CVS and AbbVie: Two Healthcare Buys After the Dip
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- CVS Health has pulled back this year after CMS proposed 2027 Medicare Advantage payment rates rising just 0.09% year-over-year — essentially flat — followed by a Q4 earnings sell-off as rising costs outpaced strong revenue growth.
- CVS CEO David Joyner said the proposed rate "simply does not match the level of medical cost trend in the industry," warning that reimbursement not keeping pace with medical costs will compress insurance margins.
- CVS Health was already planning to scale back its Medicare Advantage operations to focus on profitable growth, and the company emphasizes its diversified healthcare business, vast retail footprint, and patient relationships as offsets to the insurance headwinds.
- AbbVie shares dropped after Q4 earnings as investors remain uneasy about the company's reliance on Humira, which lost U.S. patent exclusivity in 2023 and is now its third-best-selling drug with declining sales.
- AbbVie management expects Skyrizi and Rinvoq to combine for more than $31 billion in sales this year — already exceeding 2027 guidance and far eclipsing Humira's peak revenue, per the article.
- AbbVie's pipeline includes emraclidine, a schizophrenia drug with a new mechanism of action that the source projects could generate well over $1 billion in peak sales if approved.
- AbbVie has raised its dividend for 54 consecutive years, earning Dividend King status and making it especially attractive for income-focused investors despite the recent slide.
Why it matters: For CVS, the 0.09% proposed MA rate increase materially threatens insurance-segment margins that the company is already restructuring, making its retail-pharmacy and care-services diversification the central investment bet. For AbbVie, Skyrizi and Rinvoq's projected $31 billion in 2026 sales versus declining Humira revenue is the concrete pivot investors are weighing, and 54 straight years of dividend hikes give income holders a clear reason to hold through the transition.
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