Morgan Stanley Sees Upside for CVS Health (CVS) and Walgreens Boots Alliance (WBA) on Higher Vaccine Medicare Reimbursement Rates
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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".
Shares of CVS Health closed at $75.13 yesterday.
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