CVS Health Corporation (CVS) Earnings Call Transcript & Summary

Welcome to the 2020 Annual Meeting for CVS Health Corporation. Our host for today's call is Colleen McIntosh, Corporate Secretary. [Operator Instructions] I will now turn the call over to your host, Colleen McIntosh. You may begin.

Welcome to the CVS Health Annual Meeting of Stockholders. Please note that the agenda and the rules of the meeting have been posted on the virtual meeting website. And if you've not already voted or wish to change your vote, you can do so at any time until the polls are closed by clicking the vote now button. You can also submit a question or comment at any time using the ask a question box on the website. I'll now turn it over to our Chair, David Dorman.

Good morning, and welcome to the 2020 Annual Meeting of Stockholders of CVS Health Corporation. I'm David Dorman, Chair of the Board of CVS Health Corp. Also with me for our virtual meeting today are Larry Merlo, the company's President and Chief Executive Officer; Colleen McIntosh, who you just heard from, is our Senior Vice President, Corporate Secretary and Chief Governance Officer. I would also like to introduce a number of other individuals who are with us for our virtual meeting this morning. First, it's my pleasure to introduce the members of the company's Board of Directors who are standing for reelection. First, Fernando Aguirre, Former Chairman, President and CEO of Chiquita Brands International; David Brown, Partner and Member of the Executive Committee of the law firm of Nelson and Mullins, Alecia DeCoudreaux, President, Amerita of Mills College and Former Executive at Eli Lilly; Nancy-Ann DeParle, Managing Partner at Consonance Capital Partners and Former Director of the White House Office of Health Reform; Roger Farah, Chairman of the Board of Tiffany & Company and Former Executive at Tory Burch & Ralph Lauren. Anne Finucane, Vice Chairman at Bank of America, and Chairman of the Bank of America Merrill Lynch Europe. Edward Ludwig, former Chairman and CEO of Becton Dickinson; JP Millon, former President and CEO of PCS Health Systems; Mary Schapiro, Vice Chair of Public Policy at Bloomberg LP. and former Chairwoman of the SEC. Bill Weldon, former Chairman, CEO of Johnson & Johnson; and Tony White, former Chairman, President and CEO of Applied Biosystems. I would also like to thank our 2 directors who are retiring today: first, Richard Bracken, former Chairman and CEO of HCA Holdings; and Richard Swift, Former Chairman, President and CEO of Foster Wheeler. Richard has been a member of the Board since 2015 and has served as Chair of our Medical Affairs Committee since it was first formed in 2016. Dick has been a member of the Board since 2006 and has been chair of our Audit Committee since 2011. Both have served the Board with great distinction, and we wish them well in their retirement. Finally, I would like to acknowledge representatives of the company's independent auditors, Ernst & Young LLP, who are also joining the virtual meeting including lead Audit partner, Mike Fischer. Ernst & Young have indicated they do not wish to make a statement at this time. I'll introduce some of our officers a little later in the meeting. Now turning to our formal business for the day. Madam Secretary, will you present the list of stockholders of record on March 18, 2020, and tell us what -- that we have a quorum for the transaction business?

Mr. Chairman, I can report that the list of stockholders of record on March 18, 2020, has been certified and received and that beginning on April 3, 2020, a notice of meeting, proxy statement and annual report were mailed or made available to all such stockholders and that they are present today, either by person or in proxy, holders of at least 1.1 billion shares, representing approximately 85% of the outstanding shares of the company's common stock that we, therefore, have a quorum.

Thank you, Madam Secretary. I'd now like to appoint Carl Wagner of American Election Services as inspector of elections. Madam Secretary, would you confirm that the oath has been administered?

Mr. Chairman, I can confirm that the oath of office has been administered and executed and is in my possession.

Thank you. Our principal business today is to act upon the following proposals as set forth in full in the proxy statement mailed and made available to our stockholders beginning on April 3, 2020. First, a proposal to elect 13 directors; second, a proposal to ratify the appointment of Ernst & Young as CVS' independent auditors for 2020. Third, a proposal to approve company's executive compensation as described in the proxy statement; and fourth, a proposal to amend the company's 2017 incentive compensation plan to increase the shares authorized to be used under the plan. Fifth, a proposal to amend the company's employee stock purchase plan to increase the shares available for sale under that plan. Sixth, a stockholder proposal for reducing the ownership threshold required to request stockholder action by written consent; and seventh, a stockholder proposal regarding the company's Chair of the Board. We have with us this morning, [ Glenn Baty ], who will now briefly present the 2 stockholder proposals. Mr. [ Baty ].

