, Inc., Tree Merger Sub, Inc. and Omnicare, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed May 21, [removed: 2015; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000006480315000030/exhibit21agreementandplano.htm)] [added: 2015).](http://www.sec.gov/Archives/edgar/data/64803/000006480315000030/exhibit21agreementandplano.htm)] |

| [removed: 2.2] [added: 2.3] | | [Agreement and Plan of Merger, dated as of December 3, 2017, among CVS Health Corporation, Hudson Merger Sub Corp. and Aetna Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed December 5, [removed: 2017; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312517361800/d444237dex21.htm)] [added: 2017).](http://www.sec.gov/Archives/edgar/data/64803/000119312517361800/d444237dex21.htm)] |

| [removed: 2.3] [added: 2.2] | | [Master Transaction Agreement [added: dated as of October 22, 2017,] by and between Aetna Inc. and Hartford Life and Accident Insurance Company [removed: dated as of October 22, 2017.](https://www.sec.gov/Archives/edgar/data/64803/000006480319000013/ex23.htm)] [added: (incorporated by reference to Exhibit 2.3 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018).](http://www.sec.gov/Archives/edgar/data/64803/000006480319000013/ex23.htm)] |

| [removed: 3] [added: 3] | | [removed: Articles] [added: Articles] of Incorporation and [removed: Bylaws] [added: Bylaws] |

| 3.1 | | [Restated Certificate of Incorporation of the Registrant [added: dated June 4, 2018] (incorporated by reference to Exhibit 3.1C of Registrant’s Current Report on Form 8-K filed June 5, [removed: 2018; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312518184593/d456958dex31c.htm)] [added: 2018).](http://www.sec.gov/Archives/edgar/data/64803/000119312518184593/d456958dex31c.htm)] |

| 3.2 | | [removed: [By-laws] [added: [By-Laws] of the Registrant, as amended and restated [added: June 4, 2018] (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed June 5, [removed: 2018; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312518184593/d456958dex32.htm)] [added: 2018).](http://www.sec.gov/Archives/edgar/data/64803/000119312518184593/d456958dex32.htm)] |

| [removed: 4] [added: 4] | | [removed: Instruments] [added: Instruments] defining the rights of security holders, including [removed: indentures] [added: indentures] |

| 4.1 | | [Specimen common stock certificate (incorporated by reference to Exhibit 4.1 to the Registration Statement of the Registrant ((then known as CVS Corporation) as successor to Melville Corporation) on Form 8-B filed November 4, [removed: 1996; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/0000950103-96-001174.txt)] [added: 1996).](http://www.sec.gov/Archives/edgar/data/64803/0000950103-96-001174.txt)] |

| 4.2 | | [Senior Indenture dated August 15, 2006, between the Registrant and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed August 15, [removed: 2006; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000095010306001962/ex0401.htm)] [added: 2006).](http://www.sec.gov/Archives/edgar/data/64803/000095010306001962/ex0401.htm)] |

| 4.3 | | [Form of the Registrant’s 2020 Floating Rate Note (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed March 12, [removed: 2018; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex41.htm)] [added: 2018).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex41.htm)] |

| 4.4 | | [Form of the Registrant’s 2021 Floating Rate Note (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed March 12, [removed: 2018; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex42.htm)] [added: 2018).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex42.htm)] |

| 4.5 | | [Form of the Registrant’s 2020 Note (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed March 12, [removed: 2018; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex43.htm)] [added: 2018).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex43.htm)] |

| 4.6 | | [Form of the Registrant’s 2021 Note (incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K filed March 12, [removed: 2018; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex44.htm)] [added: 2018).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex44.htm)] |

| 4.7 | | [Form of the Registrant’s 2023 Note (incorporated by reference to Exhibit 4.5 to the Registrant’s Current Report on Form 8-K filed March 12, [removed: 2018; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex45.htm)] [added: 2018).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex45.htm)] |

| 4.8 | | [Form of the Registrant’s 2025 Note (incorporated by reference to Exhibit 4.6 to the Registrant’s Current Report on Form 8-K filed March 12, [removed: 2018; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex46.htm)] [added: 2018).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex46.htm)] |

| 4.9 | | [Form of the Registrant’s 2028 Note (incorporated by reference to Exhibit 4.7 to the Registrant’s Current Report on Form 8-K filed March 12, [removed: 2018; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex47.htm)] [added: 2018).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex47.htm)] |

