CVS Health (CVS) 10-K risk factor changes: FY2020 vs FY2019

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

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

You should read the following section in conjunction with the MD&A, included in Item 7 of this [removed: Form] 10-K, our consolidated financial statements and the related notes, included in Item 8 of this 10-K, and our “Cautionary Statement Concerning Forward-Looking Statements” in this 10-K.

[removed: | • |] [added: -] As competition increases in the geographies in which we operate, including competition from new entrants, a significant increase in price compression and/or reimbursement pressures could occur, and this could require us to reevaluate our pricing structures to remain competitive. [removed: |]

[removed: | • |] [added: -] The competitive success of our Pharmacy Services segment is dependent on our ability to establish and maintain contractual relationships with network pharmacies as PBM clients evaluate adopting narrow or restricted retail pharmacy networks. [removed: |]

[removed: | • |] [added: -] The competitive success of our Retail/LTC segment and our specialty pharmacy operations is dependent on our ability to establish and maintain contractual relationships with PBMs and other payors on acceptable terms as the payors’ clients evaluate adopting narrow or restricted retail pharmacy networks. [removed: |]

[removed: | • |] [added: -] In our PBM business, we maintain contractual relationships with brand name drug manufacturers that provide for purchase discounts and/or rebates on drugs dispensed by pharmacies in our retail network and by our specialty and mail order pharmacies (all or a portion of which may be passed on to clients). [removed: Manufacturer’s rebates often depend on a PBM’s ability to meet contractual requirements, including the placement of a manufacturer’s products on the PBM’s formularies. If we lose our relationship with one or more drug manufacturers, or if the discounts or rebates provided by drug manufacturers decline, our operating results, cash flows and/or prospects could be adversely affected. |]

[removed: | • |] [added: -] The PBM industry has been experiencing price compression as a result of competitive pressures and increased client demands for lower prices, increased revenue sharing, including sharing in a larger portion of rebates received from drug manufacturers, enhanced service offerings and/or higher service levels. [removed: Marketplace dynamics and regulatory changes also have adversely affected our ability to offer plan sponsors pricing that includes the use of retail “differential” or “spread,” which could adversely affect our future profitability, and we expect these trends to continue. |]

[removed: | • |] [added: -] 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. [removed: 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. |]

[removed: | • |] [added: -] A shift in the mix of our pharmacy prescription volume towards programs offering lower reimbursement rates as a result of competition or otherwise could adversely affect our margins, including the ongoing shift in pharmacy mix towards 90-day prescriptions at retail and the ongoing shift in pharmacy mix towards Medicare Part D prescriptions. [removed: |]

[removed: | • |] PBM [removed: client contracts often are for a period of approximately three years. However, PBM] clients [removed: may require early or periodic re-negotiation of pricing prior to contract expiration. PBM clients] are generally well informed, can move between us and our competitors and often seek competing bids prior to expiration of their contracts. [removed: We are therefore under pressure |]

[added: We are therefore under pressure] to contain price increases despite being faced with increasing drug costs and increasing operating costs.

[removed: | • |] [added: -] The operating results and margins of our LTC business are further affected by the increased efforts of health care payors to negotiate reduced or capitated pricing arrangements and by the financial health of, and purchases and sales of, our LTC customers. [removed: |]

[removed: | • |] [added: -] 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. [removed: 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. |]

[removed: | • |] [added: -] We requested [removed: significant] increases in our premium rates in our Commercial Health Care Benefits business for [removed: 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)] [added: 2021] and expect to continue to request increases in those rates for [removed: 2021] [added: 2022] 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 [removed: the] federal and state governments, including as a result of the [removed: 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] [added: Patient Protection] and [removed: potentially worsen in 2020. These rate increases may be significant] [added: Affordable Care Act] and [removed: thus heighten] the [removed: risks of adverse publicity, adverse regulatory action and adverse selection] [added: Health Care] and [added: Education Reconciliation Act of 2010 (collectively,] the [removed: likelihood that our requested premium rate increases will be denied, reduced or delayed, which could lead to operating margin compression. |][added: “ACA”).]

For example, decisions to buy our Pharmacy Services and Health Care Benefits products and services increasingly are made or influenced by consumers, either through direct purchasing [removed: (for example,] [added: (e.g.,] Medicare Advantage plans and PDPs) or through public health insurance exchanges (“Public Exchanges”) and private health insurance exchanges (together with Public Exchanges, collectively, “Insurance Exchanges”) that allow individual choice.

Consumers also are increasingly seeking to access consumer goods and health care products and services locally and through other direct channels such as mobile [removed: devices and websites.]

[removed: | • |] [added: -] adversely affecting our brand and reputation; [removed: |]

[removed: | • |] [added: -] adversely affecting our ability to market and sell our products and/or services and/or retain our existing customers and members; [removed: |]

[removed: | • |] [added: -] requiring us to change our products and/or services; [removed: |]

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

[removed: | • |] [added: -] increasing or significantly changing the regulatory and legislative requirements with which we must comply. [removed: |]

Additionally, an increase in the sales of our proprietary brands may adversely affect our sales of products owned by [added: our suppliers and adversely impact certain of our supplier relationships.]

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

[removed: | • |] [added: -] increased safety risk profiles or regulatory restrictions; [removed: |]

[removed: | • |] [added: -] manufacturing or other supply issues; [removed: |]

[removed: | • |] [added: -] certain products being withdrawn by their manufacturers or transitioned to over-the-counter products; [removed: |]

[removed: | • |] [added: -] future FDA rulings restricting the supply or increasing the cost of products; [removed: |]

[removed: | • |] [added: -] the introduction of new and successful prescription drugs or lower-priced generic alternatives to existing brand name products; or [removed: |]

[removed: | • |] [added: -] inflation in the price of brand name drugs. [removed: |]

Premiums for our Insured Health Care Benefits products, which comprised [removed: 91%] [added: 92%] of our Health Care Benefits revenues for [removed: 2019,] [added: 2020,] are priced in advance based on our forecasts of health care and other benefit costs during a fixed premium period, which is generally one year.

[removed: As] a result, our profits are particularly sensitive to the accuracy of our forecasts and our ability to anticipate and detect medical cost trends.

A number of factors contribute to rising health care and other benefit costs, including [added: COVID-19,] previously uninsured members entering the health care system, changes in members’ behavior and health care utilization patterns, turnover in our membership, additional government mandated benefits or other regulatory [removed: changes,] changes [added: (including under the Families First Act and the CARES Act), changes] in the health status of our members, the aging of the population and other changing demographic characteristics, advances in medical technology, increases in the number and [added: cost of prescription drugs (including specialty]

[removed: 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 [added: 2020-2021 influenza season was impacted by efforts taken to reduce the spread of COVID-19; and the] 2019-2020 influenza season had an earlier than average start and [removed: has] [added: had] a higher incidence of influenza than the 2018-2019 influenza [removed: season; and influenza related health care costs were higher than Aetna projected in 2017-2018.][added: season.]

We also must estimate the amount of rebates payable under the [removed: ACA’s,] [added: MLR rules of] the [removed: U.S. Centers for Medicare & Medicaid Services’ (“CMS’s”)] [added: ACA, CMS] and the [removed: federal Office of Personnel Management’s (“OPM’s”) minimum medical loss ratio (“MLR”) rules] [added: OPM] and the amounts payable by us to, and receivable by us from, the United States federal government under the ACA’s remaining premium stabilization program.

For example, as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] we established a premium deficiency reserve of [removed: $4] [added: $11] million and [removed: $16] [added: $4] million, respectively, related to Medicaid products in the Health Care Benefits segment.

A worsening (or improvement) of health care cost trend rates or changes in claim payment patterns from those that we assumed in estimating health care costs payable as of December 31, [removed: 2019] [added: 2020] would cause these estimates to change in the near term, and such a change could be material.

These risks are particularly acute during and following periods when utilization of medical and/or other covered services and/or medical cost trends are below recent historical levels and in products where there is significant turnover in our membership each year, and such risks are [removed: further magnified by the ACA and other legislation and regulations that limit our ability to price for our projected and/or experienced increases in utilization and/or medical cost trends.]

[added: An unfavorable, uncertain or volatile economic environment could cause a decline in drug utilization, an] increase in health care utilization and dampen demand for PBM services as well as consumer demand for products sold in our retail stores.

Summary

The following is a summary of the principal risks we face:

Risks Related to COVID-19

- The impact of COVID-19 on our businesses, operating results, cash flows and/or financial condition is uncertain, but the impact could be material and adverse.

- The impact of COVID-19 and the related testing and vaccination may result in us not being able to accurately forecast health care and other benefit costs, and we are uncertain that future health care and other benefits costs will not exceed our projections.

- Each of our segments operates in a highly competitive and evolving business environment.

- A change in our Health Care Benefits product mix may adversely affect our profit margins.

- Negative public perception of the industries in which we operate can adversely affect our businesses, operating results, cash flows and prospects.

- Failure to maintain or improve our relationships with our retail and specialty pharmacy customers may adversely affect our operating results.

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

- We may not be able to accurately forecast health care and other benefit costs.

