Caremark, the pharmacy benefits management business of CVS Caremark Corp., has struggled and reported lower profits in recent years.
Caremark lost several large contracts in 2010, and this year, the company is expected to report a smaller profit because of expenses related to a huge new contract with Aetna Inc. and lower drug prices from a contract with a federal employees' union. The Woonsocket, R.I., company has also faced questions about its business model and scrutiny from regulators. New President and CEO Larry Merlo has said he is committed to the CVS-Caremark combination, and he reiterated that view Thursday in his first earnings call as CEO.
Merlo also said the company has no plans to split up and hit back at "special interests" and other critics. Merlo replaced Thomas Ryan as president in 2010 and became CEO when Ryan officially retired on March 1. Ryan led the company for 16 years and was at the helm in 2007 when CVS, then only a large drugstore chain, acquired Caremark for $26.5 billion.
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MERLO: "I believe we have the right plan being executed by the right people supported with the right processes and technology to deliver on the full potential of this business over the long term. In addition to the anticipated benefits from this plan, 2012 begins the generic wave, a generic wave that will carry through the next few years with over $90 billion of branded products coming off patent. So I am confident that 2012 will be the year that our PBM breaks trend and demonstrates healthy operating profit growth. We believe that improving the performance of our PBM is the most effective and fastest way to increase shareholder value and that breaking up the company would be a step in the wrong direction for plan members, retail customers, and certainly, our payors."
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