Good morning, this is [ Glenn Baty ]. Proposal 6 makes shareholder written consent meaningful, Kenneth Steiner, sponsor. Shareholders request that our Board of Directors take the steps necessary to change 25% to 3% in this passage from our bylaws. A request by stockholder for a record date in accordance with Article 8 of the Certificate of Incorporation must be delivered by the holders of record of at least 25% of the voting power of the outstanding capital stock of the corporation entitled to express consent on the relative action. This proposal includes taking the steps necessary to make each change in our governing documents that is needed to be consistent with this 25% to 3% amendment. When the CVS directors adopted a shareholder right to act by written consent, CVS directors put in a hurdle to make written consent not a meaningful right. CVS directors made it necessary for an unwieldy 25% of CVS shares to simply request a record date. It makes no sense to gather 25% of CVS stock to just obtain a record date from management when only 15% of CVS can force management to call a special meeting. The current CVS written consent is thus useless baggage without this proposal. Please vote, yes, make shareholder written consent meaningful proposal 6. Proposal 7, independent Board Chairman, sponsored by John Chevedden. Shareholders request that our Board of Directors adopt this policy and amend our governing documents as necessary to require that the Chairman of the Board to be an independent member of the Board whenever possible. Although it would be better to have an immediate transition to an independent Board Chairman, Board would have the discretion to phase in this policy for the next Chief Executive Officer transition. Timing may be right for a new CVS Chairman of the Board and to transition to a permanent role for an independent Board Chairman at CVS. The current CVS shareholders -- the current CVs Chairman, David Dorman, has 14 years long tenure and was rejected by more shareholders than any other CVS Director in 2019. Meanwhile, in less than 5 years, the CVS stock price has fallen from $112 to $61. Executive pay was also rejected by 9% of shares in 2019, which, combined with the price of CVS stock suggests that CVS executive pay may not have the proper incentives, a typical rejection rate for executive Pay is 5%; David Brown, who chaired the CVS Executive Pay Committee received many negative votes compared to other CVS directors in 2019. Please vote yes, independent Board Chairman, Proposal 7.

Thank you.

And I'm finished. You're welcome.

Thank you. The company's position on both the stockholder proposals is set forth in the proxy statement. Balloting on all the proposals as outlined is now before the meeting. I understand that voting is available online for anyone who has not put in a proxy or who wishes to change his or her vote. If you would like to vote online, please do so now. [Voting]

While the final votes are being cast and counted, I'd like to take this opportunity to introduce some of the company's executive officers who are joining our virtual meeting. First of all, Eva Boratto, Chief Financial Officer; John Roberts, Chief Operating Officer; Alan Lotvin, President of CVS Caremark; Karen Lynch, President of Aetna; Tom Moriarty, Chief Policy and External Affairs Officer and General Counsel; and Valerie Haertel, Senior Vice President of Investor Relations. The polls for voting on all matters at this meeting are now closed. No further voting is permitted and the inspector of election will consider no further proxies or evidence of voting. The inspector of elections will tabulate the votes cast at this meeting and certify the final results in due course. Returning to the business of the meeting. Madam Secretary, would you announce the preliminary results of the voting?

The proposal to elect 13 directors has been approved with at least the majority in favor of each nominee. The proposal to ratify the appointment of Ernst & Young as independent auditors has been approved with a vote of approximately 97% for. The proposal to approve on an advisory basis, the corporation's executive compensation has been rejected with a vote of approximately 75% against. The proposal to amend the company's 2017 incentive compensation plan has been approved with a vote of approximately 93% for. The proposal to amend the company's employee stock purchase plan has been approved with a vote of approximately 98% for. The stockholder proposal regarding the ownership threshold for stockholder action by written consent has been rejected with a vote of approximately 84% against. The stockholder proposal regarding our independent chair has been rejected with a vote of approximately 79% against. Therefore, subject to final verification of the vote by the inspector of election, proposals 1, 2, 4 and 5 have been approved by the required stockholder vote, and proposals 3, 6 and 7 have been rejected by the required stockholder vote. Further details of the vote as verified by the inspector of election will be disclosed in a Form 8-K to be filed with the SEC within the next couple of days.