- If actual claims in our Insured Health Care Benefits products exceed our estimates, our operating results could be materially adversely affected, and our ability to take timely corrective actions to limit future costs may be limited.

- We are exposed to risks relating to the solvency of other insurers.

- We are subject to potential changes in public policy, laws and regulations, including reform of the U.S. health care system, which can adversely affect our businesses.

- If we fail to comply with applicable laws and regulations, we could be subject to significant adverse regulatory actions or suffer brand and reputational harm.

- If our compliance or other systems and processes fail or are deemed inadequate, we may suffer brand and reputational harm and become subject to regulatory actions and/or litigation.

- The litigation and other adverse legal proceedings that we face are costly to defend, may result in changes in our business practices, harm our brand and reputation and adversely affect our businesses and operating results.

- The governmental audits, investigations and reviews to which we are subject could result in changes to our business practices and also could result in material refunds, fines, penalties, civil and/or criminal liabilities and other sanctions.

- Our litigation and regulatory risk profile are changing as we offer new products and services.

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

- Programs funded in whole or in part by the U.S. federal government account for a significant portion of our revenues, and we expect that percentage to increase.

- We may not be able to obtain adequate premium rate increases in our Insured Health Care Benefits products, which would have an adverse effect on our revenues, MBRs and operating results.

- Minimum MLR rebate requirements limit the level of margin we can earn in our Insured Health Care Benefits products while leaving us exposed to higher than expected medical costs.

- Our operating results may be adversely affected by changes in laws and policies governing employers and by union organizing activity.

- We may be unable to successfully integrate companies we acquire.

- The acquisitions, joint ventures, strategic alliances and other inorganic growth opportunities we pursue may be unsuccessful.

- In order to complete a proposed acquisition, we may be required to divest certain portions of our business, for which we may not be able to obtain favorable pricing.

- Failure to meet customer expectations may harm our brand and reputation, our ability to retain and grow our customer base and membership and our operating results and cash flows.

- Our use and disclosure of members’, customers’ and other constituents’ sensitive information is subject to complex regulations at multiple levels, and we would be adversely affected if we or our business associates or other vendors fail to adequately protect members’, customers’ or other constituents’ sensitive information.

- Product liability, product recall or personal injury issues could damage our reputation and have a significant adverse effect on our businesses, operating results, cash flows and/or financial condition.

- We face significant competition in attracting and retaining talented employees, and managing succession for, and retention of, key executives is critical to our success.

- Sales of our products and services are dependent on our ability to attract and motivate internal sales personnel and independent third-party brokers, consultants and agents.

- Failure of our businesses to effectively collaborate could prevent us from maximizing our operating results.

- The failure or disruption of our information technology systems or infrastructure to support our businesses could adversely affect our reputation, businesses, operating results and cash flows.

- Pursuing multiple initiatives simultaneously presents challenges to maintaining, continuing to develop and improve an effective information technology system.

- We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and disrupt our business operations.

- Both our and our vendors’ operations are subject to a variety of business continuity hazards and risks.

- We would be adversely affected if we do not effectively deploy our capital.

Downgrades or potential downgrades in our credit ratings could adversely affect our brand and reputation, businesses, operating results, cash flows and financial condition.

- Goodwill and other intangible assets could, in the future, become impaired.

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| • | 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. |

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our suppliers and adversely impact certain of our supplier relationships.

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*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 [removed: Forward Looking] [added: Forward-Looking] Statements” in this 10-K.*

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

The Company has [removed: approximately] [added: more than] 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.

[removed: CVS Health] [added: We] also [removed: serves] [added: serve] an estimated [removed: 37] [added: 34] 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”).

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

The Company [removed: provided administrative services to, and] retained the financial results [removed: of,] [added: of] the divested plans through [removed: 2019.][added: 2019 through a reinsurance agreement.]

Subsequent to 2019, the Company [removed: will] no longer [removed: retain] [added: retains] the financial results of the divested plans.

As a result of the [added: acquisition of] Aetna [removed: Acquisition,] [added: (the “Aetna Acquisition”),] the Company added the Health Care Benefits segment.

See Note [removed: 17 ‘‘Segment Reporting’’] [added: 8 ‘‘Borrowings and Credit Agreements’’] included in Item 8 of this 10-K for [removed: segment financial] [added: additional] information.

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 [removed: exchanges,] [added: exchanges and] other sponsors of health benefit plans [removed: and individuals] throughout the United States.

The Retail/LTC segment sells prescription drugs and a wide assortment of [added: health and wellness products and] general merchandise, [removed: including over-the-counter drugs, beauty products, cosmetics and personal care products,] provides health care services through its MinuteClinic® walk-in medical [removed: clinics] [added: clinics, provides medical diagnostic testing, administers vaccinations for illnesses such as influenza, COVID-19] and [added: shingles and] conducts long-term care pharmacy (“LTC”) operations, which distribute prescription drugs and provide related pharmacy consulting and other ancillary services to [removed: chronic] [added: long-term] care facilities and other care settings.

As of December 31, [removed: 2019,] [added: 2020,] the Retail/LTC segment operated [removed: approximately] [added: more than] 9,900 retail locations, approximately 1,100 [removed: MinuteClinic®] [added: MinuteClinic] locations as well as online retail pharmacy websites, LTC pharmacies and [removed: onsite] [added: on-site] pharmacies.

For the year ended December 31, [removed: 2019,] [added: 2020,] the Company dispensed approximately [removed: 26.6%] [added: 27.1%] of the total retail pharmacy prescriptions in the United States.

The Health Care Benefits segment is one of the nation’s leading diversified health care benefits [removed: providers, serving an estimated 37 million people as of December 31, 2019.][added: providers.]

The Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, medical management capabilities, Medicare Advantage and Medicare Supplement plans, PDPs, Medicaid health care management [removed: services, workers’ compensation administrative] services and health information technology products and services.

The Company refers to insurance products (where it assumes all or a majority of the risk for medical and dental care costs) as “Insured” and administrative services contract products (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs) as “ASC.” For periods prior to [removed: November 28, 2018 (the] [added: the] Aetna Acquisition [removed: Date),] [added: Date,] the Health Care Benefits segment was comprised [added: only] of the Company’s [removed: SilverScript] [added: SilverScript®] PDP business.

The Company presents the remainder of its financial results in the Corporate/Other segment, which [added: primarily] consists of:

[removed: | • |] [added: -] Management and administrative expenses to support the [added: Company’s] overall [removed: operations of the Company,] [added: operations,] which include certain aspects of executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments, expenses associated with the Company’s investments in its transformation and [removed: Enterprise] [added: enterprise] modernization programs and acquisition-related transaction and integration costs; and [removed: |]

[removed: | • |] [added: -] Products for which the Company no longer solicits or accepts new customers such as large case pensions and long-term care insurance products. [removed: |]

The following information summarizes the Company’s results of operations for [removed: 2019] [added: 2020] compared to [removed: 2018.][added: 2019.]

For discussion of the Company’s results of operations for [removed: 2018] [added: 2019] compared to [removed: 2017,] [added: 2018,] see “Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations with Retrospective Application of Segments” for the year ended December 31, 2018, which was revised to reflect the Company’s segment realignment and is] [added: Operations”] included in [removed: Exhibit 99.2 to] the Company’s [removed: Current] [added: Annual] Report on Form [removed: 8-K] [added: 10-K for the fiscal year ended December 31, 2019] filed with the U.S. Securities and Exchange Commission (the “SEC”) on [removed: August 8, 2019.][added: February 18, 2020.]

| | | | | | | | | | | | | | [added: | | | | | | | |] Change | | | | | | | | | | | | | [added: | | | | | | | |]

| | [added: | |] Year Ended December 31, | | | | | | | | | | | | [removed: 2019] [added: | | | | | | 2020] vs. [removed: 2018] [added: 2019] | | | | | | | [removed: 2018] [added: | | | | | 2019] vs. [removed: 2017] [added: 2018] | | | | | | [added: | | |]

| In millions | [added: | | 2020 | | | | | |] 2019 | | | | [removed: 2018] | | [added: 2018] | | [removed: 2017] | | | | $ | | | | [added: | |] % | | | [added: | | |] $ | | | | [added: | |] % | | [added: |]

| Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | |]

| Products | [added: | |] $ | [removed: 185,236] [added: 190,688] | | | [added: | |] $ | [removed: 183,910] [added: 185,236] | | | [added: | |] $ | [removed: 180,063] [added: 183,910] | | | [added: | |] $ | [removed: 1,326] [added: 5,452] | | | [removed: 0.7] | [added: | 2.9 | |] % | | [added: | |] $ | [removed: 3,847] [added: 1,326] | | | [removed: 2.1] | [added: | 0.7 | |] % |

| Premiums | [added: | | 69,364 | | | | | |] 63,122 | | | | [added: | |] 8,184 | | | | [removed: 3,558] | | [added: 6,242] | | [removed: 54,938] | | | | [removed: 671.3] [added: 9.9] | [added: |] % | | [removed: 4,626] | | [added: 54,938] | | [removed: 130.0] | [added: | | | 671.3 | |] % |

