The role of retail players in healthcare, like CVS (CVS), Walmart (WMT) and now Amazon (AMZN), is being closely watched by investors and clinicians alike.
In its latest earnings, CVS emphasized a continued strategy in health services, even as competitor Walgreens (WBA) has signaled a pullback. Through its recent acquisitions of home health provider Signify, and primary care provider for seniors Oak Street, CVS is continuing to look for ways to create a closed loop for patients within its own system.
“Oak Street ended the year with 202,000 at risk lives an increase of 27% versus the prior year. Through January, the number of Aetna members enrolled in Oak Street Clinic has doubled,” said CEO Karen Lynch on the recent earnings call.
“Signify completed 649,000 in-home evaluations in the quarter, an increase of 20% versus the same period last year. Among our Aetna customers, we are broadening our addressable market utilizing Signify’s strong capabilities in other products, including individual exchange and Medicaid,” Lynch said.
Chief medical officer Sree Chaguturu told Yahoo Finance the company is “building a world of health around every consumer.”
“We are not looking to build the entire health care delivery ecosystem. But where we are choosing to build is where we believe there’s the greatest opportunity to improve health outcomes. That’s primary care, retail health, home services and physician enablement and accountable care — and that’s helping physicians participate in value-based care,” Chaguturu said in a recent, wide-ranging interview.
When asked if those services step on the toes of legacy providers, like hospital systems and physician groups, by taking market share away from less complex cases, Chaguturu said it was the opposite.
“These are the most complex patients in our healthcare ecosystem, with multiple chronic diseases, and in addition to the chronic illnesses, many aspects of social fragility and social determinants of need,” he said.
Growth amid downward pressure
The company’s recent earnings beat Wall Street expectations, reporting $93.8 billion in revenue for 2023, compared to an expected $90.7 billion. But it cut its 2024 outlook, expecting an expensive year ahead.
That includes increased utilization costs for Aetna Medicare Advantage patients as delayed services from the pandemic continue to come back, and pharmacy benefits managers, like CVS Caremark, becoming a target for lawmakers in Congress who are looking at ways to reduce the power of such “middlemen.” Typically, such middlemen are blamed for increased costs in the health ecosystem, but Chaguturu says they will help in the rush of use of weight loss drugs.
The frenzy over GLP-1s, drugs that have been used for diabetics to help increase insulin production and help slow digestion, have been approved in the past few years for weight loss in obese patients.
Though GLP-1s, named for the hormone in the body they mimic, are not new, the latest formulations have had record weight loss results. That has spurred a rush of interest ranging from patients to online health platforms looking to take advantage of the trend by offering prescriptions.
Still, according to CVS, 80% of the prescriptions for the four top-selling drugs, from Novo Nordisk (NVO) and Eli Lilly (LLY), are for Type 2 diabetes patients.
Chaguturu said the PBMs will continue to drive down pricing to ensure access for more patients, and expects that more competition — which could begin as early as the end of this year — will also help drive down costs. CVS benefits by earning fees on the prescriptions of the drug it fills, as well as the rebates it gains from the drug manufacturers for covering the drugs and providing access to patients.
But it isn’t an unfettered gold rush. CVS is working with hesitant customers, like insurers and employers, who worry about the increased costs. The roughly $1,000-per-month GLP-1 drugs have caused some employers and insurers to stop covering them, or to require prior authorization in order to fill the prescription.
That includes CVS’s own insurer, Aetna, which told Yahoo Finance previously that, “Prior authorization is required for coverage of these medications. This process allows our clinicians to review the request using evidence-based guidelines to ensure that coverage is appropriate given the member’s clinical status. The prior authorization process may include a review of the member’s age, body mass index, previous medical history and response to previous therapy.”
CVS is also building clinical support for the employers and insurers, to ensure patients who get prescriptions actually need them, and then providing support to manage any side effects, according to Chaguturu.
He said clients are taking a variety of approaches to GLP-1s, including waiting until prices come down, or until a way to ensure appropriate prescribing is in place, before agreeing to cover them.
“In addition to bringing down pricing, we offer coverage and clinical solutions to help employers and health plans have access,” he said.
He expects new competitors on the scene, driving the ability to bring down pricing per prescription and net cost of prescription over the coming years.
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. Follow Anjalee on all social media platforms @AnjKhem.
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