Will CVS Health's Formulary Move Boost Its Weight Management Program? (Revised)

CVS Health's PBM, CVS Caremark, will add Novo Nordisk's Wegovy to its largest commercial formularies while removing Eli Lilly's Zepbound, effective July 1, to balance GLP-1 access and affordability. This strategic shift integrates Wegovy with CVS's Weight Management program, offering lifestyle coaching, and aims to replicate past success in driving adoption of affordable medications, having already demonstrated client savings of up to 26% on GLP-1 costs. The initiative underscores CVS's robust PBM strategy and has contributed to its shares rallying 48.8% year-to-date, significantly outperforming peers, with the stock trading at an attractive forward P/S of 0.21X.

Analysis

CVS Health is strategically positioning its Pharmacy Benefit Manager, CVS Caremark, to capitalize on the high-growth GLP-1 market by making Novo Nordisk's Wegovy a preferred drug on its largest commercial formularies while delisting Eli Lilly's Zepbound, effective July 1. This decision is not merely a cost-containment measure but a core component of its integrated Weight Management program, which combines medication with lifestyle coaching. The efficacy of this bundled approach is supported by data showing program clients spend up to 26% less on GLP-1 medications with high member satisfaction. This move mirrors the company's past success in driving market share for its preferred Humira biosimilar, suggesting a repeatable strategy for managing drug costs and utilization. The market has responded favorably to this proactive management, with CVS shares rallying 48.8% year-to-date, drastically outperforming peers like UnitedHealth, which has seen a 40.7% loss. Despite this rally, the stock trades at an attractive forward price-to-sales multiple of 0.21x, significantly below the industry average of 0.40x, and carries a 'Value Score of A'. While 2025 earnings estimates are trending upward, the outlook for 2026 remains mixed, indicating some uncertainty in the longer-term growth trajectory.

Key Decisions for Investors

• Given CVS's significant stock outperformance, demonstrated PBM strategy in the GLP-1 space, and a valuation that remains well below the industry average, investors may view the current momentum as a positive signal for continued strength.
• The exclusive formulary placement of Wegovy over Zepbound presents a direct headwind for Eli Lilly (LLY) and a tailwind for Novo Nordisk (NVO) within the CVS Caremark network; investors should monitor for competitive responses from other PBMs and any shifts in market share.
• While the 2025 earnings outlook is positive, the mixed consensus for 2026 warrants caution; it is prudent to monitor upcoming financial reports for evidence that this GLP-1 strategy is translating into sustainable long-term earnings growth.