Lower Medicare rates impact CVS, Humana, and other health stocks

Pharmaceutical Giant Eli Lily Faces Shortage of Popular Weight Loss Drug as Health Insurance Companies Struggle to Keep Up with Medicare Funding Increases

On Tuesday, the stocks of several health insurance companies, including Humana, CVS Health, UnitedHealth, and Elevance Health, suffered a decline after federal regulators announced that government payments to Medicare Advantage and Medicare Part D programs would increase by an average of 3.7% or $16 billion year-over-year in 2025. This news caused Humana’s stock to drop by 12%, while UnitedHealth’s stock fell by 6%, CVS Health shares slid by 8%, Centene Corp.’s stock fell by 5%, and Elevance Health’s stock dropped by 4%.

Humana, the nation’s second-largest Medicare Advantage health insurer, has been facing challenges for years as the rate increases announced by CMS have not been enough to boost its earnings. During an investor call in March, Humana CFO Susan Diamond expressed disappointment in the rate increase and stated that it may be challenging for the company to reach its goal of boosting earnings by $6 to $10 without a bigger increase in payments.

The lack of a significant rate increase is especially concerning for Humana as it comes at a time when other pharmaceutical companies are facing their own challenges. For example, Eli Lily is currently facing a shortage of its weight loss drug ZepboundOzempic due to manufacturing issues. Additionally, there has been backlash over the low cost of producing the drug, which has raised questions about the sustainability of the pharmaceutical industry as a whole.

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