Thank you, Madam Secretary. As there is no other formal business, I hereby adjourn the meeting. I'm now going to turn things over to Larry Merlo, our CEO, for a business update and some Q&A. Larry?

Right. Well, thank you, Dave, and good morning, everyone, and thanks for joining us today. Before we get started, I would ask that you take a moment to read our cautionary statement concerning forward-looking statements. Now here's what I'll cover with you this morning: I'll start with a brief review of our response to the COVID-19 pandemic and how our diverse portfolio of assets are relevant in this new norm. I'll also provide a reminder of our strategic priorities, along with an update on our financial performance, and then I'll wrap up with a look at our corporate social responsibility efforts and highlight some notable recognitions we've received over the past year. I think as we all know, we are currently going through an unprecedented time with the COVID-19 pandemic. And while there are many uncertainties regarding both the severity and duration of the pandemic, CVS Health is uniquely positioned to help the country through this crisis. Our enterprise is taking measures to help combat the virus and to help the government and our clients with testing, along with keeping people healthy. And I want to thank all of our colleagues who have worked tirelessly on the front lines and across the organization to support our communities, clients and their members and our customers, and I could not be more proud of their efforts. Now we have responded swiftly and comprehensively to the challenges COVID-19 presented with 2 key priorities. Our first focus is on the well-being and safety of our colleagues, consumers and communities we serve; and second is maintaining the continuity of our businesses and operations. And we have been executing a robust COVID-19 response plan led by 2 of our senior leaders, Karen Lynch, President of Aetna; and Dr. Troy Brennan, our Chief Medical Officer. Now we took swift action to keep our colleagues safe, while we have our stores and other operations up and running with minimal disruption. We implemented social distancing practices, enhanced cleaning protocols, distributed personal protective equipment and outfitted stores with plexiglass barriers. We provided our colleagues with enhanced benefits and resources, including family support, and announced bonuses for our frontline colleagues for their outstanding work. And all of these actions have helped ensure the continuity of our operations at a time when they are needed the most. For our consumers and members impacted by the virus, we're providing them with continued access to quality health care while relieving some of the added costs and stress resulting from the pandemic through a multitude of programs that include: waiving COVID-19-related member costs for diagnostic testing and inpatient admissions. We also waived member out-of-pocket costs for telemedicine visits for any health condition. CVS Pharmacy has waived fees associated with home delivery for prescriptions and accompanying front store products for all consumers, in both Aetna and Caremark have worked with clients and their members to support medication access and maintaining adherence by waiving early refill limits and extending previously approved prior authorizations for maintenance medications. For our Aetna-contracted health care providers, we have streamlined processes, we have eased administrative policies, we're making timely payments, and we're enhancing telemedicine policies to allow them to focus on patient care. Now to support our communities, we are creating action-based solutions, working alongside local, state and federal government partners, playing an important role in helping with the reopening of our economy. For example, across 5 states, we have opened large-scale COVID-19 testing sites, and we have now administered over 100,000 tests with real-time results. Additional testing sites are being set up as we speak, and we are targeting the opening of up to 1,000 locations across the country by the end of May. We also recently expanded our Coram services nationwide. We've worked in partnership with hospitals and providers to help transition eligible IV therapy patients back into the home, and that has freed up important hospital capacity. Now the actions that we have taken, they all point to our strategy of making health care access local and simple, while helping people achieve their best health. And as a result, we expect that elements of today's new norm will become part of tomorrow's