| Services | [added: | | 7,856 | | | | | |] 7,407 | | | | [added: | |] 1,825 | | | | [removed: 1,144] | | [added: 449] | | [removed: 5,582] | | | | [removed: 305.9] [added: 6.1] | [added: |] % | | [removed: 681] | | [added: 5,582] | | [removed: 59.5] | [added: | | | 305.9 | |] % |

| Net investment income | [added: | | 798 | | | | | |] 1,011 | | | | [added: | |] 660 | | | | [removed: 21] | | [added: (213)] | | [removed: 351] | | | | [removed: 53.2] [added: (21.1)] | [added: |] % | | [removed: 639] | | [added: 351] | | [removed: 3,042.9] | [added: | | | 53.2 | |] % |

| Total revenues | [added: | | 268,706 | | | | | |] 256,776 | | | | [added: | |] 194,579 | | | | [removed: 184,786] | | [added: 11,930] | | [removed: 62,197] | | | | [removed: 32.0] [added: 4.6] | [added: |] % | | [removed: 9,793] | | [added: 62,197] | | [removed: 5.3] | [added: | | | 32.0 | |] % |

| Operating costs: | | | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | |]

| Cost of products sold | [added: | | 163,981 | | | | | |] 158,719 | | | | [added: | |] 156,447 | | | | [removed: 153,448] | | [added: 5,262] | | [removed: 2,272] | | | | [removed: 1.5] [added: 3.3] | [added: |] % | | [removed: 2,999] | | [added: 2,272] | | [removed: 2.0] | [added: | | | 1.5 | |] % |

| Benefit costs | [added: | | 55,679 | | | | | |] 52,529 | | | | [added: | |] 6,594 | | | | [removed: 2,810] | | [added: 3,150] | | [removed: 45,935] | | | | [removed: 696.6] [added: 6.0] | [added: |] % | | [removed: 3,784] | | [added: 45,935] | | [removed: 134.7] | [added: | | | 696.6 | |] % |

| Goodwill impairments | [added: | |] — | | | | [added: | | — | | | | | |] 6,149 | | | | [removed: 181] | | [added: —] | | [removed: (6,149] | | [removed: )] | | [removed: (100.0] [added: —] | [removed: )%] | [added: %] | [removed: 5,968] | | | [added: (6,149)] | [removed: 3,297.2] | [added: | | | | (100.0) | |] % |

| Operating expenses | [added: | | 35,135 | | | | | |] 33,541 | | | | [added: | |] 21,368 | | | | [removed: 18,809] | | [added: 1,594] | | [removed: 12,173] | | | | [removed: 57.0] [added: 4.8] | [added: |] % | | [removed: 2,559] | | [added: 12,173] | | [removed: 13.6] | [added: | | | 57.0 | |] % |

| Total operating costs | [added: | | 254,795 | | | | | |] 244,789 | | | | [added: | |] 190,558 | | | | [removed: 175,248] | | [added: 10,006] | | [removed: 54,231] | | | | [removed: 28.5] [added: 4.1] | [added: |] % | | [removed: 15,310] | | [added: 54,231] | | [removed: 8.7] | [added: | | | 28.5 | |] % |

| Operating income | [added: | | 13,911 | | | | | |] 11,987 | | | | [added: | |] 4,021 | | | | [removed: 9,538] | | [added: 1,924] | | [removed: 7,966] | | | | [removed: 198.1] [added: 16.1] | [added: |] % | | [removed: (5,517] | | [removed: )] [added: 7,966] | | [removed: (57.8] | [removed: )%] | [added: | | 198.1 | | % |]

| Interest expense | [added: | | 2,907 | | | | | |] 3,035 | | | | [added: | |] 2,619 | | | | [removed: 1,062] | | [added: (128)] | | [removed: 416] | | | | [removed: 15.9] [added: (4.2)] | [added: |] % | | [removed: 1,557] | | [added: 416] | | [removed: 146.6] | [added: | | | 15.9 | |] % |

| Loss on early extinguishment of debt | [added: | | 1,440 | | | | | |] 79 | | | | [added: | |] — | | | | [removed: —] | | [added: 1,361] | | [removed: 79] | | | | [removed: 100.0] [added: 1,722.8] | [added: |] % | | [removed: —] | | [added: 79] | | [added: | | | |] — | [added: |] % |

| Other [removed: expense (income)] [added: income] | [removed: (124] | | [removed: )] [added: (206)] | | [removed: (4] | | [removed: )] | | [removed: 208] [added: (124)] | | | | [removed: (120] | | [removed: )] [added: (4)] | | [removed: (3,000.0] | [removed: )%] | | [removed: (212] | [added: (82)] | [removed: )] | | [removed: (101.9] | [removed: )%] | [added: | (66.1) | | % | | | | (120) | | | | | | (3,000.0) | | % |]

In an increasingly connected and digital world, we are meeting people wherever they are and changing health care to meet their needs.

The Health Care Benefits

segment also provided workers’ compensation administrative services through its Coventry Health Care Workers’ Compensation business (“Workers’ Compensation business”) prior to the sale of this business on July 31, 2020.

COVID-19

The COVID-19 pandemic has severely impacted the economies of the U.S. and other countries around the world.

Beginning in March 2020, the effects of the COVID-19 pandemic began to emerge in the U.S. The Company executed preparedness plans to maintain continuity of its operations, including transitioning many office-based colleagues to a remote work environment and installing protective equipment in our retail pharmacies.

The Company also provided enhanced benefits to its colleagues, including bonuses to frontline colleagues, dependent care financial assistance, paid sick leave for part-time colleagues and paid time off to colleagues who test positive or are quarantined due to exposure to COVID-19.

Our strong local presence and scale in communities across the country enabled us to play an indispensable role in the national response to COVID-19, as well as provide seamless support for our customers wherever they needed us: in our CVS locations, in their homes, and virtually.

The COVID-19 pandemic had a significant impact on the Company’s operating results for the year ended December 31, 2020, primarily in the Company’s Health Care Benefits and Retail/LTC segments.

Beginning in mid-March, the health system experienced a significant reduction in utilization of medical services (“utilization”) that is discretionary and the cancellation of elective medical procedures.

Utilization remained below historical levels through April, began to recover in May and June and reached more normal levels in the third and fourth quarters, with select geographies impacted by COVID-19 waves.

In response to COVID-19, the Company expanded benefit coverage to its members.

These expanded benefits included cost-sharing waivers for COVID-19 related treatments, as well as assistance to members through premium credits, telehealth cost-sharing waivers and other investments.

COVID-19 also resulted in a shift in the Company’s medical membership during the year.

The Company experienced declines in Commercial membership due to reductions in workforce at our existing customers, substantially offset by increases in Medicaid membership primarily as a result of the suspension of eligibility redeterminations and increased unemployment.

During March 2020, the Company experienced increased prescription volume due to the greater use of 90-day prescriptions and early refills of maintenance medications, as well as increased front store volume as consumers prepared for the COVID-19 pandemic.

Beginning in the second quarter and continuing throughout the remainder of the year, the Company experienced reduced customer traffic in its retail pharmacies and MinuteClinic locations due to shelter-in-place orders as well as reduced new therapy prescriptions and decreased long-term care prescription volume as a result of the COVID-19 pandemic.

In addition, the Company incurred incremental operating expenses associated with the Company’s COVID-19 pandemic response efforts and waived fees associated with prescription home delivery and associated front store products.

During 2020, the Company also played a key role in supporting the local communities in which it operates.

The Company offered COVID-19 diagnostic testing at more than 4,000 CVS Pharmacy locations as of December 31, 2020.

In addition, the Company launched critical diagnostic testing for the vulnerable senior population in long-term care facilities in partnership with three states.

The Company was also selected to administer COVID-19 vaccines in both long-term care facilities and its retail pharmacies.

The Company began administering COVID-19 vaccinations in long-term care facilities and in certain of its retail pharmacies during December 2020 and February 2021, respectively, and expects to play a significant role in COVID-19 vaccine administration in the future.

The COVID-19 pandemic continues to evolve.

We believe COVID-19’s impact on our businesses, operating results, cash flows and/or financial condition primarily will be driven by the geographies impacted and the severity and duration of the pandemic; the pandemic’s impact on the U.S. and global economies and consumer behavior and health care utilization patterns; and the timing, scope and impact of stimulus legislation as well as other federal, state and local governmental responses to the pandemic.

Those primary drivers are beyond our knowledge and control.

As a result, the impact COVID-19 will have on our businesses, operating results, cash flows and/or financial condition is uncertain, but the impact could be adverse and material.

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- Total revenues increased $11.9 billion or 4.6% in 2020 compared to 2019.

The increase in total revenues was primarily driven by growth in the Health Care Benefits and Retail/LTC segments.

- Operating expenses increased $1.6 billion or 4.8% in 2020 compared to 2019.

Operating expenses as a percentage of total revenues remained consistent at 13.1% in both 2020 and 2019.

The increase in operating expenses was primarily due to the reinstatement of the non-deductible health insurer fee (“HIF”) which was $1.0 billion for 2020, incremental operating expenses associated with the Company’s COVID-19 pandemic response efforts and increased operating expenses associated with growth in the business.

