CVS Health Revises Outlook Amid Rising Healthcare Costs, Cigna Expands Specialty Pharmacy Footprint

Market Developments: CVS Health Adjusts Forecast, Cigna Bolsters Specialty Pharmacy

U.S. healthcare sector participants are navigating evolving cost structures and strategic investments, with CVS Health revising its financial outlook while The Cigna Group expands its specialty pharmacy presence. These movements highlight the dynamic financial and operational challenges and opportunities within the industry, particularly in value-based care and specialized pharmaceutical services.

The Event in Detail

CVS Health reduced its full-year adjusted operating income forecast for its Health Services segment by approximately $200 million, now projecting at least $7.34 billion. This adjustment is primarily attributed to Oak Street Health, its healthcare delivery asset, which recorded a higher medical benefit ratio (MBR) in Q2 2025. Factors contributing to the elevated MBR include persistently rising medical costs, changes in membership mix, and expanded benefit offerings. Despite these pressures, Oak Street Health reported a 31% increase in total at-risk membership year-over-year.

Concurrently, The Cigna Group's Evernorth Health Services announced a $3.5 billion investment in Shields Health Solutions, a specialty pharmacy management company. This investment, in the form of preferred stock, aims to enhance Evernorth's capabilities in the burgeoning specialty pharmacy market. Shields, spun out from Walgreens, assists hospitals and providers in establishing and managing their specialty pharmacies, a sector characterized by high-cost medications for complex conditions.

Analysis of Market Reaction

CVS Health's revised guidance signals increasing financial pressure within its value-based care segment, specifically Oak Street Health. The challenges faced by Oak Street Health underscore the inherent complexities and financial risks associated with managing high-acuity patient populations and navigating dynamic benefit designs within the Medicare Advantage landscape. The downward adjustment suggests that the path to profitability for value-based care acquisitions may be more protracted than initially anticipated. This comes even as CVS Health stock has rallied 29.4% in the past year against an industry fall of 18.8%, trading at a forward 12-month price/sales (P/S) of 0.23X, lower than the industry average of 0.39X.

Cigna's investment in Shields Health Solutions represents a strategic move to capitalize on the rapid growth of the specialty drug market. Specialty drugs, while consumed by a small percentage of the U.S. population (less than 5%), account for a significant portion (over 50%) of total U.S. pharmacy spend due to their high list prices. This investment strengthens Evernorth's existing specialty pharmacy services and aligns with Cigna's broader vertical integration strategy, aiming to capture more value across the healthcare continuum.

Broader Context & Implications

The developments at CVS Health and Cigna highlight divergent strategies and inherent challenges in the competitive healthcare sector. CVS's struggle with Oak Street Health's profitability mirrors a broader industry trend of elevated utilization and declining profits for several national insurers. Across six major carriers, profits have decreased by an average of 27% over the past two years, with Cigna being an exception. Morningstar anticipates base medical-loss ratios in 2025 to be considerably higher than in the past five years, primarily due to the lingering effects of care delayed during the COVID-19 pandemic and increased utilization in Medicare Advantage.

The specialty pharmacy market, bolstered by Cigna's investment, continues to be a key growth area. Shields Health Solutions reported nearly $700 million in revenue over the last twelve months, up from $212 million in 2021, driven by rising demand for specialty medications. This sector offers substantial profit margins per prescription despite potential lower percentage margins compared to non-specialty medicines.

Regulatory challenges, including increased scrutiny of billing practices for Medicare Advantage plans and potential reforms to pharmacy benefit managers (PBMs), are anticipated to add further pressure across the industry. The Centers for Medicare & Medicaid Services (CMS) plans annual audits of MA plans, which could intensify financial scrutiny.

Expert Commentary

"Evernorth's investment in Shields Health Solutions strategically expands its specialty pharmacy capabilities amid growing market demand," stated a Healthcare Industry Analyst, emphasizing the rationale behind Cigna's calculated move into the high-growth sector.

Looking Ahead

CVS Health is implementing several measures to mitigate the financial pressures at Oak Street Health. These include assembling a strong leadership team with expertise in value-based care, assessing and upgrading its technology stack for better medical cost management, and adopting a measured approach to Oak Street center expansion, prioritizing patient growth within existing facilities. The company maintains that value-based care is critical for its Medicare Advantage strategy, aiming for improved clinical outcomes and lower costs.

The broader healthcare sector will likely continue to experience volatility. The strategic adjustments by large players like CVS and Cigna's continued vertical integration efforts could reshape the competitive landscape. Investors will be monitoring the effectiveness of CVS's operational adjustments at Oak Street Health, the integration and performance of Cigna's expanded specialty pharmacy assets, and the impact of evolving regulatory oversight, particularly concerning Medicare Advantage and PBMs. The long-term profitability of value-based care models and the trajectory of specialty drug demand remain critical factors for the industry.