| 4.10 | | [Form of the Registrant’s 2038 Note (incorporated by reference to Exhibit 4.8 to the Registrant’s Current Report on Form 8-K filed March 12, [removed: 2018; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex48.htm)] [added: 2018).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex48.htm)] |

| 4.11 | | [Form of the Registrant’s 2048 Note (incorporated by reference to Exhibit 4.9 to the Registrant’s Current Report on Form 8-K filed March 12, [removed: 2018; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex49.htm)] [added: 2018).](http://www.sec.gov/Archives/edgar/data/64803/000119312518079390/d547656dex49.htm)] |

| [removed: 10] [added: 10] | | [removed: Material Contracts] [added: Material Contracts] |

| 10.1 | | [removed: [Credit Agreement] [added: [Five Year Credit Agreement,] dated as of [removed: July 1, 2015,] [added: May 18, 2017,] by and among the Registrant, the lenders party thereto and The Bank of New York Mellon, as Administrative Agent (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, [removed: 2015 (Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000006480315000054/exhibit102creditagreementj.htm)] [added: 2017).](http://www.sec.gov/Archives/edgar/data/64803/000155837017006198/cvs-20170630ex1026f1efc.htm)] |

| 10.2 | | [Amendment No. 1 to [added: Five Year] Credit Agreement dated as of December 15, 2017, to the [added: Five Year] Credit Agreement dated as of [removed: July 1, 2015,] [added: May 18, 2017,] by and among the Registrant, the lenders party thereto and The Bank of New York Mellon, as Administrative Agent (incorporated by reference to Exhibit [removed: 10.5] [added: 10.3] to the Registrant’s Current Report on Form 8-K filed December 19, [removed: 2017; Commission File No. 001-01-011).](http://www.sec.gov/Archives/edgar/data/64803/000119312517373753/d508259dex105.htm)] [added: 2017).](http://www.sec.gov/Archives/edgar/data/64803/000119312517373753/d508259dex103.htm)] |

| 10.3 | | [Amendment No. 2 to [added: Five Year] Credit Agreement dated as of May 17, 2018, to the [added: Five Year] Credit Agreement dated as of [removed: July 1, 2015,] [added: May 18, 2017,] by and among the Registrant, the lenders party thereto and The Bank of New York Mellon, as Administrative Agent (incorporated by reference to Exhibit [removed: 10.3] [added: 10.4] to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, [removed: 2018; Commission File No. 001-01-011).](http://www.sec.gov/Archives/edgar/data/64803/000155837018006683/cvs-20180630ex1031b224c.htm)] [added: 2018).](http://www.sec.gov/Archives/edgar/data/64803/000155837018006683/cvs-20180630ex1045acd05.htm)] |

| 10.4 | | [removed: [Five] [added: [Amendment No. 3, dated as of May 16, 2019, to the Five] Year Credit [removed: Agreement,] [added: Agreement] dated as of May 18, 2017, by and among the Registrant, the lenders party thereto and The Bank of New York Mellon, as Administrative Agent (incorporated by reference to Exhibit [removed: 10.2 to] [added: 10.4 of] the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, [removed: 2017; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000155837017006198/cvs-20170630ex1026f1efc.htm)] [added: 2019).](http://www.sec.gov/Archives/edgar/data/64803/000006480319000039/ex104-06302019.htm)] |

| [removed: 10.5] [added: 10.6] | | [Amendment No. [removed: 1 to Five Year Credit Agreement] [added: 1,] dated as of [removed: December 15, 2017,] [added: May 16, 2019,] to the Five Year Credit Agreement dated as of May [removed: 18, 2017,] [added: 17, 2018,] by and among the Registrant, the lenders party thereto and The Bank of New York Mellon, as Administrative Agent (incorporated by reference to Exhibit 10.3 [removed: to] [added: of] the Registrant’s [removed: Current] [added: Quarterly] Report on Form [removed: 8-K filed December 19, 2017; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312517373753/d508259dex103.htm)] [added: 10-Q for the fiscal quarter ended June 30, 2019).](http://www.sec.gov/Archives/edgar/data/64803/000006480319000039/ex103-06302019.htm)] |