Onofre Ltda.

(“Onofre”), both recorded in the year ended December 31, 2019, and (iii) the favorable impact of enterprise-wide cost savings initiatives in 2020.

- Operating income increased $1.9 billion or 16.1% in 2020 compared to 2019.

The increase in operating income was primarily due to:

- Increased operating income in the Health Care Benefits segment, primarily as a result of the COVID-19 pandemic, pre-tax income of $307 million associated with the receipt of amounts owed to the Company under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”) risk corridor program that was previously fully reserved for as payment was uncertain, and the $269 million pre-tax gain on the sale of the Workers’ Compensation business;

- Increased operating income in the Pharmacy Services segment, primarily related to improved purchasing economics; and

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 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).

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.

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 (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.

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

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

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| • | Total revenues increased $62.2 billion or 32.0% in 2019 compared to 2018. The increase in total revenues was primarily due to the impact of the Aetna Acquisition (primarily reflected in the Health Care Benefits segment) which occurred in November 2018, a 5.0% increase in Pharmacy Services segment revenue and a 3.1% increase in Retail/LTC segment revenue. |

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| *•* | Operating expenses increased $12.2 billion or 57.0% in 2019 compared to 2018. Operating expenses as a percentage of total revenues were 13.1% in 2019, an increase of 210 basis points compared to 2018. The increase in operating expenses was primarily due to the impact of the Aetna Acquisition (including intangible asset amortization) and higher operating |

(“Onofre”), both recorded in the year ended December 31, 2019.

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| • | Operating income increased $8.0 billion in 2019 compared to 2018. The increase was primarily due to (i) the absence of the $6.1 billion of pre-tax goodwill impairment charges related to the LTC reporting unit recorded within the Retail/LTC segment in 2018, (ii) the impact of the Aetna Acquisition and (iii) increased prescription volume and improved purchasing economics in the Pharmacy Services and Retail/LTC segments. The increase was partially offset by: |

- Continued price compression in the Pharmacy Services segment;

- An increase in intangible asset amortization primarily related to the Aetna Acquisition;

The Company’s investment portfolio supported the following products at December 31, [removed: 2019] [added: 2020] and [removed: 2018:][added: 2019:]

| In millions | [removed: 2019] | | [added: 2020] | | [removed: 2018] | | | [added: | 2019 | | |]

| Experience-rated products | [added: | |] $ | [removed: 1,100] [added: 1,037] | | | [added: | |] $ | [removed: 1,063] [added: 1,100] | |

| Remaining products | [removed: 18,587] | | [added: 22,775] | | [removed: 17,191] | | | [added: | 18,587 | | |]

| Total investments | [added: | |] $ | [removed: 19,687] [added: 23,812] | | | [added: | |] $ | [removed: 18,254] [added: 19,687] | |

The debt securities in the Company’s investment portfolio had an average credit quality rating of A at both December 31, [removed: 2019] [added: 2020] and [removed: 2018] [added: 2019] with approximately [removed: $4.4] [added: $6.3] billion and [removed: $3.9] [added: $4.4] billion rated AAA at December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] respectively.

The debt securities that were rated below investment grade (that is, having a credit quality rating below BBB-/Baa3) were [removed: $1.2] [added: $1.9] billion and [removed: $1.1] [added: $1.2] billion at December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] respectively (of which [removed: 4%] [added: 2%] and [removed: 6%] [added: 4%] at December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] respectively, supported experience-rated products).

At December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] the Company held [removed: $333] [added: $321] million and [removed: $373] [added: $333] million, respectively, of municipal debt securities that were guaranteed by third parties, representing 2% of total investments at both December 31, [removed: 2019] [added: 2020] and [removed: 2018.][added: 2019.]

These securities had an average credit quality rating of AA [removed: and AA-] at [added: both] December 31, [removed: 2019] [added: 2020] and [removed: 2018, respectively,] [added: 2019] with the guarantee.

These securities had an average credit quality rating of [removed: A+] [added: A] and [removed: A-] [added: A+] at December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] respectively, without the guarantee.

At both December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] 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 [removed: 10-K,] [added: 10-K] for additional information on the methodologies and key assumptions used to determine the fair value of investments.

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

The amount of the credit-related component [added: is recorded as an allowance]

[added: If a debt security] is [removed: included] in [removed: net income,] [added: an unrealized loss position] and the [removed: amount of the non-credit related component is included in other comprehensive income (loss), unless the] Company [removed: intends] [added: does not have the intent] to sell [removed: the debt security or] [added: and] it is more likely than not that the Company will [removed: be required] [added: not have] to sell [removed: the debt] [added: such] security [removed: prior to its anticipated] [added: before] recovery of [removed: the debt security’s] [added: its] amortized cost [removed: basis.][added: basis, the Company bifurcates the impairment into credit-related and non-credit related components.]

[removed: Accounting for other-than-temporary] [added: The] impairment [removed: (“OTTI”)] of debt securities is considered a critical accounting policy.

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

The assumptions used were as follows: an immediate increase of 100 basis points in interest rates (which the Company believes represents a moderately adverse [removed: scenario and is approximately equal to] [added: scenario) for long-term debt issued by] the [removed: historical annual volatility of] [added: Company, as well as its] interest rate [removed: movements for intermediate-term available-for-sale debt securities)] [added: sensitive investments] and an immediate decrease of 15% in prices for [added: publicly traded] domestic equity securities.

Assuming an immediate increase of 100 basis points in interest [removed: rates and an immediate decrease of 15% in the prices for domestic equity securities,] [added: rates,] the theoretical decline in the fair values of market sensitive instruments at December 31, [removed: 2019] [added: 2020] is as follows:

[removed: | • | The fair value of long-term debt would decline by approximately $4.5 billion ($5.7 billion pretax).] Changes in the fair value of long-term debt do not impact the Company’s operating results or financial condition. [removed: |]

[removed: | • |] [added: -] The theoretical reduction in the fair value of [removed: investment securities] [added: interest rate sensitive investments] partially offset by the theoretical reduction in the fair value of interest rate sensitive liabilities would result in a net decline in fair value of approximately [removed: $420] [added: $490] million [removed: ($530] [added: ($615] million pretax) related to continuing non-experience-rated products. [removed: Reductions in the fair value of investment securities would be reflected as an unrealized loss in equity, as the Company classifies these securities as available for sale. The Company does not record liabilities at fair value. |]

Based on overall exposure to interest rate risk and equity price risk, the Company believes that these changes in market rates and prices would not materially affect consolidated near-term financial condition, operating results or cash flows as of December 31, [removed: 2019.][added: 2020.]

[removed: As of each of] [added: At] December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] the Company did not have any material foreign currency exchange rate or commodity derivative instruments in place and believes its exposure to foreign currency exchange rate risk [removed: and commodity price risk] is not material.

The Company also faces certain operational [removed: risks, including risks related to information security, including cybersecurity.][added: risks.]

The Company and its vendors have experienced [removed: and continue to experience a variety of] [added: diverse] cyber [removed: attacks, and the Company] [added: attacks] and [removed: its vendors] expect to continue to experience cyber attacks going forward.

The Company is dedicating and will continue to dedicate significant resources and incur significant expenses to maintain and update on an ongoing basis the systems and processes that are designed to mitigate the information security risks it faces and protect the security of its computer systems, software, networks and other technology assets against attempts by unauthorized parties to obtain access to confidential information, [removed: destroy data,] disrupt or degrade [removed: service, sabotage systems] [added: service] or cause other damage.

The impact of cyber attacks has not been material to the Company’s operations or operating results through December 31, [removed: 2019.][added: 2020.]

The Board and its Audit Committee [removed: (the “Audit Committee”)] and Nominating and Corporate Governance Committee are regularly informed regarding the Company’s information security policies, practices and status.

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If a debt security is in an unrealized loss position and the Company has the intent to sell the security, or it is more likely than not that the Company will have to sell the security before recovery of its amortized cost basis, the amortized cost basis of the security is written down to its fair value and the difference is recognized in net income.

for credit losses and recognized in net income, and the amount of the non-credit related component is included in other comprehensive income.

- The fair value of long-term debt issued by the Company would decline by approximately $5.3 billion ($6.7 billion pretax).

Reductions in the fair value of investment securities would be reflected as an unrealized loss in equity, as the Company classifies these debt securities as available for sale.

The Company does not record liabilities at fair value.

If the value of the Company’s publicly traded domestic equity securities were to decline by 15%, this would result in a net decline in fair value of $5 million ($7 million pretax).

At December 31, 2020 and 2019, 5.5% and 6.1%, respectively, of the Company’s investment portfolio was comprised of investments that have exposure to the oil and gas industry, with more than half that amount comprised of investment grade rated debt securities.

These exposures are experiencing varied degrees of financial strains in the current depressed oil and gas price environment, and the likelihood of the Company’s portfolio incurring additional realized capital losses on these exposures may increase if such depressed prices persist and/or decline further.

Those risks include risks related to the COVID-19 pandemic and risks related to information security, including cybersecurity.

The spread of COVID-19, or actions taken to mitigate its spread, could have material and adverse effects on our ability to operate our businesses effectively, including as a result of the complete or partial closure of facilities or labor shortages.

