FDA-approved for the treatment of Type 2 diabetes.

“Most employers cover Ozempic for diabetes, they don’t necessarily cover it as an anti-obesity medication,” said Seth Friedman, pharmacy and health plans practice leader at Gallagher.

That makes it even trickier for employees to navigate whether they can get access to the drug and if it will be covered by their insurance. “They see that it’s covered but they get rejected,” Friedman said.

A 2023 survey by the International Foundation of Employee Benefit Plans found that 76% of the companies polled provided GLP-1 drug coverage for diabetes, versus only 27% that provided coverage for weight loss — leaving many workers shut out.

“Obviously, there is demand for them, and it’s not for diabetes, it’s for weight loss,” said Kushner.

“Looking ahead to 2025, about half of large employers will cover the drugs for weight loss,” said Beth Umland, Mercer’s research director of health and benefits. However, “even when they do, there are guardrails around who can use it.”

Demand for these treatments is only expected to increase — but the added controls for coverage are also helping to keep costs in check.

Nearly all employers have some sort of “utilization management” restrictions in place, such as a prior authorization requirement, according to Gallagher’s Friedman.

For some companies, that may mean workers must try other weight-loss methods first or meet with a dietitian and enroll in a weight-loss management program. Others may require a threshold for body mass index, or BMI, of at least 30, depending on how the plan is set up, Friedman said.

This information is available during open enrollment, which typically runs through early December. 

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]]> https://thenewshub.in/2024/10/11/ozempic-is-driving-up-the-cost-of-your-health-care-whether-you-can-get-your-hands-on-it-or-not/feed/ 0 https://thenewshub.in/2024/10/11/pharmacy-deserts-are-appearing-across-u-s-as-rite-aid-walgreens-cvs-drug-store-closures-spread/ https://thenewshub.in/2024/10/11/pharmacy-deserts-are-appearing-across-u-s-as-rite-aid-walgreens-cvs-drug-store-closures-spread/?noamp=mobile#respond Fri, 11 Oct 2024 13:19:29 +0000 https://thenewshub.in/2024/10/11/pharmacy-deserts-are-appearing-across-u-s-as-rite-aid-walgreens-cvs-drug-store-closures-spread/

A shuttered Rite Aid store in New Lebanon, Ohio.

Kevin Williams

New Lebanon, Ohio, population 3,756, has three dollar stores, a Groceryland grocery store, a few fast-food restaurants, a public library branch, and a spirit-filled school system. What it doesn’t have is a pharmacy.

As part of Rite Aid’s bankruptcy filing in October 2023, the chain announced it was closing 800 stores, with Ohio especially hard hit, at 180 closings slated largely in struggling small towns or Rust Belt cities. According to Rite Aid’s website, the chain currently has 1,700 locations, down from the 2,111 reported at the time of bankruptcy. The company has stated it will emerge from bankruptcy with about 1,300 stores.

New Lebanon’s Rite Aid closed in September.

“My community needs a pharmacist. It is concerning to me that the residents don’t have one here,” said New Lebanon Mayor David Nickerson.

Some smaller towns near New Lebanon have their own pharmacies, but even those are a 15-minute drive away. New Lebanon’s Rite Aid prescriptions were transferred to a Walgreens 30 minutes away in Dayton.

Nickerson, who was just elected last year and has a military background, recently found himself walking the Walgreens parking lot in Dayton. He even strolled around the back of the building at night, doing a thorough inspection to tell his constituents he had done his due diligence and made sure it was a safe place to go. But even coming away convinced that Walgreens was safe and clean won’t be enough for some of New Lebanon’s residents.

“We have many elderly residents who are uncomfortable going that far with the traffic and unknown area,” Nickerson said.

Getting a prescription filled in New Lebanon, which sits on a busy thoroughfare leading to Dayton, wasn’t always so difficult.

“Before we moved to New Lebanon two years ago, there were three pharmacies,” said Joyce Dingman. “Last year New Lebanon’s CVS closed, and now Rite Aid is closing, leaving us with none.” 

