Market shows that Caremark is 'on the right path'

WOONSOCKET, R.I. — CVS Caremark is thriving, notwithstanding the loss of its contract with Eli Lilly and Co.

Lilly’s defection to Rightway for pharmacy benefit management follows Caremark’s exclusion of the drug maker’s GLP-1 Zepbound from its standard formulary. The PBM has preferred Novo Nordisk’s Wegovy since July 1.

“This looks like incentive-aligned behavior, not drama,” said Kearney partner Todd Huseby. “Caremark made a rational formulary call. Lilly made a rational employee PBM switch to a transparency-first challenger. The dollars barely move, though the optics are interesting in a market skeptical of PBMs. The eyebrow-raiser would have been if Caremark reversed to prefer Zepbound and Lilly suddenly returned to Caremark.”

A CVS spokesman said the company would not comment on any specific Caremark client, while noting that the PBM’s overall client retention rate remains in the very high 90s, year after year. “Those clients include many major pharmaceutical companies,” he said. 

Caremark designs several formulary options for plan sponsors, and each client chooses the option that works best for it. For example, the PBM offers options that cover both Zepbound and Wegovy, but this option is costlier for plan sponsors than its standard commercial formulary that excludes Zepbound. 

“Speaking more broadly about the GLP-1 obesity class,” he said, “many of our commercial clients simply can’t afford the prices charged by the drug makers. Our move earlier this year to negotiate Eli Lilly and Novo Nordisk against one another drove significant savings for our clients, and we are hopeful those additional savings will enable employers and unions to begin to provide coverage for this category when they previously could not.” 

Last month, during its Investor Day, CVS Health hailed the gains of Caremark. Ed DeVaney, the company’s Pharmacy Services segment president, said U.S. health care is at an inflection point with an affordability crisis in the medical and pharmacy sectors. “Within CVS Caremark we fundamentally believe we have a responsibility to change the market, recognizing we have the right people, the right assets and the right strategy,” he said.

Caremark aims to deliver “best-in-class, transparent services to clients and to the end consumer,” he noted. 

The market will reflect “if and when your are on the right path,” he said, citing Caremark’s retention of more than 98% of its customers during the 2026 selling season, and its capture of more than $6 billion in new business. “Our priorities are aligned to customers’ needs.”

Caremark’s top four priorities “will guide our success moving forward,” DeVaney said. The No. 1 priority “by far” is delivering lowest net cost pricing, with the other three being creating simple, connected experiences; innovating with transparency and choice; and maintaining specialty leadership.

“These priorities have allowed us to successfully navigate changes in the marketplace,” said De­Vaney. “And we have consistently delivered margins in or around 4%. Looking forward, as we once again navigate changing market dynamics, we are confident that the value we deliver to customers will enable us to earn similar margins as we advance forward.”

“We do believe Caremark plays a critical role within the marketplace,” he added. “Taking a step back, I think it’s important to understand why our customers need PBMs. I’ve been in this market for 20 years now. And we have successfully delivered significant value in a market that has always had cross-subsidized pricing and consultants that continue to perpetuate a market basket pricing model.”

Dea Belazi, chief executive officer of AscellaHealth, which develops specialty pharmacy programs and services, said the loss of the Lilly contract is significant. “From our perspective working with self-insured employers over the past 20 years, it most definitely appears to be a tipping point, and we should not be surprised,” he said. “Fifty-two percent of U.S. employers said they would reevaluate their current PBM if annual costs rose by 3% to 10%, and they are on track to do just that.

“Companies simply cannot afford the status quo and will look for new, better and more flexible ways to serve their employee populations. We are seeing more organizations push back on the idea that the bundled PBM model is the better, safer or more cost-effective option, with first movers among the more independent, self-insured employers.”

Lilly’s move “accelerates the momentum behind transparency-based PBMs and marks an inflection point where the largest employers begin demanding structural change,” he added.

A Lilly spokeswoman said, “As responsible stewards of our employee benefit plans, we routinely review our benefit service providers to ensure we continue delivering high-quality, cost-effective coverage.”