| [removed: 10.6] [added: 10.5] | | [removed: [Amendment No. 2 to Five] [added: [Five] Year Credit Agreement dated as of May 17, 2018, [removed: to the Five Year Credit Agreement dated as of May 18, 2017,] by and among the Registrant, the lenders party thereto and The Bank of New York Mellon, as Administrative Agent (incorporated by reference to Exhibit [removed: 10.4] [added: 10.2] to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, [removed: 2018; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000155837018006683/cvs-20180630ex1045acd05.htm)] [added: 2018).](http://www.sec.gov/Archives/edgar/data/64803/000155837018006683/cvs-20180630ex102e86994.htm)] |

| 10.7 | | [removed: [Term Loan] [added: [364-Day Credit] Agreement dated as of [removed: December 15, 2017,] [added: May 16, 2019] by and among the Registrant, the lenders party thereto and [removed: Barclays] Bank [removed: PLC,] [added: of America, N.A.,] as [removed: administrative agent] [added: Administrative Agent] (incorporated by reference to Exhibit 10.1 [removed: to] [added: of] the Registrant’s [removed: Current] [added: Quarterly] Report on Form [removed: 8-K filed December 19, 2017; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312517373753/d508259dex101.htm)] [added: 10-Q for the fiscal quarter ended June 30, 2019).](http://www.sec.gov/Archives/edgar/data/64803/000006480319000039/ex101-06302019.htm)] |

| 10.8 | | [removed: [Amendment No. 1 to Term Loan] [added: [Five Year Credit] Agreement dated as of May [removed: 17, 2018, to the Term Loan Agreement dated as of December 15, 2017,] [added: 16, 2019] by and among the Registrant, the lenders party thereto and [removed: Barclays] Bank [removed: PLC,] [added: of America, N.A.,] as Administrative Agent (incorporated by reference to Exhibit [removed: 10.5 to] [added: 10.2 of] the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, [removed: 2018; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000155837018006683/cvs-20180630ex105816bc5.htm)] [added: 2019).](http://www.sec.gov/Archives/edgar/data/64803/000006480319000039/ex102-06302019.htm)] |

| [removed: 10.14*] [added: 10.12*] | | [The Registrant’s [removed: 1996 Directors] [added: 2007 Employee] Stock [added: Purchase] Plan, as amended [removed: and restated November 5, 2002] (incorporated by reference to Exhibit [removed: 10.18] [added: 10.20] to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December [removed: 28, 2002; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000110465903004471/j8483_ex10d18.htm)] [added: 31, 2015).](http://www.sec.gov/Archives/edgar/data/64803/000006480316000074/a10202007employeestockpurc.htm)] |

| [removed: 10.15*] [added: 10.36*] | | [removed: [Caremark Rx,] [added: [Amended Aetna] Inc. [removed: 2004 Incentive] [added: 2010] Stock [removed: Plan] [added: Incentive Plan, as amended May 19, 2017] (incorporated by reference to Exhibit [removed: 99.2 of] [added: 99.1 to] the Registrant’s Registration Statement [removed: No. 333-141481] on Form S-8 filed [removed: March 22, 2007; Commission File No. 011-01011).](http://www.sec.gov/Archives/edgar/data/64803/000095010307000715/dp05021_ex9902.htm)] [added: November 30, 2018).](http://www.sec.gov/Archives/edgar/data/64803/000119312518339749/d650942dex991.htm)] |

| [removed: 10.16*] [added: 10.9*] | | [The Registrant’s Supplemental Retirement Plan I for Select Senior Management, as amended and restated as of December 31, 2008 (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, [removed: 2009; Commission File No. 011-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312509163865/dex106.htm)] [added: 2009).](http://www.sec.gov/Archives/edgar/data/64803/000119312509163865/dex106.htm)] |

| [removed: 10.17*] [added: 10.18*] | | [The Registrant’s [removed: 1997] [added: Executive] Incentive [removed: Compensation] Plan, as amended [removed: through December 31, 2008] (incorporated by reference to Exhibit [removed: 10.8] [added: 10.4] to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, [removed: 2009; Commission File No. 011-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312509163865/dex108.htm)] [added: 2017).](http://www.sec.gov/Archives/edgar/data/64803/000155837017006198/cvs-20170630ex1043fff6d.htm)] |