She and her husband will head to a town 30 minutes away to get prescriptions filled at a Kroger pharmacy.

 A spokesman for Rite Aid confirmed the outsized impact the closings are having on Ohio.

“Nearly all our stores in Ohio will be closing by the end of September as part of our recent Chapter 11 process to create a stronger, healthier company,” the spokesman said, adding that there would only be four Rite Aids remaining in Ohio. There were over 140 before the latest round of closures.

New Lebanon, though, is hardly alone in its struggle to hold on to a pharmacy.  Experts say the retail pharmacy model has been squeezed by complicated and sometimes lower reimbursement rates for medication while competition for sales of candy and paper towels, items that used to pad profits, has grown more fierce.   

The pharmacy squeeze

At a time when the federal government is suing the primary drug market’s middlemen, the pharmacy benefit managers — with the Federal Trade Commission alleging inflated prices on drugs like insulin — some are pointing the finger at the PBMs for the pharmacy deserts.

Miranda Rochol, senior vice president of provider solutions at healthcare technology company Prescryptive Health — who worked her way up in the business, starting as a pharmacy technician before moving to Walgreens health technology team — says the PBMs are largely to blame for the current problems in the industry. “PBMs can steer patients into their own pharmacies, drive profit to their pharmacies, and under-pay community pharmacies,” she said.

In June, the FTC issued a scathing report about PBMs and the “squeezing” of Main Street pharmacies caused by decades of mergers and acquisitions. According to the FTC, the three largest PBMs control nearly 80% of all prescriptions filled in the United States, negotiating the terms and conditions for access to prescription drugs for hundreds of millions of Americans. The report blames falling reimbursement rates from PBMs for many of the financial troubles of smaller pharmacies.

“As long as the big three PBMs go unchecked, more pharmacy deserts will appear,” Rochol said.

The three largest PBMs are CVS‘s Caremark, OptumRX (part of UnitedHealth), and Express Scripts, owned by Cigna.

A spokesperson for Express Scripts pointed to its lawsuit filed against the FTC in response to the report, calling it unfair, biased, erroneous, and defamatory, and claims the report ” wrongly concluded that PBMs inflate drug costs and harm independent pharmacies.”

Tim Wentworth, Walgreens Boots Alliance CEO — who was CEO of Express Scripts from 2016–2021 — addressed PBMs in Walgreens’ third quarter earnings call, saying the company was “in active discussions with our PBM and payer partners to align incentives and ensure we are paid fairly.”

Walgreens has announced that it may close as many as 25 percent of its 8,200 stores, which will further squeeze communities that lack pharmacies. A spokesman for Walgreens pointed out that while they may be large in size, they are still “independent” — unaffiliated with a PBM — so they face many of the same price pressures as smaller stores.

CVS has also closed stores, and for its part, a CVS Caremark spokesman disputes claims that it is economically squeezing smaller pharmacies, citing Georgia as an example. Between 2023 and 2024, independent pharmacies in the CVS Caremark pharmacy network were reimbursed 67.5% higher on average than CVS Pharmacy locations, and 51.9% higher than other chain pharmacies in the state. 

“Local, independently owned pharmacies serve as vital partners in CVS Caremark pharmacy networks, representing more than 40% percent of our in-network pharmacies,” the spokesman said. “CVS Caremark reimburses independent pharmacies substantially more, in aggregate, than chain pharmacies.”

The CVS spokesman also said that CVS pharmacies are not all serviced by Caremark, working with over 70 different PBMs. None of CVS’s closings, the spokesman said, were related to PBM issues, but due to changes in consumer buying patterns and population shifts.

“Claiming that PBMs are under-reimbursing independent pharmacies is not based on the fact. Research in fact shows that PBMs are reimbursing independent pharmacies at higher amounts than chain pharmacies,” said Greg Lopes, spokesman for the Pharmaceutical Care Management Association, the national trade group representing PBMs. “There are unfortunately many factors for pharmacy closures in rural areas, including population declines and the growing use of online pharmacies.”