Disruptions in our supply chains, our distribution chains and/or public and private infrastructure, including communications, financial services and supply chains, could materially and adversely impact our business operations.

We have transitioned a significant subset of our colleagues to a remote work environment in an effort to mitigate the spread of COVID-19, as have a significant number of our third-party service providers, which may amplify certain risks to our businesses, including an increased demand for information technology resources, increased risk of phishing and other cyber attacks, increased risk of unauthorized dissemination of sensitive personal information or proprietary or confidential information about us or our medical members or other third-parties and increased risk of business interruptions.

As examples, the Company and its vendors have experienced attempts to gain access to systems, denial of service attacks, attempted malware infections, account takeovers, scanning activity and phishing emails.

Attacks can originate from external criminals, terrorists, nation states or internal actors.

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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.

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Among other things, the Company and its vendors have experienced automated attempts to gain access to public facing networks, brute force, SYN flood and distributed denial of service attacks, attempted malware infections, vulnerability scanning, ransomware attacks, spear-phishing campaigns, mass reconnaissance attempts, injection attempts, phishing, PHP injection and cross-site scripting.

The Company also has seen an increase in attacks designed to obtain access to consumers’ accounts using illegally obtained demographic information.

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

The Company has [removed: approximately] [added: more than] 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.

[removed: CVS Health] [added: We] also [removed: serves] [added: serve] an estimated [removed: 37] [added: 34] 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”).

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

[removed: As part of] [added: On November 30, 2018,] the [removed: agreement reached with] [added: Company completed] the [removed: DOJ, Aetna entered into a purchase agreement with a subsidiary] [added: sale] of [added: Aetna’s standalone PDPs to] WellCare Health Plans, Inc. [removed: (“WellCare”) for the divestiture of Aetna’s standalone PDPs] effective December 31, 2018.

Subsequent to 2019, the Company [removed: will] no longer [removed: retain] [added: retains] the financial results of the divested plans.

As a result of the [added: acquisition of] Aetna [removed: Acquisition,] [added: (the “Aetna Acquisition”),] the Company added the Health Care Benefits segment.

[added: As a diversified health services company,] CVS [removed: Health’s] [added: Health is focused on its] purpose of helping people on their path to better [removed: health guides the Company’s approach to transforming the consumer health experience.][added: health.]

[added: The] Company believes its strategy [removed: of putting] [added: oriented around] the consumer [removed: at] [added: and being present for all] the [removed: center of care] [added: meaningful moments in health] will drive long-term sustainable value and place the Company at the forefront of the evolution of health care.

The Pharmacy Services segment’s clients are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care (“Managed Medicaid”) plans, plans offered on public health insurance exchanges (“Public Exchanges”) and private health insurance exchanges (“Private Exchanges” and together with Public Exchanges, “Insurance [removed: Exchanges”),] [added: Exchanges”) and] other sponsors of health benefit plans [removed: and individuals] throughout the [removed: U.S. The Pharmacy Services segment includes retail specialty pharmacy stores, specialty mail order pharmacies, mail order dispensing pharmacies, compounding pharmacies and branches for infusion and enteral nutrition services.][added: United States.]

During the year ended December 31, [removed: 2019,] [added: 2020,] the Company’s PBM filled or managed [removed: 2.0] [added: 2.1] billion prescriptions on a 30-day equivalent basis.

[removed: Beginning in 2018,] PBM clients [removed: were] [added: are] given [removed: 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.

The Company maintains a national network of [removed: more than 68,000] [added: approximately 66,000] retail pharmacies, consisting of approximately [removed: 41,000] [added: 40,000] chain pharmacies (which includes CVS Pharmacy locations) and approximately [removed: 27,000] [added: 26,000] independent pharmacies, in the United States, including Puerto Rico, the District of Columbia, Guam and the 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 [added: pharmacy will receive payment for the prescription.]

[removed: It] [added: The Company also offers a performance program for non-Medicare customers, which] can be implemented with either the Company’s broad, national network or with [removed: a] [added: any] managed network (as allowed by applicable laws and regulations).

The program aligns with key Healthcare Effectiveness Data Information Set measures [added: utilized by the U.S. Centers for Medicare & Medicaid Services (“CMS”)] and is funded by client fees.

This review may involve communications with the prescriber and, with the prescriber’s approval when required, can result in generic substitution, therapeutic interchange or other actions designed to help reduce cost and/or improve quality of [removed: treatment.]

[removed: These] [added: The] specialty mail order pharmacies are used for delivery of advanced medications to individuals with chronic or genetic diseases and disorders.

The Company’s [removed: utilization management] [added: UM] 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: This] [added: The Pharmacy Services segment’s claim adjudication] platform incorporates architecture that centralizes the data generated from filling mail order prescriptions, adjudicating retail pharmacy claims and delivering other solutions to PBM clients.

The Health Engagement Engine® technology and proprietary clinical algorithms help connect the various parts of the [removed: Enterprise] [added: enterprise] and serve an essential role in cost management and health [removed: improvement.][added: improvement, leveraging cloud-native technologies and practices.]

This capability transforms pharmacy data into actionable interventions at key points of care, [removed: such as] [added: including in retail,] mail and specialty [removed: pharmacists,] [added: pharmacies as well as in customer care call center operations, leveraging our enterprise data platform] to [removed: help provide] [added: improve the] quality [added: of] care.

The Company’s Pharmacy Services clients are primarily employers, insurance companies, unions, government employee groups, health plans, Medicare Part D plans, Managed Medicaid plans and plans offered on Insurance [removed: Exchanges,] [added: Exchanges and] other sponsors of health benefit plans [removed: and individuals located] throughout the United States.

In [removed: 2018 and 2017,] [added: 2018,] revenues from Aetna accounted for approximately 9.8% [removed: and 12.3%, respectively,] of the Company’s consolidated total revenues.

The Pharmacy Services segment has a significant number of competitors [removed: (e.g., the Express Scripts business of Cigna Corporation, OptumRx, Prime Therapeutics, MedImpact, Humana and PillPack),] offering PBM services, including large, national PBM [removed: companies,] [added: companies (e.g., Prime Therapeutics and MedImpact),] PBMs owned by large national health plans [added: (e.g., the Express Scripts business of Cigna Corporation] and [added: the OptumRx business of UnitedHealth) and] smaller standalone PBMs.

The Retail/LTC segment sells prescription drugs and a wide assortment of [added: health and wellness products and] general merchandise, [removed: including over-the-counter drugs, beauty products, cosmetics and personal care products,] provides health care services through its MinuteClinic® walk-in medical [removed: clinics] [added: clinics, provides medical diagnostic testing, administers vaccinations for illnesses such as influenza, COVID-19] and [added: shingles 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, [removed: 2019,] [added: 2020,] the Retail/LTC segment operated [removed: approximately] [added: more than] 9,900 retail locations, approximately 1,100 MinuteClinic locations as well as online retail pharmacy websites, LTC pharmacies and [removed: onsite] [added: on-site] pharmacies.

During the year ended December 31, [removed: 2019,] [added: 2020,] the Retail/LTC segment filled [removed: 1.4] [added: 1.5] billion prescriptions on a 30-day equivalent basis.

For the year ended December 31, [removed: 2019,] [added: 2020,] the Company dispensed approximately [removed: 26.6%] [added: 27.1%] of the total retail pharmacy prescriptions in the United States.

Front store categories include over-the-counter drugs, [removed: beauty] [added: consumer health] products, [removed: cosmetics] [added: beauty products] and personal care products.

| | [added: | |] Percentage of Revenues | | | | | | | | [added: | | | | | | |]

| | [added: | | 2020 | | | | | |] 2019 | | | [removed: 2018] | | | [removed: 2017] [added: 2018] | | [added: |]

| Pharmacy (1) | [removed: 76.7] | [added: | 76.9 | |] % | | [removed: 76.4] | [added: | 76.7 | |] % | | [removed: 75.0] | [added: | 76.4 | |] % |

| Front store and other (2) | [removed: 23.3] | [added: | 23.1 | |] % | | [removed: 23.6] | [added: | 23.3 | |] % | | [removed: 25.0] | [added: | 23.6 | |] % |

| | [added: | |] 100.0 | [added: |] % | | [added: | |] 100.0 | [added: |] % | | [added: | |] 100.0 | [added: |] % |

[removed: | (1) | Pharmacy] [added: (1)Pharmacy] includes LTC sales and sales in pharmacies within Target Corporation [added: (“Target”) and other retail] stores. [removed: |]

[removed: | (2) | “Other”] [added: (2)“Other”] represents less than [removed: 5%] [added: 10%] of the “Front store and other” revenue category. [removed: |]

Pharmacy revenues represented approximately three-fourths of Retail/LTC segment revenues in each of [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017.][added: 2018.]

The Company believes that retail pharmacy operations will continue to represent a critical part of the Company’s business due to industry demographics, e.g., an aging American population consuming a greater number of prescription drugs, prescription drugs being used more often as the first line of defense for managing illness, the introduction of new pharmaceutical products, [added: the need for vaccinations] and Medicare Part D growth.

