Morgan Stanley Sees Upside for CVS Health (CVS) and Walgreens Boots Alliance (WBA) on Higher Vaccine Medicare Reimbursement Rates

March 16, 2021 8:40 AM EDT
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Morgan Stanley analyst Ricky Goldwasser reiterated an Overweight rating on CVS Health (NYSE: CVS) after the CMS decided to increase Medicare payments for the administration of vaccines on the belief that it represents a 2-7% potential tailwind to earnings growth and greater flexibility to deploy capital deployment from incremental cash flows. The benefit is even more impactful on Equalweight rated Walgreens Boots Alliance (NASDAQ: WBA).

The analyst stated "CMS’ decision to increase Medicare payments for the administration of COVID -19
vaccines, from ~$28 to $40 for a single-dose vaccine (i.e. JNJ) and from ~$45 to $80 for two-dose vaccines (PFE and MRNA) represents a meaningful upside to CVS and Walgreens guidance. While seniors covered by Medicare account for only ~15 to 20% of the addressable vaccinated population by our estimates, if commercial payors follow, as has been the case last April when CMS opted to raise labs reimbursement for COVID-19 PCR testing, the higher reimbursement rates could translate to as much as three times higher average EBIT per person vaccinated, from ~$10 to $17 average EBIT contribution to as much as $28 to $34
per vaccinated individual, by our estimates".

For an analyst ratings summary and ratings history on CVS Health click here. For more ratings news on CVS Health click here.

Shares of CVS Health closed at $75.13 yesterday.



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