Data from the National Community Pharmacists Association illustrates the concern over PBM pricing.

Almost all pharmacies (99%) have experienced a reduction in the reimbursed dollar amount of prescribed medications at the point of sale. More than half say that insurance plans and their PBMs are reimbursing pharmacies less than the cost to purchase the drug for at least three of every 10 prescriptions they fill.

The National Association of Chain Drug Stores is pressing for PBM reform legislation. “The U.S. Congress has done the hard work to get bipartisan pharmacy benefit manager (PBM) reform ready to go, and that is ‘must-pass legislation’ before the 118th Congress adjourns,” said Steven C. Anderson, president and CEO of NACDS.

CVS pulled out of NACDS in 2022 amid the trade association’s support of PBM reform.

The vital role of the local pharmacist in Amazon era

According to experts, PBMs, are just one of many reasons retail pharmacies are struggling.

With the neighborhood pharmacy’s demise, patients have to get more creative in getting their medicines. Dr. Colin Banas, chief medical officer of health-care solutions company DrFirst, says there are various other ways for patients to get medicine if their neighborhood pharmacy closes.

“For urgent medications, if patients cannot drive to an available pharmacy, they may explore prescription pickup and delivery services offered by ride-share services such as Uber and Lyft,” Banas said.

He added that it’s also worth checking with local hospitals to see if they have in-house pharmacies that can dispense prescriptions. “Even some doctors’ offices and urgent care centers stock certain medications, so it’s worth making a few calls,” Banas said. 

But Banas believes the pharmacy deserts will only grow, and lead to an increase the number of apps and digitization.

“As pharmacy deserts become more common, patients should keep an eye on new apps and digital tools that will increasingly begin to fill some of the gaps,” Banas said.

This week, Amazon announced that its same-day prescription delivery would expand to roughly half the U.S. next year.

Patient advocates say that technology can’t replace humanity.

All the focus on PBMs, reimbursements, and profits misses the human aspects of the profession, says Dr. Tamera Hughes, an assistant professor at High Point University’s School of Pharmacy who spent several years working at a community pharmacy in Georgia during the last decade before entering academia.

Hughes says PBM business models do prefer to shuttle people more towards medication by mail, but what may be gained in short-term savings is lost in the value of the pharmacist-patient relationship.

“Medication delivery takes away the engagement and rapport that pharmacists build within the communities they serve,” Hughes said.

During her time working at a pharmacy, she got to know her regulars, their needs, and their ailments. “I knew all my customers by name; I asked about their holidays and grandchildren. By removing that one-on-one upfront engagement with the communities they serve, you strip away what it means to holistically look at someone else’s health,” Hughes said. “Pharmacists are not just dispensing the medication, but some of the other lifestyle things that produce a healthy individual, and pharmacies have been great historically doing it.”

In fact, Hughes says that a pharmacist often serves as a de facto doctor for someone who can’t afford a visit.

“People would come to the pharmacy counter to pick up a prescription, while another two to three people would come to pharmacy because their child is sick and say to the pharmacist ‘What can you recommend for a sore throat or a cough?’ … At least five times an hour, I walked from behind the counter to assist someone in picking out medication for their children, and we are able to ask questions to get them the best over-the-counter medicine,” Hughes said.

Pharmacies are being squeezed from all directions — by rising PBMS costs, competition from online pharmacies like Amazon, and retail competitors like dollar stores — but Hughes says by serving as a first defense against illness, neighborhood pharmacists can save greater strain on the larger health system. With the drug store chains like Rite-Aid closing hundreds of retail locations, that line of defense is being lost.

A spokesman for Rite Aid said the closings were the result of trying to create a more “efficient company.”   

In New Lebanon, city officials and the mayor just want their pharmacy back. Acting village manager Rob Anderson says it is a real inconvenience for some residents, and the Rite Aid closing served as a blow to the town.

“Having Rite Aid leave makes it seem like your town is on a negative path when, in reality, New Lebanon’s doing is just fine,” Anderson said.  “But it makes you think the big corporations don’t value your town like they once did.”

