CVS Health (CVS) is one of the largest healthcare companies in the country, boasting a vertically integrated business that raked in more than $124 billion in revenues last year.
But not all parts of its business are equal. The front-end of its CVS retail pharmacies — the brand it is best known for — has been struggling for years, just like its peers in the sector. The pharmacy benefit manager Caremark is the target of political pressure. The Aetna insurance plans have had mixed success over the years. And questions remain about CVS's ability to succeed in the health provider space with its 2023 acquisition of Oak Street.
After former CEO Karen Lynch left late last year and the company began a strategic review to potentially break up certain units, new CEO David Joyner is faced with answering the question: What, exactly, is CVS?
Is it a retail pharmacy giant, an insurance giant, or does it continue to be, like UnitedHealth Group, an awkward mix of vertically integrated parts that, thanks to government rules and regulations, can never totally sync their operations?
"We are, as a management team, working through that very question," Joyner told Yahoo Finance in an interview this week.
But it doesn't appear the company is ready to shed any of its parts, as had been reported late last year.
"I would say that the overarching theme is, I want to become America's most trusted healthcare company. And to do that, I do think we have to be in both the provider business, which is in the pharmacy and in the clinic business, and I also think we need to be able to manage the risk, which is part of what Aetna and Caremark brings to the table," Joyner said.
"I would expect, by the year-end, we will have a much better and more organized story to tell," he added.
The GLP-1 move
One major move the company made this week was to address the high cost of popular GLP-1 weight-loss drugs.
CVS chose Novo Nordisk's (NVO) Wegovy as the preferred drug on its formulary and excluded Eli Lilly's (LLY) Zepbound on the list. In response, Eli Lilly's CEO told Yahoo Finance he wasn't interested in exclusive deals and that he felt confident in the access points the company has created, including the online prescription options connected through LillyDirect.
In fact, CEO David Ricks said, the new prescriptions being filled for vials rather than injectables from LillyDirect equaled more than the total of new prescriptions for Wegovy.
"I think we've really found an interesting part of the market here," Ricks said, adding that he hopes there will eventually be more insurance coverage for weight-loss drugs.
When asked about that idea, Joyner told Yahoo Finance he agrees there is a case to be made for online platforms when insurance doesn't cover the products.
"I do agree with what Dave Ricks has said. I do think that in those hair-loss products, ED [erectile dysfunction] products, all these other categories which generally are not covered by plan sponsors, there ... are multiple ways to access it," Joyner said.
His own experience, though, informs Joyner after three decades that customers value in-person store experiences.
"While it has always been a cost-effective distribution point, it has not been the preference of the consumer and even during COVID, [when] people were not leaving their homes, we should have seen this massive spike in home delivery. We still didn't get anywhere near what the optimal rates were," Joyner said.
Joyner added that over time, it's possible that digital and home delivery numbers grow.
Abandoning the ACA
CVS also announced this week it was leaving the Affordable Care Act marketplace, for the second time.
Joyner said its Aetna insurance plans are unprofitable and not worth the trouble. If they did decide to reenter the exchange, most states mandate a five-year waiting period.
"So, this is why this has been ... such an important decision for us, about whether or not we could actually find our way to profitability before five years, or should we exit. So that tells you the calculus that we were looking at in terms of this market," Joyner said.
He added that there is likely to be more volatility in the ACA space as questions swirl around the future of government-funded enhanced subsidies, which are set to expire at the end of this year, barring new legislation, and how that impacts the rate of plan sign-ups in coming years.
"I think the ACA business is a viable product as long as it's funded and supported by the government. I do think it's a business that ... can work. Unfortunately, the way we built our product and the way that our network was put together, and the way in which — we're just small, we're subscale, and we have not prioritized that segment of our business," Joyner said.
The company has been caught in what Joyner termed a "bad underwriting cycle" with a confluence of factors that include the ways in which marketplace plans are sold, how brokers are paid, and other companies' exits that resulted in "a really bad mix in the markets that we are serving."
Because it's a government-subsidized product, it doesn't follow data cycles the way normal insurance products do, giving the company insight and predictability for certain markets.
Joyner said the company is intently focused on its strategic turnaround and felt like the marketplace just wasn't a priority.
"It's not an indictment on the product (or) the market. It's basically our inability to effectively compete," he said.
"I just didn't think I had enough time, and enough money, quite frankly, to get us to a path to where ... it worked for us."
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Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. That includes GLP-1s, of course. Follow Anjalee as AnjKhem on social media platforms X, LinkedIn, and Bluesky @AnjKhem.