The Company continues to launch and enhance new and exclusive brands to create unmatched offerings in beauty products and deliver other unique product offerings, including a full range of high-quality CVS [removed: Health] [added: Health®] and other proprietary brand products that are only available through CVS stores.

In an increasingly connected and digital world, we are meeting people wherever they are and changing health care to meet their needs.

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

COVID-19

The COVID-19 pandemic has severely impacted the economies of the U.S. and other countries around the world.

Beginning in March 2020, the effects of the COVID-19 pandemic began to emerge in the U.S. The Company executed preparedness plans to maintain continuity of its operations, including transitioning many office-based colleagues to a remote work environment and installing protective equipment in our retail pharmacies.

The Company also provided enhanced benefits to its colleagues, including bonuses to frontline colleagues, dependent care financial assistance, paid sick leave for part-time colleagues and paid time off to colleagues who test positive or are quarantined due to exposure to COVID-19.

Our strong local presence and scale in communities across the country enabled us to play an indispensable role in the national response to COVID-19, as well as provide seamless support for our customers wherever they needed us: in our CVS locations, in their homes, and virtually.

The Company offered COVID-19 diagnostic testing at more than 4,000 CVS Pharmacy® locations as of December 31, 2020 and launched critical diagnostic testing for the vulnerable senior population in long-term care facilities in partnership with three states.

The Company was also selected to administer COVID-19 vaccines in both long-term care facilities and its retail pharmacies.

The Company began administering COVID-19 vaccinations in long-term care facilities and in certain of its retail pharmacies during December 2020 and February 2021, respectively, and expects to play a significant role in COVID-19 vaccine administration in the future.

In the Health Care Benefits segment, the Company also expanded benefit coverage to its members, including cost-sharing waivers for COVID-19 related treatments, as well as assistance to members through premium credits, telehealth cost-sharing waivers and other investments.

The impact of COVID-19 on the Company’s businesses, operating results, cash flows and financial condition in the year ended December 31, 2020, as well as information regarding certain expected impacts of COVID-19 on the Company, is discussed throughout this 10-K.

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

treatment.

*Group Purchasing Organization Services*

The Company operates a group purchasing organization that negotiates pricing for the purchase of pharmaceuticals and rebates with pharmaceutical manufacturers on behalf of its participants.

The Company also provides various administrative, management and reporting services to pharmaceutical manufacturers.

The technology leverages assisted artificial intelligence to deliver insights to the business and bring automation to otherwise manual tasks.

Specialty services also connects with our claim adjudication platform and various health plan adjudication platforms with a centralized architecture servicing many clients and members.

Operating services, such as Specialty Expedite®, provide an interconnected onboarding solution for specialty medications and branding solutions ranging from fulfillment to total patient management.

These services are managed through our new innovative specialty workflow and web platform.

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MinuteClinic also maintains relationships with leading hospitals, clinics and physicians in the communities we serve to support and enhance quality, access and continuity of care.

*On-site Pharmacies*

*Medical Diagnostic Testing*

The Company provides medical diagnostic testing primarily through its COVID-19 testing sites located at CVS Pharmacy locations as well as in long-term care facilities, at community-based testing sites in underserved areas, large-scale rapid test sites in select states, and through its Return ReadySM solution.

Community Location Development

The Company operated over 650 HealthHUB locations as of December 31, 2020.

During the year ended December 31, 2020, the quarterly earnings progression was also impacted by COVID-19.

During March 2020, the Company experienced greater use of 90-day prescriptions, early refills of maintenance medications and increased front store volume as consumers prepared for the COVID-19 pandemic.

Subsequent to March 2020, the Company experienced reduced customer traffic in its retail pharmacies and MinuteClinic locations due to shelter-in-place orders as well as reduced new therapy prescriptions as a result of the COVID-19 pandemic.

Beginning in the third quarter, the Company saw an increase in diagnostic testing related to the COVID-19 pandemic and in December 2020, the Company began administering COVID-19 vaccinations in long-term care facilities.

The Health Care Benefits segment also provided workers’ compensation administrative services through its Coventry Health Care Workers’ Compensation business (“Workers’ Compensation business”) prior to the sale of this business on July 31, 2020.

- *Commercial Medical*: The Health Care Benefits segment offers point-of-service (“POS”), preferred provider organization (“PPO”), health maintenance organization (“HMO”) and indemnity benefit (“Indemnity”) plans.

Commercial medical products also include health savings accounts (“HSAs”) and consumer-directed health plans that combine traditional POS or PPO and/or dental coverage, subject to a deductible, with an accumulating benefit account (which may be funded by the plan sponsor and/or the member in the case of HSAs).

Principal products and services are targeted specifically to large multi-site national, mid-sized and small employers, individual insureds and expatriates.

The Company offers medical stop loss insurance coverage for certain employers who elect to self-insure their health benefits.

Under medical stop loss insurance products, the Company assumes risk for costs associated with large individual claims and/or aggregate loss experience within an employer’s plan above a pre-set annual threshold.

These Government Medical products are further described below:

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 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.

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

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.

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

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.

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.

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.

The majority of the Pharmacy Services segment’s clients have migrated to a single claim adjudication platform.

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Visits paid for by employers, health insurers or other third parties accounted for approximately 92% of MinuteClinic’s total revenues in 2019.

MinuteClinic is now affiliated with more than 90 major health systems and continues to build a platform that supports primary care.

*Onsite Pharmacies*

Retail Store Development

The Company also competes with

| | |

| --- | --- |

| • | *Commercial Medical*: The Health Care Benefits segment offers point-of-service (“POS”), preferred provider organization (“PPO”), health maintenance organization (“HMO”) and indemnity benefit (“Indemnity”) plans. Commercial medical products also include health savings accounts (“HSAs”) and consumer-directed health plans that combine traditional POS or PPO and/or dental coverage, subject to a deductible, with an accumulating benefit account (which may be funded by the plan sponsor and/or the member in the case of HSAs). Principal products and services are targeted specifically to large multi-site national, mid-sized and small employers, individual insureds and expatriates. The Company offers medical stop loss insurance coverage for certain employers who elect to self-insure their health benefits. Under medical stop loss insurance products, the Company assumes risk for costs associated with large individual claims and/or aggregate loss experience within an employer’s plan above a pre-set annual threshold. |

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Item 103 of SEC Regulation S-K requires disclosure of environmental legal proceedings with a governmental authority if management reasonably believes that the proceedings involve potential monetary sanctions of [removed: $100,000] [added: $1 million] or more.

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

alleged historical noncompliance with hazardous waste regulations in connection with LTC pharmacies in the State of New York.

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

For the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2019][added: 2020]

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

[removed: ][added: ]

| Delaware | [added: | |] 05-0494040 | [added: | |]

| (State or other jurisdiction of incorporation or organization) | [added: | |] (I.R.S. Employer Identification No.) | [added: | |]

| One CVS Drive, | [added: | |] Woonsocket, | [added: | |] Rhode Island | [added: | |] 02895 | [added: | |]

| (Address of principal executive offices) | | | [added: | | | | | |] (Zip Code) | [added: | |]

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

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

| Title of each class | [added: | |] Trading Symbol(s) | [added: | |] Name of each exchange on which registered | [added: | |]

| Common Stock, par value $0.01 per share | [added: | |] CVS | [added: | |] New York Stock Exchange | [added: | |]

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

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

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

| 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. | | | | [added: | | | | | | | |] ☑ | [added: | |] Yes | [added: | |] ☐ | [added: | |] No | [added: | |]

| 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). | | | | [added: | | | | | | | |] ☑ | [added: | |] Yes | [added: | |] ☐ | [added: | |] No | [added: | |]

| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting 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. | | | | | | | | [added: | | | | | | | | | | | | | | | |]

| Large accelerated filer | [added: | |] ☑ | | [added: | | | |] Accelerated filer | | | | [added: | | | | | | | |] ☐ | [added: | |]

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

| | | | [added: | | | | | |] Emerging growth company | | | | [added: | | | | | | | |] ☐ | [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. | | | | | | | [added: | | | | | | | | | | | | | |] ☐ | [added: | |]

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

The aggregate market value of the registrant’s common stock held by non-affiliates was approximately [removed: $70,617,679,934] [added: $84,719,366,378] as of June [removed: 28, 2019,] [added: 30, 2020,] based on the closing price of the common stock on the New York Stock Exchange.

As of February [removed: 12, 2020,] [added: 8, 2021,] the registrant had [removed: 1,304,159,680] [added: 1,311,354,926] shares of common stock outstanding.

Information contained in the definitive proxy statement for CVS Health Corporation’s [removed: 2020] [added: 2021] Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, [removed: 2019] [added: 2020] (the “Proxy Statement”), is incorporated by reference in Parts III and IV to the extent described therein.