             

]]> https://thenewshub.in/2024/10/11/pharmacy-deserts-are-appearing-across-u-s-as-rite-aid-walgreens-cvs-drug-store-closures-spread/feed/ 0 https://thenewshub.in/2024/10/10/pfizer-threatened-to-sue-renegade-executives-prior-to-activist-schism-starboards-smith-says/ https://thenewshub.in/2024/10/10/pfizer-threatened-to-sue-renegade-executives-prior-to-activist-schism-starboards-smith-says/?noamp=mobile#respond Thu, 10 Oct 2024 19:33:00 +0000 https://thenewshub.in/2024/10/10/pfizer-threatened-to-sue-renegade-executives-prior-to-activist-schism-starboards-smith-says/

Ian Read, former CEO of Pfizer Inc., gestures as he speaks during a panel session at the World Economic Forum in Davos, Switzerland, on Jan. 17, 2017.

Simon Dawson | Bloomberg | Getty Images

Activist Starboard Value accused Pfizer of threatening litigation against the company’s former CEO and chief financial officer in order to get them to break ranks with the investor’s nascent turnaround campaign at the pharmaceutical giant.

Starboard managing member Jeff Smith said in a Thursday letter to Pfizer’s board that the company or its advisors also “threatened” to claw back former chief executive Ian Read and ex-CFO Frank D’Amelio’s past compensation and cancel their unvested shares.

Smith asked that the board assemble a special committee to investigate the matter, describing it as “highly inappropriate, flagrantly unethical, and a significant breach of fiduciary obligations.”

The risk of legal liability was a driving factor in Read and D’Amelio’s public backing of Pfizer CEO Albert Bourla late Wednesday night, said a person familiar with the interactions between the company and the two former executives.

Pfizer shares slipped overnight as news of the two executives’ breakaway emerged, and opened down roughly 2.5% in Thursday morning trading.

Starboard’s Smith said that when the activist approached the two executives, both expressed “concerns” about Pfizer’s direction under Bourla and offered to help Starboard in its turnaround campaign.

Starboard did not respond to CNBC’s requests for comment. A Pfizer spokesperson declined to comment.

Smith and Bourla are slated to meet in person next week, Smith said, confirming earlier reports. The agenda of the discussion could not be learned, but people familiar with Starboard’s thinking previously said Pfizer’s focus on disciplined cost structure and mergers and acquisitions had suffered under Bourla’s leadership.

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]]> https://thenewshub.in/2024/10/10/pfizer-threatened-to-sue-renegade-executives-prior-to-activist-schism-starboards-smith-says/feed/ 0 https://thenewshub.in/2024/10/09/cvs-unitedhealth-say-ftc-should-take-lina-khan-and-two-commissioners-off-drug-middlemen-case/ https://thenewshub.in/2024/10/09/cvs-unitedhealth-say-ftc-should-take-lina-khan-and-two-commissioners-off-drug-middlemen-case/?noamp=mobile#respond Wed, 09 Oct 2024 14:17:47 +0000 https://thenewshub.in/2024/10/09/cvs-unitedhealth-say-ftc-should-take-lina-khan-and-two-commissioners-off-drug-middlemen-case/

FTC Chairwoman Lina Khan testifies during the House Appropriations Subcommittee on Financial Services and General Government hearing titled “Fiscal Year 2025 Request for the Federal Trade Commission,” in Rayburn Building on Wednesday, May 15, 2024. 

Tom Williams | Cq-roll Call, Inc. | Getty Images

CVS Health and UnitedHealth Group are demanding Federal Trade Commission Chair Lina Khan and two other commissioners recuse themselves from a suit accusing the companies and other drug middlemen of boosting their profits while inflating insulin costs for Americans. 

In separate motions filed Tuesday night with the FTC, CVS and UnitedHealth argued that all three commissioners have an extensive track record of making public statements that indicate “serious bias” against the companies’ so-called pharmacy benefit managers. 