| [removed: 10.18*] [added: 10.10*] | | [Form of Enterprise Non-Competition, Non-Disclosure and Developments Agreement between the Registrant and certain of the Registrant’s executive officers (incorporated by reference to Exhibit 10.25 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, [removed: 2013; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000006480314000008/ex1025restrictivecovenanta.htm)] [added: 2013).](http://www.sec.gov/Archives/edgar/data/64803/000006480314000008/ex1025restrictivecovenanta.htm)] |

| [removed: 10.19*] [added: 10.17*] | | [The Registrant’s [removed: 2010] [added: 2017] Incentive Compensation [removed: Plan, as amended through January 15, 2013] [added: Plan] (incorporated by reference to Exhibit A to the Registrant’s Definitive Proxy Statement on Form 14A filed March [removed: 27, 2015; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000120677415001037/cvs_def14a.htm#a1a)] [added: 31, 2017).](http://www.sec.gov/Archives/edgar/data/64803/000120677417001033/cvs3183461-def14a.htm)] |

| [removed: 10.20*] [added: 10.13*] | | [removed: [The Registrant’s Deferred Stock Compensation Plan,] [added: [Universal 409A Definition Document,] as amended (incorporated by reference to Exhibit [removed: 10.17] [added: 10.28] to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, [removed: 2015; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000006480316000074/a1017deferredstockcompensa.htm)] [added: 2015).](http://www.sec.gov/Archives/edgar/data/64803/000006480316000074/a1028universal409adefiniti.htm)] |

| [removed: 10.21*] [added: 10.16*] | | [The Registrant’s [removed: 2007 Employee] [added: Performance-Based Restricted] Stock [removed: Purchase] [added: Unit] Plan, as amended (incorporated by reference to Exhibit [removed: 10.20] [added: 10.27] to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, [removed: 2015; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000006480316000074/a10202007employeestockpurc.htm)] [added: 2016).](http://www.sec.gov/Archives/edgar/data/64803/000006480317000006/ex1027performance-basedres.htm)] |

| 1. | Financial Statements. See “Index to Consolidated Financial Statements” in Item 8 of this 10-K. |

| 4.12 | | [Form of the Registrant’s 2024 Note (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed August 15, 2019).](http://www.sec.gov/Archives/edgar/data/64803/000119312519222479/d791446dex41.htm) |

| 4.13 | | [Form of the Registrant’s 2026 Note (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed August 15, 2019).](http://www.sec.gov/Archives/edgar/data/64803/000119312519222479/d791446dex42.htm) |

| 4.14 | | [Form of the Registrant’s 2029 Note (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed August 15, 2019).](http://www.sec.gov/Archives/edgar/data/64803/000119312519222479/d791446dex43.htm) |

| 4.15 | | [Material terms of outstanding securities that are registered under Section 12 of the 1934 Act as required by Item 202(a)-(d) and (f) of Regulation S-K.](https://www.sec.gov/Archives/edgar/data/64803/000006480320000007/exhibit415-2019.htm) |

| 10.11* | | [The Registrant’s Deferred Stock Compensation Plan, as amended and restated.](https://www.sec.gov/Archives/edgar/data/64803/000006480320000007/exhibit1011-2019.htm) |

| 10.14* | | [The Registrant’s Deferred Compensation Plan, as amended and restated.](https://www.sec.gov/Archives/edgar/data/64803/000006480320000007/exhibit1014-2019.htm) |

| 10.48* | | [Restrictive Covenant Agreement dated June 21, 2019 between the Registrant and Eva Boratto.](https://www.sec.gov/Archives/edgar/data/64803/000006480320000007/exhibit1048-2019.htm) |

| 10.54* | | [Restrictive Covenant Agreement dated June 19, 2019 between the Registrant and Derica Rice.](https://www.sec.gov/Archives/edgar/data/64803/000006480320000007/exhibit1054-2019.htm) |

| 10.56* | | [Restrictive Covenant Agreement dated July 8, 2019 between the Registrant and Thomas Moriarty.](https://www.sec.gov/Archives/edgar/data/64803/000006480320000007/exhibit1056-2019.htm) |

| 10.57* | | Descriptions of certain arrangements not embodied in formal documents as described under the heading “Non-Employee Director Compensation” are incorporated herein by reference to the Proxy Statement (when filed). |