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

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

| Item 1: | [removed: [Business](#s1cd14bb447b64f8fb85299c11228c546)] | [removed: [2](#s1cd14bb447b64f8fb85299c11228c546)] | [added: [Business](#ic31760c417ad433094d37b2420225748_13) | | | [2](#ic31760c417ad433094d37b2420225748_13) | | |]

| Item 1A: | [added: | |] [Risk [removed: Factors](#s7569003a9d7a41c5a26e8114b5c0067c)] [added: Factors](#ic31760c417ad433094d37b2420225748_31)] | [removed: [29](#s7569003a9d7a41c5a26e8114b5c0067c)] | [added: | [32](#ic31760c417ad433094d37b2420225748_31) | | |]

| Item 1B: | [added: | |] [Unresolved Staff [removed: Comments](#s3653e460421043ff92eeeb9a7c8a67d5)] [added: Comments](#ic31760c417ad433094d37b2420225748_34)] | [removed: [52](#s3653e460421043ff92eeeb9a7c8a67d5)] | [added: | [61](#ic31760c417ad433094d37b2420225748_34) | | |]

| Item 2: | [removed: [Properties](#s087f1f6c48ed44bcb0465820aa88bb21)] | [removed: [52](#s087f1f6c48ed44bcb0465820aa88bb21)] | [added: [Properties](#ic31760c417ad433094d37b2420225748_37) | | | [61](#ic31760c417ad433094d37b2420225748_37) | | |]

| Item 3: | [added: | |] [Legal [removed: Proceedings](#sfce30239f6f041629e07af2d8555097a)] [added: Proceedings](#ic31760c417ad433094d37b2420225748_40)] | [removed: [52](#sfce30239f6f041629e07af2d8555097a)] | [added: | [61](#ic31760c417ad433094d37b2420225748_40) | | |]

| Item 4: | [added: | |] [Mine Safety [removed: Disclosures](#s0a49e7c3d90c49e7aab6456c6e3cb056)] [added: Disclosures](#ic31760c417ad433094d37b2420225748_43)] | [removed: [53](#s0a49e7c3d90c49e7aab6456c6e3cb056)] | [added: | [62](#ic31760c417ad433094d37b2420225748_43) | | |]

| | [added: | |] [Information about our Executive [removed: Officers](#s970f62f816bf4b90acfa246a103dbcbc)] [added: Officers](#ic31760c417ad433094d37b2420225748_46)] | [removed: [54](#s970f62f816bf4b90acfa246a103dbcbc)] | [added: | [63](#ic31760c417ad433094d37b2420225748_46) | | |]

| Part II | | | [added: | | | | | |]

| Item 5: | [added: | |] [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s144423a057a74d54bb459866cb562653)] [added: Securities](#ic31760c417ad433094d37b2420225748_52)] | [removed: [55](#s144423a057a74d54bb459866cb562653)] | [added: | [64](#ic31760c417ad433094d37b2420225748_52) | | |]

| Item 7: | [added: | |] [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s3986652bc9234d81a2a620f1dd663cad)] [added: Operations](#ic31760c417ad433094d37b2420225748_58)] | [removed: [58](#s3986652bc9234d81a2a620f1dd663cad)] | [added: | [66](#ic31760c417ad433094d37b2420225748_58) | | |]

| Item 7A: | [added: | |] [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s70446864f19945c390e4ea4951fcdcb5)] [added: Risk](#ic31760c417ad433094d37b2420225748_91)] | [removed: [87](#s70446864f19945c390e4ea4951fcdcb5)] | [added: | [97](#ic31760c417ad433094d37b2420225748_91) | | |]

| Item 8: | [added: | |] [Financial Statements and Supplementary [removed: Data](#s4d0cd8443c3d45a29aae0f0716b4cae6)] [added: Data](#ic31760c417ad433094d37b2420225748_94)] | [removed: [90](#s4d0cd8443c3d45a29aae0f0716b4cae6)] | [added: | [100](#ic31760c417ad433094d37b2420225748_94) | | |]

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| Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. | | | | | | | | | | | | | | | | | | | | | ☑ | | |

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| Item 6: | | | [Reserved](#ic31760c417ad433094d37b2420225748_55) | | | [65](#ic31760c417ad433094d37b2420225748_55) | | |

| Item 9B: | | | [Other Information](#ic31760c417ad433094d37b2420225748_217) | | | [177](#ic31760c417ad433094d37b2420225748_217) | | |

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| Item 11: | | | [Executive Compensation](#ic31760c417ad433094d37b2420225748_226) | | | [177](#ic31760c417ad433094d37b2420225748_226) | | |

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| Item 16: | | | [Form 10-K Summary](#ic31760c417ad433094d37b2420225748_244) | | | [183](#ic31760c417ad433094d37b2420225748_244) | | |

| | | | [Signatures](#ic31760c417ad433094d37b2420225748_247) | | | [184](#ic31760c417ad433094d37b2420225748_247) | | |

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| Item 6: | [Selected Financial Data](#s3876121a637c4c39844d74c5348d898f) | [57](#s3876121a637c4c39844d74c5348d898f) |

| Item 9B: | [Other Information](#sa42a09036897444c8fba2d8d38add7b0) | [171](#sa42a09036897444c8fba2d8d38add7b0) |

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| Item 11: | [Executive Compensation](#se326522ace2546a2b1a233003ce45539) | [171](#se326522ace2546a2b1a233003ce45539) |

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| Item 16: | [Form 10-K Summary](#s11b21ea88c024f36b4b9d06526cc17fd) | [177](#s11b21ea88c024f36b4b9d06526cc17fd) |

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

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As of December 31, [removed: 2019,] [added: 2020,] the Retail/LTC segment operated the following properties:

[removed: | • |] [added: -] Approximately [removed: 1,725] [added: 1,845] retail pharmacies [removed: and] [added: within retail chains, as well as] approximately 80 clinics in Target [added: Corporation (“Target”)] stores; [removed: |]

[removed: | • |] [added: -] Owned distribution centers and leased distribution facilities throughout the [removed: U.S.] [added: United States] totaling approximately 10.5 million square feet; and [removed: |]

[removed: | • |] [added: -] Owned and leased LTC pharmacies throughout the [removed: U.S.] [added: United States] and an owned LTC repackaging facility. [removed: |]

In connection with certain business dispositions completed between 1995 and 1997, the Company continues to guarantee lease obligations for [removed: 79] [added: 76] former stores.

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

- Approximately 8,115 retail stores, of which approximately 5% were owned.

Net selling space for retail stores was approximately 80.1 million square feet as of December 31, 2020.

| | |

| --- | --- |

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

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| --- | --- |

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| --- | --- |

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| --- | --- |

The following sets forth the name, age and biographical information for each of the Registrant’s executive officers as of February [removed: 18, 2020.][added: 16, 2021.]

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

[removed: Bisaccia*,] [added: Roberts*,] age [removed: 63,] [added: 65,] Executive Vice President [removed: of CVS Health Corporation since March 2016] and Chief [removed: Human Resources] [added: Operating] Officer of CVS Health Corporation since [removed: January 2010; Senior] [added: March 2017; Executive] Vice President of CVS Health Corporation [added: and President of CVS Caremark] from [removed: January 2010] [added: September 2012] through February [removed: 2016.][added: 2017.]

Boratto*, age [removed: 53,] [added: 54,] 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.

Brennan, M.D*., age [removed: 65,] [added: 66,] 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.

Clark*, age [removed: 55,] [added: 56,] 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.

[removed: Flum*,] [added: Lotvin, M.D*.,] age [removed: 50,] [added: 59,] Executive Vice [removed: President, Enterprise Strategy and Digital] [added: President] of CVS Health Corporation [removed: since November 2018; Executive Vice President, Corporate Strategy] and [removed: Business Development] [added: President] of CVS [removed: Pharmacy, Inc. from June 2016 through October 2018;] [added: Caremark since March 2020;] Executive Vice President - [removed: Pharmacy Services] [added: Transformation] of CVS [removed: Pharmacy, Inc.] [added: Health Corporation] from [removed: March 2015] [added: June 2018] through [removed: May 2016; Senior] [added: February 2020; Executive] Vice President [removed: of Retail Pharmacy of CVS] [added: - Specialty] Pharmacy, [removed: Inc.] [added: CVS Caremark] from [removed: December 2010] [added: November 2012] through [removed: February 2015.][added: May 2018.]

Lynch*, age [removed: 57,] [added: 58, President and Chief] Executive [added: Officer of CVS Health Corporation since February 2021; Executive] Vice President of CVS Health Corporation [removed: since] [added: from] November [removed: 2018;] [added: 2018 through January 2021;] President of Aetna [removed: since] [added: from] January [removed: 2015;] [added: 2015 through January 2021;] Executive Vice President, Local and Regional Businesses of Aetna from February 2013 through December [removed: 2014.][added: 2014; and a director of CVS Health Corporation since February 2021.]

Ms. Lynch is [added: also] a member of the board of directors of U.S. Bancorp, a banking and financial services company.

Moriarty*, age [removed: 56,] [added: 57,] 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.

Ms. Boratto is also a member of the board of directors of United Parcel Service, Inc., an international package delivery and supply chain management company.

*Daniel P.

Finke*, age 50, Executive Vice President of CVS Health Corporation and President of Health Care Benefits since February 2021; Executive Vice President, Commercial Business and Markets of Aetna from February 2020 through January 2021; Executive Vice President, Consumer Health and Service of Aetna from June 2018 through January 2020; Senior Vice President, Network and Clinical Services of Aetna from January 2016 through May 2018.