The companies accused Khan, as well as Commissioners Alvaro Bedoya and Rebecca Kelly Slaughter, of incorrectly asserting that PBMs are “price gougers” that hold significant control over the pricing and access to drugs like insulin. CVS said those statements demonstrate that the commissioners have “prejudged this matter,” so their participation in the case “violates due process.” 

“If the opposite of ‘complete fairness’ is ‘blatant bias,’ the Three Commissioners would easily satisfy even that standard,” CVS wrote in a 23-page motion.

Meanwhile, UnitedHealth’s 17-page motion said, “Any judge who made these remarks about a litigant at the outset of a lawsuit would immediately need to recuse for blatant bias.”

The FTC on Wednesday declined CNBC’s request for comment on the motion. 

More CNBC health coverage

Other corporate giants, including Amazon and Meta, have unsuccessfully pushed for Khan to be disqualified from previous cases or investigations, citing concerns about her objectivity. Khan has resisted those calls, saying she has never prejudged any case or set of facts. 

The FTC filed the suit last month against the three largest PBMs, CVS Health’s Caremark, UnitedHealth Group‘s Optum Rx and Cigna‘s Express Scripts. All are owned by or connected to health insurers and collectively administer about 80% of the nation’s prescriptions, according to the FTC. 

The FTC filed its complaint through its so-called administrative process, which initiates a proceeding before an administrative judge who would hear the case.

PBMs sit at the center of the drug supply chain in the U.S., negotiating medication rebates with manufacturers on behalf of insurers, creating lists of preferred medications covered by health plans and reimbursing pharmacies for prescriptions. The FTC has been investigating PBMs and their role in insulin prices since 2022.

The agency’s lawsuit argues that the three PBMs have created a “perverse” system that prioritizes high rebates from manufacturers, which leads to “artificially inflated insulin list prices.” The suit also alleges that PBMs favor high-list-price insulins even when insulins with lower list prices become available. 

The lawsuit also includes each PBM’s affiliated group purchasing organization, or GPO, which brokers drug purchases for hospitals and other health-care providers. Zinc Health Services operates as the GPO for Caremark, while Emisar Pharma acts as the GPO for OptumRx. Ascent Health Services is the GPO for Cigna.

The lawsuit is just one of several headwinds CVS is facing. Shares of the company are down more than 20% this year as it grapples with runaway medical costs in its insurance segment and pharmacy reimbursement pressure. 

CVS has engaged advisors in a strategic review of its business, which could potentially involve splitting the company’s insurer from its retail pharmacies. It’s unclear where Caremark would fall in the case of a breakup. 

A general view shows a sign of CVS Health Customer Support Center in CVS headquarters of CVS Health Corp in Woonsocket, Rhode Island, U.S. October 30, 2023. 

Faith Ninivaggi | Reuters

In the motion Tuesday, CVS alleged that Khan has vilified PBMs during her entire professional career. For example, the company cited a 2022 statement in which Khan said PBMs “practically determine which medicines are prescribed, which pharmacies patients can use, and the amount patients will pay at the pharmacy counter.”

CVS similarly pointed to Slaughter’s previous comments about the allegedly “disturbing,” “unacceptable” and “rotten” rebating practices of PBMs, and how she believes they create “competitive distortions in pharmaceutical markets.” Meanwhile, the company cited Bedoya’s suggestions that “a significant part of the blame” for insulin price increases rests on rebates demanded by PBMs. 

CVS called the prior statements of the three commissioners “incorrect assertions” about Caremark and other PBMs. 

The health-care giant also alleged that during the FTC probe, the three commissioners attended closed events to help fundraise for anti-PBM lobbying groups. Organizers of those events vilified PBMs as “bloodsuckers” and “vampires,” CVS argued in the motion.

The Biden administration and lawmakers on both sides of the aisle have escalated pressure on PBMs, seeking to increase transparency into their business practices as many patients struggle to afford prescription drugs. Americans pay two to three times more than patients in other developed nations for prescription drugs on average, according to a fact sheet from the White House.

