A historically bad flu season has sent Americans to the doctor in droves — and given a boost to companies across the health care business.
Hospitalization rates for flu have reached record levels, according to the Centers for Disease Control and Prevention. The rapid spread of the illness is worrisome, with a higher-than-normal number of deaths related to flu and pneumonia, including 53 children.
For care providers and other companies all along the pharmaceutical supply chain, it has led to higher revenue from increasing hospital visits and drug sales.
Margins for flu treatments, widely available in generic form, are razor thin. But the surge in demand caused by this year’s outbreak has helped improve results at drug distributors such as McKesson Corp., which move medications from the factory to the pharmacy, and for drug retailers including CVS Health Corp., which have seen more consumers pick up prescriptions.
Laboratory companies such as Quest Diagnostics Inc. are also receiving a boost as more sick patients are being sent by their doctors for tests and blood work.
The effects are unlikely to ebb soon. More than 7% of people in the U.S. who visited a health care provider during the week ending Jan. 27 went due to flu-like illness, a weekly level not seen since the 2009 swine-flu pandemic. This year’s flu vaccine has been unusually ineffective, and the season has shown no sign of subsiding.
“Everyone that has a theoretical benefit from the flu is calling it out as it has been a modest tailwind,” said Jefferies LLC analyst Brian Tanquilut, who expects companies to see an even bigger benefit in the current quarter.
For some companies, the flu outbreak is turning what threatened to be a relatively dismal period on its head.
On Thursday, CVS said its operating profit for the first quarter will be better than previously projected as it fills more prescriptions for flu treatments.
“The exceptionally strong flu season across the country has had a major factor in this improved outlook,” CVS Chief Financial Officer David Denton said on a earnings call.
The hospital business, which has been struggling in the face of competition from walk-in clinics and other outpatient treatment options, has also been granted a temporary reprieve from its longer-term decline by the flu.