CVS Health Faces Growth Challenges Amid Medicare Rate Concerns
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1h ago
0mins
Should l Buy CVS?
Source: Fool
- Medicare Rate Weakness: The Trump administration's proposal for a mere 0.09% increase in Medicare Advantage rates for 2027, significantly below the expected 4%-6%, threatens to undermine over one-third of CVS Health's revenue, potentially stalling growth in a crucial segment.
- Rising Medical Costs: With medical costs on the rise, CVS's already thin single-digit profit margins are at risk, and without substantial sales growth, the company could face dire financial consequences, especially after reporting a nearly $4 billion net loss in its latest quarter due to goodwill impairment charges.
- Stock Volatility Risks: Despite a remarkable 77% rise in CVS Health's stock in 2025, investor sentiment is cautious due to industry pressures and the increasing availability of pharmaceuticals online, with the stock down 5% since the beginning of the year, indicating market concerns about its future.
- Dismal Growth Outlook: Although CVS's forward price-to-earnings ratio stands at 10, suggesting it might be undervalued, the lack of improved margins and appealing growth prospects significantly diminishes its attractiveness as an investment, with potential for further declines ahead.
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Analyst Views on CVS
Wall Street analysts forecast CVS stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for CVS is 96.71 USD with a low forecast of 91.00 USD and a high forecast of 105.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
17 Analyst Rating
16 Buy
1 Hold
0 Sell
Strong Buy
Current: 75.240
Low
91.00
Averages
96.71
High
105.00
Current: 75.240
Low
91.00
Averages
96.71
High
105.00
About CVS
CVS Health Corporation is a health solutions company. The Company's segments include Health Care Benefits, Health Services, Pharmacy & Consumer Wellness and Corporate/Other. Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, PDPs and Medicaid health care management services. Health Services segment provides a full range of pharmacy benefit management (PBM) solutions through its CVS Caremark operations and delivers health care services in its medical clinics, virtually, and in the home. Pharmacy & Consumer Wellness segment dispenses prescriptions in its CVS Pharmacy retail locations and through its infusion operations, provides ancillary pharmacy services including pharmacy patient care programs, diagnostic testing and vaccination administration, and sells a wide assortment of health and wellness products and general merchandise.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
CVS Health Faces Growth Challenges Amid Medicare Rate Concerns
- Medicare Rate Weakness: The Trump administration's proposal for a mere 0.09% increase in Medicare Advantage rates for 2027, significantly below the expected 4%-6%, threatens to undermine over one-third of CVS Health's revenue, potentially stalling growth in a crucial segment.
- Rising Medical Costs: With medical costs on the rise, CVS's already thin single-digit profit margins are at risk, and without substantial sales growth, the company could face dire financial consequences, especially after reporting a nearly $4 billion net loss in its latest quarter due to goodwill impairment charges.
- Stock Volatility Risks: Despite a remarkable 77% rise in CVS Health's stock in 2025, investor sentiment is cautious due to industry pressures and the increasing availability of pharmaceuticals online, with the stock down 5% since the beginning of the year, indicating market concerns about its future.
- Dismal Growth Outlook: Although CVS's forward price-to-earnings ratio stands at 10, suggesting it might be undervalued, the lack of improved margins and appealing growth prospects significantly diminishes its attractiveness as an investment, with potential for further declines ahead.
See More
CVS Health Introduces Biosimilar Policy Changes for Bone Disease Treatments
- Biosimilar Introduction: CVS Health announced the inclusion of biosimilars Prolia and Forteo in its commercial formularies, replacing brand-name drugs from Amgen and Eli Lilly, expected to provide over 50% cost savings for patients.
- Significant Cost Savings: The low-cost alternatives from CVS's biosimilar unit Cordavis and companies like Celltrion will help generate $1.5 billion in gross savings for customers and patients, significantly reducing the financial burden of osteoporosis treatments.
- Implementation Timeline: These formulary changes will take effect on April 1, with CVS Caremark overseeing the execution, ensuring customers and members have access to more competitive treatment options.