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]]> https://thenewshub.in/2024/10/09/cvs-unitedhealth-say-ftc-should-take-lina-khan-and-two-commissioners-off-drug-middlemen-case/feed/ 0 https://thenewshub.in/2024/10/07/activist-starboard-value-has-1-billion-pfizer-stake-taps-former-executives-for-help-sources-say/ https://thenewshub.in/2024/10/07/activist-starboard-value-has-1-billion-pfizer-stake-taps-former-executives-for-help-sources-say/?noamp=mobile#respond Mon, 07 Oct 2024 02:20:11 +0000 https://thenewshub.in/2024/10/07/activist-starboard-value-has-1-billion-pfizer-stake-taps-former-executives-for-help-sources-say/

People pass by the Pfizer headquarters building in New York City, Jan. 29, 2023.

Kena Betancur | View Press | Corbis News | Getty Images

Activist investor Starboard Value has a roughly $1 billion stake in pharmaceutical giant Pfizer and is seeking to mount a turnaround at the struggling company, according to people familiar with the matter.

The activist’s exact plans could not be learned, but Starboard has approached former Pfizer CEO Ian Read and ex-finance chief Frank D’Amelio, both of whom have expressed interest in supporting Starboard’s turnaround, said the people.

Starboard believes that Pfizer’s current leadership under CEO Albert Bourla has stepped away from historically disciplined cost structure and investment in novel drugs, the people said.

Pfizer’s revenue and free cash flow ballooned during the Covid-19 pandemic, thanks to the company’s fast-tracked vaccine. But its stock has not done well, trading about 30% lower than it did in 2019. That is in part due to an expensive acquisition strategy — nearly $70 billion in M&A since 2020 — the return of which some analysts have questioned.

One particularly concerning deal was Pfizer’s acquisition of Global Blood Therapeutics. Pfizer pulled a drug for sickle cell disease it got just two years ago via the roughly $5 billion acquisition. The company played down the financial impact in September, saying the drug Oxbryta brought in a little over $300 million last year.

Read was Pfizer’s chief from 2010 to 2019 and inherited a company in tumult. But shares more than doubled during his tenure, as executives instituted that cost- and core-focused culture which it has now apparently moved from.

To be sure, the company has taken steps to tamp down on costs. It began a $4 billion cost-cutting program and then announced a second round of further cost reductions. Still, more than $100 billion in shareholder value has evaporated since the Covid-19 pandemic faded largely into the rearview mirror.

Starboard is run by Jeff Smith, and has historically focused on the technology sector. It is currently challenging News Corp’s dual-class share structure, and in recent months has mounted campaigns at Autodesk, Salesforce and Match Group.

The Wall Street Journal earlier reported news of Starboard’s stake. A Pfizer spokesperson declined to comment on “speculation and rumor.”

— CNBC’s Angelica Peebles contributed to this report.

]]> https://thenewshub.in/2024/10/07/activist-starboard-value-has-1-billion-pfizer-stake-taps-former-executives-for-help-sources-say/feed/ 0 https://thenewshub.in/2024/10/04/cvs-is-under-pressure-and-considering-a-breakup-heres-why-that-could-be-risky/ https://thenewshub.in/2024/10/04/cvs-is-under-pressure-and-considering-a-breakup-heres-why-that-could-be-risky/?noamp=mobile#respond Fri, 04 Oct 2024 15:30:17 +0000 https://thenewshub.in/2024/10/04/cvs-is-under-pressure-and-considering-a-breakup-heres-why-that-could-be-risky/

A sign outside of a CVS pharmacy store on February 07, 2024 in Miami, Florida. 

Joe Raedle | Getty Images

It’s time for a wellness check at CVS Health.

Shares of the company are down more than 20% this year as it grapples with higher-than-expected medical costs in its insurance unit and pharmacy reimbursement pressure, among other issues.

As it seeks to claw back faith with Wall Street, the company is considering breaking itself up.