everyday routines. And while the actions we have taken to respond to the pandemic come at a cost, we believe these investments in our people and our businesses are the right ones, and our differentiated offerings have enabled us to play a key role in responding to this health crisis. Now the pandemic has also underscored the strength and diversity of our organization and the unique combination of resources and talent that we have to deliver comprehensive health services to members and consumers across the health care system. Prior to the pandemic, we had been working on transforming our organization, and one key component has been expanding our digital capabilities. As a result of this, we were able to quickly innovate and support the additional volume, along with the unique needs that have arisen during pandemic. And our consumer-centric digital strategy has become even more relevant as people are increasingly using technology while they shelter in place. And we have achieved higher levels of engagement across our digital assets in the first quarter, a trend that began in January and certainly accelerated with COVID-19. And let me just give you a few examples of that. Utilization of telemedicine for virtual visits through our MinuteClinics is up about 600% compared to Q1 '19. Retail prescription home delivery, that's up more than 1,000%. Additionally, we saw a fourfold increase in the number of consumers adding front store items to their prescription deliveries. We also saw a double-digit percentage increase in app usage across CVS Pharmacy, Caremark and Specialty year-over-year. As an example, in specialty pharmacy, digital refills were up approximately 50%. Additionally, in our Aetna health app, we engaged more households in the first quarter than we did in the first 3 quarters combined of 2019. So while we have been responding to the pandemic in full force, we have also been executing on our priorities to ensure we are using the full breadth of our capabilities to make care more accessible and affordable while we enable better health outcomes. And as a result, we have made strong progress towards our enterprise priorities to accelerate growth, and those priorities remain: to grow and differentiate our businesses, to deliver transformational products and services, to create a consumer-centric technology infrastructure and to modernize enterprise functions and capabilities. And before I jump into our first quarter 2020 results, let me just hit a few highlights from our 2019 year. We delivered adjusted earnings per share of $7.08, exceeding our financial expectations. And performance for the year was driven by strong operating execution across the enterprise with all segments meeting or exceeding expectations. And we exceeded our synergy goal for the year, and we raised our run rate expectations. In 2019, we generated $12.8 billion in cash from operations, reduced long-term debt by $4.7 billion and paid $2.6 billion in dividends to shareholders. Now moving on to our Q1 2020 results, we delivered adjusted earnings per share of $1.91, with total revenues of nearly $67 billion, that's up 8% year-over-year. And the underlying core performance of our businesses was strong, and in March, COVID-19-related business activity added approximately $0.10 to our Q1 adjusted earnings per share. Now adjusted operating income growth was primarily driven by the Pharmacy Services segment as well as the Retail/Long-Term Care segment, while Health Care Benefits' adjusted operating income was slightly lower year-over-year. Pharmacy Services adjusted operating income increased 24.7% versus LY. That was driven by Specialty Pharmacy volume, continued improvement in purchasing economics and an increase in generic dispensing rate. The Retail segment adjusted operating income growth was driven by strong sales performance, the benefit of a higher generic dispensing rate, front store margin improvements and a lower SG&A. In the Health Care Benefits segment, adjusted operating income was down slightly due to lower commercial insured membership, higher Medicaid benefit costs in certain states, along with investments to onboard the IlliniCare members. Partially offsetting these impacts was our strong Medicare Advantage membership growth. Sequentially, we saw growth of 11.3%, and that outpaced the industry average. Now our enterprise results for the quarter, which exceeded expectations, reflect strong underlying performance, along with an acceleration of prescriptions dispensed, strong front store sales and a modest reduction in discretionary medical