- Market Strategy Shift: By prioritizing biosimilar adoption, CVS not only enhances patient affordability but also strengthens its competitive position in the healthcare market, aligning with the industry's urgent need to lower drug costs.
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Cigna Group Stock Rises on Settlement Agreement
- Settlement Agreement Impact: Cigna's settlement with drug management agencies is expected to save American patients up to $7 billion in out-of-pocket insulin costs over the next decade while generating millions in new annual revenue for local pharmacies, significantly enhancing the company's market outlook.
- Earnings Beat Expectations: Cigna reported fourth-quarter 2025 revenue of $72.49 billion, exceeding analyst estimates of $69.83 billion and reflecting a 10% year-over-year increase, primarily driven by strong performance from Evernorth Health Services, indicating sustained growth potential in the healthcare sector.
- Customer Relationship Growth: The company reported a 3% increase in total customer relationships to 188.4 million, reflecting ongoing expansion in Pharmacy Benefit Services and Behavioral Care, although total medical customers decreased by 5% to 18.1 million, highlighting increasing market competition.
- Optimistic Future Outlook: Cigna expects fiscal 2026 revenues of approximately $280 billion, slightly below the consensus of $283.86 billion, but anticipates adjusted income from operations of at least $7.95 billion, demonstrating confidence in future growth despite market challenges.
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UNH Stock: The Factors Behind UnitedHealth's Struggles in Its Recovery
Stock Performance: UnitedHealth Group experienced a significant 20% drop in stock value in one day, highlighting ongoing struggles for the company.
Reliance on Medicare: The decline serves as a reminder of major health insurers' heavy dependence on the federal government's Medicare Advantage program for senior citizens.
See More
UNH Stock Soared Until Medicare Advantage Update Hit.
Stock Performance: UnitedHealth Group experienced a significant 20% drop in stock value in one day, highlighting ongoing struggles for the company.
Medicare Advantage Reliance: The stock tumble serves as a reminder of health insurers' heavy dependence on the federal government's Medicare Advantage program for seniors.
See More
U.S. Labor Department Pushes for Drug Pricing Transparency
- New Drug Transparency Regulation: The U.S. Department of Labor has proposed a regulation requiring Pharmacy Benefit Managers (PBMs) to fully disclose their compensation to self-insured health plans, impacting approximately 90 million Americans, aimed at eliminating hidden fees and enhancing transparency in the healthcare system.
- Targeting Hidden Fees: The regulation specifically addresses PBMs' practices such as spread pricing, rebates, and clawbacks, aiming to reduce improper profits made by PBMs in drug transactions by mandating disclosure of these fees to protect employers and patients' interests.
- Market Reaction: Following the announcement of a mere 0.09% increase in Medicare payments, the market reacted sharply, with Humana's stock dropping over 13% and UnitedHealth nearly 9%, reflecting investor concerns about the industry's outlook amidst rising costs.
- Long-term Profit Pressure: For companies like CVS, UnitedHealth, and Cigna, PBM services are a significant revenue driver; the new regulation may compress their profit margins, leading to prolonged earnings pressure for these healthcare giants.
See More
CVS Health Faces Growth Challenges Amid Medicare Rate Concerns
- Medicare Rate Weakness: The Trump administration's proposal for a mere 0.09% increase in Medicare Advantage rates for 2027, significantly below the expected 4%-6%, threatens to undermine over one-third of CVS Health's revenue, potentially stalling growth in a crucial segment.
- Rising Medical Costs: With medical costs on the rise, CVS's already thin single-digit profit margins are at risk, and without substantial sales growth, the company could face dire financial consequences, especially after reporting a nearly $4 billion net loss in its latest quarter due to goodwill impairment charges.
- Stock Volatility Risks: Despite a remarkable 77% rise in CVS Health's stock in 2025, investor sentiment is cautious due to industry pressures and the increasing availability of pharmaceuticals online, with the stock down 5% since the beginning of the year, indicating market concerns about its future.