CVS has engaged advisors in a strategic review of its business, CNBC reported Monday. One option being weighed is splitting up its retail pharmacy and insurance units. It would be a stunning reversal for the company, which has spent tens of billions of dollars on acquisitions over the last two decades to turn itself into a one-stop health destination for patients.

Some analysts contend that a breakup of CVS would be challenging and unlikely. 

CVS risks losing customers and revenue if it splits up its vertically integrated business segments, which includes health insurer Aetna and the major pharmacy benefits manager Caremark. That could translate to more lost profits for a health-care giant that has slashed its full-year 2024 earnings guidance for three consecutive quarters. 

“There really is no perfect option for a split,” said eMarketer senior analyst Rajiv Leventhal, who believes a breakup is still a possibility. “If that does happen, one side of the split becomes really successful and prosperous, and the other would significantly struggle.”

Notably, CVS executives on Monday met with major shareholder Glenview Capital to discuss how to fix the flailing business and recover its stock, CNBC previously reported. But Glenview on Tuesday denied rumors that it is pushing to break up the company.

If CVS stays intact, CEO Karen Lynch and the rest of the management team will have to execute major changes to address what industry experts say are glaring issues battering its bottom line and stock price.

The company has already undertaken a $2 billion cost-cutting plan, announced in August, to help shore up profits. CVS on Monday said that plan involves laying off nearly 3,000 employees.

More CNBC health coverage

Some analysts said the health-care giant must prioritize recovering the margins in its insurance business, which they believe is the main issue weighing on its stock price and financial guidance for the year. That pressure drove a leadership change earlier this year, with Lynch assuming direct oversight of the company’s insurance unit in August, displacing then-President Brian Kane.

CVS’ management team and board of directors “are continually exploring ways to create shareholder value,” a company spokesperson told CNBC, declining to comment on the rumors of a breakup. 

“We remain focused on driving performance and delivering high quality healthcare products and services enabled by our unmatched scale and integrated model,” the spokesperson said in a statement. 

Investors may get more clarity on the path forward for the company during its upcoming earnings call in November.

UnitedHealth Group, Cigna and Humana, also have their own PBMs, said eMarketer’s Leventhal. 

But Caremark, in some cases, also funnels drug prescriptions to CVS retail pharmacies, he said. That has helped the company’s drugstores gain meaningful prescription market share over its chief rival, Walgreens, which has been struggling to operate as a largely stand-alone pharmacy business. 

CVS is the top U.S. pharmacy in terms of prescription drug revenue, holding more than 25% of the market share in 2023, according to Statista data released in March. Walgreens trailed behind with nearly 15% of that share last year. 

Now, CVS drugstores must maintain an edge over competitors at a time when the broader retail pharmacy industry faces profitability issues, largely due to falling reimbursement rates for prescription drugs. Increased competition from Amazon and other retailers, inflation, and softer consumer spending are making it more difficult to turn a profit at the front of the store. Meanwhile, burnout among pharmacy staff is also putting pressure on the industry. 

CVS’ operating margin for its pharmacy and consumer wellness business was 4.6% last year, up from 3.3% in 2022 but down from 8.5% in 2019 and 9.9% in 2015.

CVS and Walgreens have both pivoted from years of endless retail drugstore store expansions to shuttering hundreds of locations across the U.S. CVS is wrapping up a three-year plan to close 900 of its stores, with 851 locations shuttered as of August.

The rocky outlook for retail pharmacies could make it difficult for CVS to find a buyer for its drugstores in the event of a split, according to Tanquilut. He said a spinoff of CVS’ retail pharmacies would be more likely.

“There’s a reason they’re cutting down stores. Why break it up when the relationship between Caremark and CVS retail is what keeps it outperforming the rest of the pharmacy peer group?” Tanquilut said. 

$10.6 billion last year, and Signify Health, an in-home health-care company that CVS bought for about $8 billion in 2022. Those deals aimed to build on CVS’ major push into health care – a strategy that Walgreens and other retailers have also pursued over the last few years. 