utilization, all largely driven by COVID-19. In the quarter, we generated $3.3 billion of cash from operations and returned approximately $650 million to shareholders through cash dividends. And as a preemptive measure, we issued $4 billion in bonds in March. We expect to repay the incremental debt upon a return to normalcy, and we remain committed to our target leverage ratio of low 3x in 2022. Now our strong cash-generation capability allows us to fund future growth initiatives while also executing on our capital allocation strategy. And following the Aetna acquisition, our capital allocation strategy has been guided by our commitment to maintaining a healthy balance sheet. And to deliver on that commitment and achieve our targeted leverage ratio of the low 3x, we intend to, first, maintain our dividend at $2 a share. Second, after funding the dividend, satisfying the retained capital needs of our insured subsidies, along with capital expenditures supporting the business, we will use our remaining cash to pay down existing debt. And lastly, we will refrain from any large-scale M&A transactions or share repurchases. So let me wrap up with an overview of our continued focus on CSR. At CVS, our purpose is helping people on their path to better health, and we've never been better positioned to do so. We are transforming the health care experience and investing in community health at the local level. And we are one of the most valuable employers supporting economic and professional development, and we're building healthier communities by providing support for patients that have chronic diseases and ensuring customer safety and well-being. We're also mitigating our impact on the environment and engaging our colleagues and consumers to join us on our sustainable journey. In 2019, we reframed our CSR strategy to become more inclusive of our broader enterprise and the impact we can have as a health care leader. And our refreshed CSR framework, Transform Health 2030, conveys our mission to use our scale, expertise and innovative spirit in ways that positively impact all of our stakeholders. And as you can see, the 4 key areas we are focused on are healthy people, community, business and planet, and Transform Health 2030 charts our course future and focuses in these 4 key areas. Now environmental, social and governance matters are of growing importance to investors, and CVS Health has long made this an area of priority with our efforts yielding tangible and positive results. And as you can see from this slide, we take our responsibility seriously, and we report out on the work we do through our annual CSR reporting, which you can find on the Investor Relations portion of our website. We also incorporate shareholder feedback into our policies and our programs from our ongoing dialogues. We are always looking to include more ESG content in our investor materials and at various investor events to emphasize the role that we play and all the good work that we do to ensure a more sustainable future for all of our stakeholders, investing in employees, delivering value to our customers, members and clients and dealing ethically with suppliers and supporting outside communities are now at the forefront of American business goals, and they are priorities for us. Now before closing, I would like to share some noteworthy and well-deserved recognition we have received over the past year, and one exciting accomplishment was that CVS Health was named to the prestigious Dow Jones Sustainability Index for the seventh consecutive year, and for the first time in 2019, we were added to their World index. For the third year in a row, we have been placed in the Civic 50, which is the list compiled of the 50 most community minded companies in the U.S. And we also made the CDP A List and are only 1 of 34 U.S. companies to be honored with their recognition for climate change leadership. Now these recognitions represent a partial list as CVS continues to be recognized by many organizations for the efforts we have deployed in our CSR initiatives. And we are proud of these recognitions, which we see as an indication of our place as an industry leader in the area of corporate sustainability and our commitment to improving the health care system. And we know these recognitions would not be possible without the high-quality work of thousands of CVS Health colleagues, and we remain committed to putting our best efforts forward. So with that, again, let me thank you for your time this morning, your continued interest in CVS Health. And now let's go ahead and open it up for Q&A.