- Dismal Growth Outlook: Although CVS's forward price-to-earnings ratio stands at 10, suggesting it might be undervalued, the lack of improved margins and appealing growth prospects significantly diminishes its attractiveness as an investment, with potential for further declines ahead.
See More
CVS Health Introduces Biosimilar Policy Changes for Bone Disease Treatments
- Biosimilar Introduction: CVS Health announced the inclusion of biosimilars Prolia and Forteo in its commercial formularies, replacing brand-name drugs from Amgen and Eli Lilly, expected to provide over 50% cost savings for patients.
- Significant Cost Savings: The low-cost alternatives from CVS's biosimilar unit Cordavis and companies like Celltrion will help generate $1.5 billion in gross savings for customers and patients, significantly reducing the financial burden of osteoporosis treatments.
- Implementation Timeline: These formulary changes will take effect on April 1, with CVS Caremark overseeing the execution, ensuring customers and members have access to more competitive treatment options.
- Market Strategy Shift: By prioritizing biosimilar adoption, CVS not only enhances patient affordability but also strengthens its competitive position in the healthcare market, aligning with the industry's urgent need to lower drug costs.
See More
Cigna Group Stock Rises on Settlement Agreement
- Settlement Agreement Impact: Cigna's settlement with drug management agencies is expected to save American patients up to $7 billion in out-of-pocket insulin costs over the next decade while generating millions in new annual revenue for local pharmacies, significantly enhancing the company's market outlook.
- Earnings Beat Expectations: Cigna reported fourth-quarter 2025 revenue of $72.49 billion, exceeding analyst estimates of $69.83 billion and reflecting a 10% year-over-year increase, primarily driven by strong performance from Evernorth Health Services, indicating sustained growth potential in the healthcare sector.
- Customer Relationship Growth: The company reported a 3% increase in total customer relationships to 188.4 million, reflecting ongoing expansion in Pharmacy Benefit Services and Behavioral Care, although total medical customers decreased by 5% to 18.1 million, highlighting increasing market competition.
- Optimistic Future Outlook: Cigna expects fiscal 2026 revenues of approximately $280 billion, slightly below the consensus of $283.86 billion, but anticipates adjusted income from operations of at least $7.95 billion, demonstrating confidence in future growth despite market challenges.
See More
UNH Stock: The Factors Behind UnitedHealth's Struggles in Its Recovery
Stock Performance: UnitedHealth Group experienced a significant 20% drop in stock value in one day, highlighting ongoing struggles for the company.
Reliance on Medicare: The decline serves as a reminder of major health insurers' heavy dependence on the federal government's Medicare Advantage program for senior citizens.
See More
UNH Stock Soared Until Medicare Advantage Update Hit.
Stock Performance: UnitedHealth Group experienced a significant 20% drop in stock value in one day, highlighting ongoing struggles for the company.
Medicare Advantage Reliance: The stock tumble serves as a reminder of health insurers' heavy dependence on the federal government's Medicare Advantage program for seniors.
See More
U.S. Labor Department Pushes for Drug Pricing Transparency
- New Drug Transparency Regulation: The U.S. Department of Labor has proposed a regulation requiring Pharmacy Benefit Managers (PBMs) to fully disclose their compensation to self-insured health plans, impacting approximately 90 million Americans, aimed at eliminating hidden fees and enhancing transparency in the healthcare system.
- Targeting Hidden Fees: The regulation specifically addresses PBMs' practices such as spread pricing, rebates, and clawbacks, aiming to reduce improper profits made by PBMs in drug transactions by mandating disclosure of these fees to protect employers and patients' interests.
- Market Reaction: Following the announcement of a mere 0.09% increase in Medicare payments, the market reacted sharply, with Humana's stock dropping over 13% and UnitedHealth nearly 9%, reflecting investor concerns about the industry's outlook amidst rising costs.
- Long-term Profit Pressure: For companies like CVS, UnitedHealth, and Cigna, PBM services are a significant revenue driver; the new regulation may compress their profit margins, leading to prolonged earnings pressure for these healthcare giants.
See More