| 104 | | |

| 104 | | Cover Page Interactive Data File - The cover page from the Company's Annual Report on Form 10-K for the year ended December 31, 2019, formatted in Inline XBRL (included as Exhibit 101). |

| 1. | Financial Statements. The following financial statements, related notes and report are incorporated by reference from the Annual Report in Item 8 hereof: |

| |

| --- |

| |

| Consolidated Statements of Operations for the Years Ended December 31, 2018, 2017 and 2016 |

| Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2018, 2017 and 2016 |

| Consolidated Balance Sheets as of December 31, 2018 and 2017 |

| Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016 |

| Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2018, 2017 and 2016 |

| Notes to Consolidated Financial Statements |

| Report of Independent Registered Public Accounting Firm |

| | | |

| | | |

| 10.9 | | [364-Day Credit Agreement dated as of May 17, 2018, by and among the Registrant, the lenders party thereto and The Bank of New York Mellon, as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2018; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000155837018006683/cvs-20180630ex101574691.htm) |

| 10.10 | | [Five Year Credit Agreement dated as of May 17, 2018, by and among the Registrant, the lenders party thereto and The Bank of New York Mellon, as Administrative Agent (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2018; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000155837018006683/cvs-20180630ex102e86994.htm) |

| 10.11 | | [Bridge Facility Commitment Letter dated December 3, 2017, by and among the Registrant, Barclays Bank PLC, Goldman Sachs Bank USA, Goldman Sachs Lending Partners LLC, Bank of America, N.A., and Merrill Lynch, Pierce Fenner & Smith Incorporated (incorporated by reference to Exhibit 2.2 to the Registrant’s Current Report on Form 8-K filed December 5, 2017; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312517361800/d444237dex22.htm) |

| 10.12 | | [Joinder to Bridge Facility Commitment Letter dated as of December 15, 2017, by and among the Registrant, Barclays Bank PLC, Goldman Sachs Bank USA, Goldman Sachs Lending Partners LLC, Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and each of the Additional Commitment Parties party thereto (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed December 19, 2017; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312517373753/d508259dex21.htm) |

| 10.13 | | [364-Day Bridge Term Loan Agreement, dated October 26, 2018, by and among the Registrant, the lenders party thereto and Barclays Bank PLC, as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed October 26, 2018; Commission File No. 001-010011).](http://www.sec.gov/Archives/edgar/data/64803/000119312518309257/d646052dex101.htm) |

| 10.26* | | [The Registrant’s 2017 Incentive Compensation Plan (incorporated by reference to Exhibit A to the Registrant’s Definitive Proxy Statement on Form 14A filed March 31, 2017; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000120677417001033/cvs3183461-def14a.htm) |

| 10.37* | | [The Registrant’s Severance Plan for Non-Store Employees amended as of November 28, 2018.](https://www.sec.gov/Archives/edgar/data/64803/000006480319000013/ex1037.htm) |

| 10.38* | | [The Registrant’s Performance-Based Restricted Stock Unit Program, as amended.](https://www.sec.gov/Archives/edgar/data/64803/000006480319000013/ex1038.htm) |

| 10.44* | | [Amended Aetna Inc. 2010 Stock Incentive Plan, as amended May 19, 2017 (incorporated by reference to Exhibit 99.1 to the Registrant’s Registration Statement on Form S-8 filed November 30, 2018; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000119312518339749/d650942dex991.htm) |

| 10.59* | | [Restrictive Covenant Agreement dated May 20, 2016 between the Registrant and Jonathan C. Roberts (incorporated by reference to Exhibit 10.45 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000006480317000006/ex1045robertsrestrictiveco.htm) |

| 10.62* | | [Change in Control Agreement dated October 1, 2012 between the Registrant and Thomas Moriarity (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2015; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000006480315000023/ex101changeincontrolagreem.htm) |

| 10.63* | | [Restrictive Covenant Agreement dated June 1, 2014 between the Registrant and Thomas Moriarity (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2015; Commission File No. 001-01011).](http://www.sec.gov/Archives/edgar/data/64803/000006480315000023/ex102restrictivecovenantag.htm) |

| 13 | | Annual Report to security holders, Form 10-Q or quarterly report to security holders |

| 13.1 | | [Portions of the 2018 Annual Report to Stockholders of CVS Health Corporation, which are specifically designated in this Annual Report on Form 10-K as being incorporated by reference.](https://www.sec.gov/Archives/edgar/data/64803/000006480319000013/ex131.htm) |