So let me just mention as the questions are coming up here on the screen, there are questions of a similar topic. So we're going to be -- we'll review those questions. We'll combine them together, and I'll probably paraphrase some of what has been written. So my point here is that you may not hear your question being asked verbatim. So first question that's popped up is we've heard a lot about HealthHUBs. Can we all expect HealthHUBs to come to our neighborhood? So just for everybody's benefit, our HealthHUBs strategy is really the repurpose of today's CVS Pharmacy to more of a health destination. We piloted our HealthHUBs early last year. We were extremely pleased with the results that we saw. And in the second half of 2019, we began a rollout with a plan to have 1,500 hubs by the end of 2021. And so as we sit here today, we have just around 100 hubs built in various markets across the country. We did -- when the pandemic began, we did take a pause in terms of not starting any new constructions, but we are ready to go as soon as we get the all clear sign, and we remain on target to have those 1,500 hubs by the end of next year. So we plan to have those in many, many markets across the country over that period of time. So I don't know where the person is that from the question asked, but I would say chances are pretty strong that there'll be one coming near you. The next question, are stock buybacks authorized for 2020? And if so, how much? And I touched a bit on this on my prepared remarks in terms of our capital deployment strategy. And as we had acknowledged, we have no plans for any share repurchases until we have achieved our targeted leverage ratio of the low 3x, and we are on plan to achieve that in 2022. So upon achieving that low 3x target, you could expect us to return to a more historic capital deployment strategy. Next question. Some companies have made the decision to suspend their dividend during the COVID-19 pandemic, is this a possible action during this global health crisis? Well, again, this relates back to the prior question on our capital deployment strategy. We have no plan to do that as I had acknowledged in my prepared remarks, we plan to keep our dividend at $2 a share, the annual dividend. And the answer to that question really ties back to the answer that I just provided that as we achieve that targeted leverage ratio, as I just mentioned, that's when we'll return to a more historic capital deployment strategy. The next question. What is the greatest impact of COVID-19 on the company? That's a great question. Look, as you heard me talk about in our first quarter results, I had acknowledged that COVID-19 provided a $0.10 benefit to our results. And let me talk a bit more about that a little more detail. Much of that benefit came out of our retail business. We saw a spike in customer traffic and sales activity during that March time frame. A lot of that was reflective of the actions that we took to ensure that those millions of people that have chronic diseases and those chronic diseases are being managed well by people staying adherent to their medications that those therapies were not disrupted. And we -- as you heard in our prepared remarks, we relaxed the guidelines for those folks to get their prescriptions refilled earlier. And in fact, that's what they did. And then in our front store, we also saw some incremental sales from people replenishing their medicine cabinets and certainly all the incremental purchases associated with cleaning supplies. We saw much of that benefit, I'll describe it as pull forward activity. And on our first quarter call last week, we also provided what we saw in our retail business from a sales perspective in the month of April. And that -- our April sales numbers reflect the comment that I just made. Our year-over-year prescription growth was pretty flat to last year. And we had low double-digit front store sales declines in our stores, which, again, I think, reflected the pull forward nature of the incremental sales that we saw in March, along with the fact that people were certainly sheltering in place as defined by the state orders. I think the point that I want to make here is that we obviously still have many unknowns in terms of what happens next. We're still not sure in terms of the duration of the pandemic. And we're also waiting to better understand the impact of the actions that have been taken by Congress and the various stimulus activities and what that will do to reopen our economy. The point here also is that we continue to remain an essential business to millions of individuals. And the one element that I am very encouraged by is we've talked a lot about our strategy, okay, and being a health services company. And in the need to make health care local, whether that is in the community and the home or in the palm of your hand. And as I had alluded earlier in the prepared remarks, we have made investments in terms of our journey in that direction. It's -- the HealthHUB is the most visible sign of that. But I touched on investments that we've made in technology and in digital. And some of the numbers that I quoted, if we had not made those investments, we would not have been able to see the growth increases that we saw in the utilization of telemedicine as an example, or some of the things that we were able to do to go into the homes. Our Coram team has made more than -- and this is probably about 10 days old, more than 60,000 visits into homes for people that were recently discharged from the hospital. So it's -- these are great examples of our strategy coming to life in very, very meaningful ways. Next question is are there employee furloughs so far in 2020? Well, look, I think in -- you heard us talk about as the pandemic was upon us, the 2 important priorities that we're established that guided the decisions and the actions that we took as an organization. One being the safety and health of our colleagues. And that includes their economic well-being. And that has not been negatively affected. And unlike -- unfortunately, unlike others, and I'm referring to other industries that have really had some challenges. We have not furloughed. We have not laid off nor have we decreased pay for our employees. And as I had alluded earlier, we have enhanced benefits to enable them to continue to do their work and have rewarded those efforts with bonuses. Next question is what percent of employees work mostly from home? Another great question. We have about 300,000 colleagues across the CVS Health enterprise. And I'm rounding when I -- with these numbers, I would say about 100,000, so about 1/3 of that -- of our employee population, I'll call them support personnel. They support our front lines. So they work in our corporate headquarters in our regional centers of excellence that are in markets across the country. Today, we have about 80% of those individuals that are working remotely. And kudos to our technology team. I would sit here and say that the technology folks they never get the credit due, okay? And they've done a terrific job in terms of ensuring both the stability as well as the security of our IT platforms in our network that has enabled people to work remotely without any disruption in terms of managing the business and the productivity and the efficiencies that we have come to appreciate. Next question is what is the Board doing to oversee responsible human capital management during the crisis to ensure the safety of workers and customers and that policies are, in fact, enforced? And I'll go ahead and answer that. And Dave, maybe if there's anything you want to add, I'll give you a minute if you want to add anything on. Look, we have had regular updates with our full Board in terms of the work of the task force from -- I'm going back to the second week in March when that started. And those updates have been between telephonic and written, they have been on a weekly basis, and we've been able to not just talk about what we're doing, but to ensure that we've had 2 way dialogue in terms of being able to address questions that members of our Board have had.