Oak Street Health could theoretically be spun out with Aetna in the case of a split, Mizuho managing director Ann Hynes wrote in a research note Tuesday. 

An Oak Street Health clinic stands in a Brooklyn neighborhood on February 08, 2023 in New York City. 

Spencer Platt | Getty Images

The primary care clinic operator complements Aetna’s Medicare business because it takes care of older adults, offering routine health screenings and diagnoses, among other services. CVS also sells Aetna health plans that offer discounts when patients use the company’s medical care providers. 

But CVS has also started to integrate Oak Street Health with its retail pharmacies. The company has opened those primary care clinics side by side with some drugstore locations in Texas and Illinois, with plans to introduce around two dozen more in the U.S. by the end of the year. 

Several companies, including Amazon, Walmart, CVS and Walgreens, are feeling the pain from bets on primary care. That’s because building clinics requires a lot of capital, and the locations typically lose money for several years before becoming profitable, according to Tanquilut. 

Walgreens could potentially exit that market altogether. The company said in a securities filing in August it is considering a sale of its primary care provider VillageMD.

But Tanquilut said it may not make sense for CVS to sell Oak Street Health or Signify Health because “they’re actually hitting their numbers.” 

Signify saw 27% year-over-year revenue growth in the second quarter, while Oak Street sales grew roughly 32% compared with the same period last year, reflecting strong patient membership, CVS executives said in an earnings call in August.

Oak Street ended the quarter with 207 centers, an increase of 30 from last year, executives added. 

“Why get rid of them when they’re still strategic in nature?” Tanquilut told CNBC, adding that it would be difficult to find a buyer for Oak Street given the challenging market for primary care centers.

jumped over the last year for insurers as more seniors return to hospitals to undergo procedures they had delayed during the Covid-19 pandemic, such as hip and joint replacements. 

Medicare Advantage, a privately run health insurance plan contracted by Medicare, has long been a key source of growth and profits for the broader insurance industry. More than half of Medicare beneficiaries are enrolled in those plans as of 2024, enticed by lower monthly premiums and extra benefits not covered by traditional Medicare, according to health policy research organization KFF. 

But investors are now concerned about the skyrocketing costs from Medicare Advantage plans, which insurers warn may not come down anytime soon. 

A general view shows a sign of CVS Health Customer Support Center in CVS headquarters of CVS Health Corp in Woonsocket, Rhode Island, U.S. October 30, 2023. 

Faith Ninivaggi | Reuters

Cherny said CVS faced a “double whammy” in Medicare Advantage this year, grappling with excess membership growth at a time when many seniors are using more benefits. 

In August, CVS also said its lowered full-year outlook reflected a decline in the company’s Medicare Advantage star ratings for the 2024 payment year. 

Those crucial ratings help patients compare the quality of Medicare health and drug plans and determine how much an insurer receives in bonus payments from the Centers for Medicare & Medicaid Services. Plans that receive four stars or above get a 5% bonus for the following year and have their benchmark increased, giving them a competitive advantage in their markets.

Last year, CVS projected it would lose up to $1 billion in 2024 due to lower star ratings, the company disclosed in a securities filing. 

But things may start to look up in 2025. 

For example, one of the company’s large Medicare Advantage contracts regained its four-star rating, which will “create an incremental tailwind” in 2025, CVS executives said in August. 

“We’re giving them the benefit of the doubt because we know that the stars rating bonus payments will come back in 2025,” Tanquilut said. 

During a conference In May, CVS said it would pursue a “margin over membership” strategy: CVS CFO Tom Cowhey said the company is prepared to lose up to 10% of its existing Medicare members next year in an effort to get its margins “back on track.” 

The company will make significant changes to its Medicare Advantage plans for 2025, such as increasing copays and premiums and cutting back certain health benefits. That will eliminate the expenses tied to those benefits and drive away patients who need or want to use them. 

Those actions will help the company achieve its target of 100- to 200-basis-points margin improvement in its Medicare Advantage business, CVS executives said in August. 

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