[removed: SIGNATURES][added: SIGNATURES]

| Date: | February [removed: 28, 2019] [added: 18, 2020] | By: | /s/ EVA C. BORATTO |

| | | | [removed: Eva] [added: Eva] C. [removed: Boratto] [added: Boratto] |

| | | | [removed: Executive] [added: Executive] Vice President and Chief Financial [removed: Officer] [added: Officer] |

| [removed: Signature] [added: Signature] | | [removed: Title(s)] [added: Title(s)] | | [removed: Date] [added: Date] |

| /s/ FERNANDO AGUIRRE | | Director | | February [removed: 28, 2019] [added: 18, 2020] |

| [removed: Fernando Aguirre] [added: Fernando Aguirre] | | | | |

| /s/ RICHARD M. BRACKEN | | Director | | February [removed: 28, 2019] [added: 18, 2020] |

| [removed: Richard] [added: Richard] M. [removed: Bracken] [added: Bracken] | | | | |

| /s/ C. DAVID BROWN II | | Director | | February [removed: 28, 2019] [added: 18, 2020] |

| [removed: C.] [added: C.] David Brown [removed: II] [added: II] | | | | |

| /s/ EVA C. BORATTO | | Executive Vice President and Chief Financial | | February [removed: 28, 2019] [added: 18, 2020] |

| [removed: Eva] [added: Eva] C. [removed: Boratto] [added: Boratto] | | Officer (Principal Financial Officer) | | |

| /s/ JAMES D. CLARK | | Senior Vice President - Controller and Chief | | February [removed: 28, 2019] [added: 18, 2020] |

| [removed: James] [added: James] D. [removed: Clark] [added: Clark] | | Accounting Officer (Principal Accounting Officer) | | |

| /s/ ALECIA A. DECOUDREAUX | | Director | | February [removed: 28, 2019] [added: 18, 2020] |

| [removed: Alecia] [added: Alecia] A. [removed: DeCoudreaux] [added: DeCoudreaux] | | | | |

| /s/ NANCY-ANN M. DEPARLE | | Director | | February [removed: 28, 2019] [added: 18, 2020] |

| [removed: Nancy-Ann] [added: Nancy-Ann] M. [removed: DeParle] [added: DeParle] | | | | |

| /s/ DAVID W. DORMAN | | Chair of the Board and Director | | February [removed: 28, 2019] [added: 18, 2020] |

| [removed: David] [added: David] W. [removed: Dorman] [added: Dorman] | | | | |

| /s/ ROGER N. FARAH | | Director | | February [removed: 28, 2019] [added: 18, 2020] |

| [removed: Roger] [added: Roger] N. [removed: Farah] [added: Farah] | | | | |

| /s/ ANNE M. FINUCANE | | Director | | February [removed: 28, 2019] [added: 18, 2020] |

| [removed: Anne] [added: Anne] M. [removed: Finucane] [added: Finucane] | | | | |

| /s/ EDWARD J. LUDWIG | | Director | | February [removed: 28, 2019] [added: 18, 2020] |

| [removed: Edward] [added: Edward] J. [removed: Ludwig] [added: Ludwig] | | | | |

| /s/ LARRY J. MERLO | | President and Chief Executive Officer | | February [removed: 28, 2019] [added: 18, 2020] |

| [removed: Larry] [added: Larry] J. [removed: Merlo] [added: Merlo] | | (Principal Executive Officer) and Director | | |

| /s/ JEAN-PIERRE MILLON | | Director | | February [removed: 28, 2019] [added: 18, 2020] |

| [removed: Jean-Pierre Millon] [added: Jean-Pierre Millon] | | | | |

| /s/ MARY L. SCHAPIRO | | Director | | February [removed: 28, 2019] [added: 18, 2020] |

| [removed: Mary] [added: Mary] L. [removed: Schapiro] [added: Schapiro] | | | | |

| /s/ RICHARD J. SWIFT | | Director | | February [removed: 28, 2019] [added: 18, 2020] |

| [removed: Richard] [added: Richard] J. [removed: Swift] [added: Swift] | | | | |

| /s/ WILLIAM C. WELDON | | Director | | February [removed: 28, 2019] [added: 18, 2020] |

| [removed: William] [added: William] C. [removed: Weldon] [added: Weldon] | | | | |