I don't have anything to add to that, Larry. Thank you.

All right. Thanks, Dave. Next question is, in what month will the next Board Meeting be? Okay. And look, we have regularly scheduled meetings every, I would say, every 6 to 8 weeks. And as I just acknowledged, we also meet in between those meetings, if conditions or circumstances deem that to be necessary. And I would just say that our Board is very engaged in the oversight of our business. This next question, I will go ahead and -- I'll go ahead and read this one verbatim. The Carpenters union pension funds have a collective ownership position of 542,300 shares of CVS common stock. As long-term investors, we appreciate the company's actions to address the safety and health concerns of employees and consumers associated with the COVID-19 pandemic. We appreciate the supplemental materials, which were provided concerning the executive compensation plan. Could you or the Chair explain the rationale within the context of the full long-term component for the relatively short 4-year pro rata vesting schedule associated with stock option grants? Thank you. So Dave, I'll flip that one over to you.

Yes. Basically, Board reviews this and the comp committee annually and believe it's the best practice to establish long-term shareholder value creation. And I would note that the vast majority of our executives hold their options for exercise until the final year of the options availability. And you can see that borne out in our public filings. So there is very little early, what I'll say, exercise upon initial vesting, so they are holding it for a longer-term appreciation.

Okay. Thank you, Dave. The -- I'll go ahead and read it. You support fair wages and quality affordable health insurance for security officers who keep Aetna's security offices safe and secure. And we can -- I'm not sure the specifics of the question, I would just tell you that we certainly support fair wages and a comprehensive benefit plan. And whoever has that question, if you would care to email, our Investor Relations will be happy to follow up with you specifically as to the details behind that question. Next question. I'll go ahead and read this one. It's a little long. At last year's meeting, we asked you about your partnership with ICER, a nonprofit group that is working to establish cost effectiveness formulas that would ration care by cutting it off from the most vulnerable patients. In recent weeks, when the COVID-19 scare was at its height, public officials gave instructions and made plans for exactly such a triage at the expense of those communities. We announced the shareholders in the public today that you do not support such cost effectiveness formulas and commit to ending funding for any organizations or programs that embrace such an approach. And let me answer that by saying that, look, as you think about the nature of our business, one of our overarching objectives and goals is how do we ensure -- from a pharmaceutical perspective, how do we ensure that we're getting the right drug to the right patient at the lowest possible cost. And I think as we probably had talked last year, we've done -- I think we've done a terrific job in our PBM business in terms of bending that cost curve and challenging the dynamic that the pharmaceutical manufacturers have been able to raise prices time after time after time. And they really control the challenges that Americans across the country have had in terms of affording their prescription medications. And as a PBM, we have been able to make meaningful improvements in ensuring the affordability of medications. So the -- and we've got many, many examples to prove that out, to include our latest innovation, where those individuals that have diabetes we, in working with our clients, have created a way where their members can have 0 out-of-pocket costs, which certainly takes the entire question of the cost of medication off the table. So one of the dynamics that we deploy is -- and this gets back to the work of our clinicians that there are multiple therapies within a therapeutic class for a particular indication. And the world around us has said, look, from an outcomes perspective, we don't need all of those various therapies. And we -- from the tools that I just described at a high level, we've been able to introduce cost as now a variable of care. And what's interesting is when physicians, and we've been able to provide the physician visibility at the moment of truth, which we would define as the point of prescribing. When he or she is getting ready to write that prescription, we've been able to show them the members' out-of-pocket cost. And we found that they're switching a large percentage of the time to a lower-cost therapy. That does not compromise the effectiveness or the clinical outcomes that the physician and we, as patients are striving for. So we'll continue to deploy those tools in an effort to ensure that people are getting -- the members and the customers, the patients that we serve are getting their needed medications at the lowest possible cost. And then I see one more question up here. Have you paid your store employees and others bonus pay during the pandemic? In our comments, we talked about bonuses for our frontline employees. And I believe bonus, number one, is being paid. I think it's either this week or next week. And there'll be a second bonus coming during the month of June. There -- And then there's one last question that just popped up. How many questions were submitted? The answer to that is 17. So with that, let me again thank you for attending our annual meeting. If you did have any questions that we didn't get to, please reach out to our Investor Relations team. And again, thank you for your interest in CVS Health.

That concludes our meeting.

That concludes today's conference. Thank you for attending, and have pleasant day.