*Laurie P.

Havanec*, age 60, Executive Vice President and Chief People Officer of CVS Health Corporation since February 2021; Executive Vice President and Chief People Officer, Otis Worldwide Corporation, an elevator, escalator and moving walkway manufacturer, from October 2019 through January 2021; Corporate Vice President, Talent of United Technologies Corporation, a multinational manufacturing conglomerate, from April 2019 through October 2019; Vice President - HR, Institution Businesses of Aetna from 2013 through March 2017.

*Neela Montgomery*, age 46, Executive Vice President of CVS Health Corporation and President of Retail/Pharmacy since November 2020; Chief Executive Officer of Crate & Barrel Holdings, a retailer of furniture, kitchenware and other home essentials, from August 2017 through August 2020; Executive Board Member of Otto Group GmbH, a German e-commerce company, from November 2014 through July 2017.

Ms. Montgomery is also a member of the board of directors of Logitech International SA, a Swiss-American manufacturer of computer peripherals and software.

*Lisa G.

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

*Joshua M.

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.

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.

*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.

*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.

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.

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

As of February [removed: 12, 2020,] [added: 8, 2021,] there were [removed: 26,656] [added: 26,078] registered holders of the registrant’s common stock according to the records maintained by the registrant’s transfer agent.

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

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

| Authorization Date | [added: | |] Authorized | | | | [added: | |] December 31, [removed: 2019] [added: 2020] | | |

| November 2, 2016 (“2016 Repurchase Program”) | [added: | |] $ | 15.0 | | | [added: | |] $ | 13.9 | |

During the three months ended December 31, [removed: 2019,] [added: 2020,] the Company did not repurchase any shares of common stock.

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, [removed: 2014] [added: 2015] through December 31, [removed: 2019.][added: 2020.]

The graph assumes a $100 investment in shares of CVS Health’s common stock on December 31, [removed: 2014.][added: 2015.]

[removed: ][added: ]

| | [added: | |] December 31, | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| | [removed: 2014] | | [added: 2015] | | [removed: 2015] | | | | 2016 | | | | [added: | |] 2017 | | | | [added: | |] 2018 | | | | [added: | |] 2019 | | | [added: | | | 2020 | | |]

| CVS Health Corporation | [added: | |] $ | 100 | | | [added: | |] $ | [removed: 103] [added: 82] | | | [added: | |] $ | [removed: 85] [added: 77] | | | [added: | |] $ | [removed: 80] [added: 72] | | | [added: | |] $ | [removed: 74] [added: 84] | | | [added: | |] $ | [removed: 87] [added: 80] | |

| S&P 500 Food & Staples Retail Group Index (2) | [added: | |] 100 | | | | [removed: 98] | | [added: 99] | | [removed: 98] | | | | [removed: 111] [added: 113] | | | | [removed: 112] | | [added: 114] | | [removed: 143] | | | [added: | 145 | | | | | | 169 | | |]

| S&P 500 Health Care Group Index (1) (3) | [added: | |] 100 | | | | [removed: 107] | | [added: 97] | | [removed: 104] | | | | [removed: 127] [added: 119] | | | | [removed: 135] | | [added: 126] | | [removed: 163] | | | [added: | 153 | | | | | | 173 | | |]

[removed: | (1) | Includes] [added: (1)Includes] CVS Health. [removed: |]

[removed: | (2) | Includes 5] [added: (2)Includes five] companies (COST, KR, SYY, WBA, WMT). [removed: |]

[removed: | (3) | Includes 61] [added: (3)Includes 63] companies. [removed: |]

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

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

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

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

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

| S&P 500 (1) | | | 100 | | | | | | 112 | | | | | | 136 | | | | | | 130 | | | | | | 171 | | | | | | 203 | | |

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.

| | | | | | | | |

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

| | | | | | | | |

| December 15, 2014 (“2014 Repurchase Program”) | 10.0 | | | | — | | |

Each of the share Repurchase Programs was effective immediately.

The 2014 Repurchase Program has been completed.

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

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

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

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

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| --- | --- |

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| --- | --- |

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| --- | --- |

Not applicable.

The selected consolidated financial data of CVS Health Corporation as of and for the periods indicated in the five-year period ended December 31, 2019, has been derived from the consolidated financial statements of CVS Health 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. |

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

| [Consolidated Statements of Operations for the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#s07669AC5CAF05721BC439C70A8159B1B)] [added: 2018](#ic31760c417ad433094d37b2420225748_97)] | [removed: [91](#s07669AC5CAF05721BC439C70A8159B1B)] | [added: | [101](#ic31760c417ad433094d37b2420225748_97) | | |]

| [Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#sBDD36ED7549A598EB6EE42F151568D2D)] [added: 2018](#ic31760c417ad433094d37b2420225748_100)] | [removed: [92](#sBDD36ED7549A598EB6EE42F151568D2D)] | [added: | [102](#ic31760c417ad433094d37b2420225748_100) | | |]

| [Consolidated Balance Sheets as of December 31, [removed: 2019] [added: 2020] and [removed: 2018](#s6C8AD780A658531F9232A1FC9324C490)] [added: 2019](#ic31760c417ad433094d37b2420225748_103)] | [removed: [93](#s6C8AD780A658531F9232A1FC9324C490)] | [added: | [103](#ic31760c417ad433094d37b2420225748_103) | | |]

| [Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#sC58EA9D8B86E51FAA2B1748EC7F1FB61)] [added: 2018](#ic31760c417ad433094d37b2420225748_109)] | [removed: [94](#sC58EA9D8B86E51FAA2B1748EC7F1FB61)] | [added: | [104](#ic31760c417ad433094d37b2420225748_109) | | |]

| [Consolidated Statements of Shareholders’ Equity for the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#s0DEA84317B2C5813B86A33CF48D70F14)] [added: 2018](#ic31760c417ad433094d37b2420225748_112)] | [removed: [96](#s0DEA84317B2C5813B86A33CF48D70F14)] | [added: | [106](#ic31760c417ad433094d37b2420225748_112) | | |]

| [Notes to Consolidated Financial [removed: Statements](#s66894430CA1755C2A77059E7EABCCCBC)] [added: Statements](#ic31760c417ad433094d37b2420225748_118)] | [removed: [97](#s66894430CA1755C2A77059E7EABCCCBC)] | [added: | [107](#ic31760c417ad433094d37b2420225748_118) | | |]

| [Reports of Independent Registered Public Accounting [removed: Firm](#s79E4DC93159A5F69805356EA3CA6E4EC)] [added: Firm](#ic31760c417ad433094d37b2420225748_202)] | [removed: [164](#s79E4DC93159A5F69805356EA3CA6E4EC)] | [added: | [172](#ic31760c417ad433094d37b2420225748_202) | | |]

[Index to Consolidated Financial [removed: Statements](#s4d0cd8443c3d45a29aae0f0716b4cae6)][added: Statements](#ic31760c417ad433094d37b2420225748_94)]

| | [added: | |] For the Years Ended December 31, | | | | | | | | | | | [added: | | | |]

| In millions, except per share amounts | [removed: 2019] | | [added: 2020] | | [removed: 2018] | | | | [removed: 2017] [added: 2019] | | | [added: | | | 2018 | | |]

| Revenues: | | | | | | | | | | | | [added: | | | | | |]

| Products | [added: | |] $ | [removed: 185,236] [added: 190,688] | | | [added: | |] $ | [removed: 183,910] [added: 185,236] | | | [added: | |] $ | [removed: 180,063] [added: 183,910] | |

| Premiums | [removed: 63,122] | | [added: 69,364] | | [removed: 8,184] | | | | [removed: 3,558] [added: 63,122] | | | [added: | | | 8,184 | | |]

| Services | [removed: 7,407] | | [added: 7,856] | | [removed: 1,825] | | | | [removed: 1,144] [added: 7,407] | | | [added: | | | 1,825 | | |]

| Net investment income | [removed: 1,011] | | [added: 798] | | [removed: 660] | | | | [removed: 21] [added: 1,011] | | | [added: | | | 660 | | |]

| Total revenues | [removed: 256,776] | | [added: 268,706] | | [removed: 194,579] | | | | [removed: 184,786] [added: 256,776] | | | [added: | | | 194,579 | | |]

| Operating costs: | | | | | | | | | | | | [added: | | | | | |]

| Cost of products sold | [removed: 158,719] | | [added: 163,981] | | [removed: 156,447] | | | | [removed: 153,448] [added: 158,719] | | | [added: | | | 156,447 | | |]

| Benefit costs | [removed: 52,529] | | [added: 55,679] | | [removed: 6,594] | | | | [removed: 2,810] [added: 52,529] | | | [added: | | | 6,594 | | |]

| Goodwill impairments | [added: | |] — | | | | [removed: 6,149] | | [added: —] | | [removed: 181] | | | [added: | 6,149 | | |]

| Operating expenses | [removed: 33,541] | | [added: 35,135] | | [removed: 21,368] | | | | [removed: 18,809] [added: 33,541] | | | [added: | | | 21,368 | | |]