Q2 Health Care Earnings: Policy Pain, Pharma Gains

The basic question for investors regarding insurers is whether premiums are keeping up with costs. As companies report, investors should review the fine print to see insurers' medical care ratio—the share of premiums paid to cover members' actual care, also called "medical loss ratio"—and the utilization rate, or how much care people are actually receiving.

Insurers are being squeezed on costs from multiple directions, including a multiyear increase in the amount of care sought by customers and surging pharmacy outlays, particularly from the rapidly expanding use of GLP-1 obesity drugs.

Meanwhile, the expiration of enhanced government subsidies for Affordable Care Act (ACA) enrollees at the end of 2025 has resulted in an estimated 3 million people dropping their coverage, with 2 to 3 million more expected to do so by the end of the year, according to estimates from KFF, a health care policy research organization. Those who drop coverage tend to be relatively healthy. That means insurers are left not only with fewer people paying premiums but also with a remaining pool that is, on average, more likely to need care. Massive cuts to government Medicaid spending are also weighing on insurers.

ACA marketplace insurers are already asking for a median premium increase of 14% for 2027, the second-highest increase since 2018, behind only a finalized 20% hike for 2026, according to KFF.

Medicare Advantage, though, is a recent policy bright spot. While more than 70% of insurers' Medicare Advantage plans lose money or merely break even, according to PwC, a higher-than-expected increase in government payments to insurers announced in April and cooling care utilization trends helped drive the second-quarter rally in insurer stocks, which in turn led the health care sector.

GLP-1 obesity and diabetes drugs are leading products for firms such as Eli Lilly (LLY) and Novo Nordisk (NVO). Morgan Stanley (MS) estimates that the global market for GLP-1 obesity drugs and type 2 diabetes drugs could more than double to $190 billion by 2035.

Eli Lilly and Novo Nordisk report August 5. Lilly has seen revenue and earnings soar (revenue rose 56% year over year in the first quarter), thanks largely to its Zepbound obesity drug and Mounjaro, its diabetes drug. Investors should be keen to learn about sales of Foundayo, Lilly's new oral obesity pill launched in April, and whether the lower prices for its GLP-1 drugs (accepted in exchange for Medicare and Medicaid coverage) are being offset by higher sales. As of mid-July, Lilly's second-quarter earnings per share (EPS) were expected to fall 4.7% from a year earlier, while revenue was projected to jump 33%.

Sales revenue from the injectable version of Novo Nordisk's GLP-1 drug Wegovy slumped in the first quarter because of the lower prices, but volume has been strong. The company expects full-year sales and operating profit to decline, but the second-quarter earnings report will give investors another look at whether Wegovy sales volume—including the pill version launched in January—can overcome the lower price.

Across the sector, looming "patent cliffs"—when a drugmaker's patent expires and the market opens to generics—are driving acquisitions. About $200 to $400 billion in annual revenues is expected to go "off patent" by 2030.

Drugmakers are looking to replace that revenue partly through acquisitions of companies and assets in the obesity, immunology, and oncology spaces. In successful cases, investors will be happy to look beyond the costs of those deals. However, in cases of clinical setbacks, not so much. Investors will want to parse earnings reports and conference calls for related news.

HCA Healthcare (HCA) delivered a warning on July 14 that may set the tone for care providers this earnings season. The company lowered its full-year guidance, citing a rise in the number of uninsured patients receiving care due to lost ACA coverage. HCA said both same-facility inpatient and outpatient surgeries declined during the quarter, and it estimated the impact at roughly $400 million in pre-tax income. Its shares fell 7% that day. Peers such as Tenet Healthcare (THC) and Universal Health Services (UHS) also tumbled.

When care providers report, investors should look for answers to whether the number of uninsured patients is accelerating, how much unpaid care or medical debt is being accumulated, and whether cost-cutting programs can cover the gap.

Investors should also expect companies and executives to discuss how they're implementing artificial intelligence to achieve efficiency gains and improve their margins. AI implementation is real, particularly with the emergence of agentic AI. But investors should look beyond the rhetoric for concrete results.

Consulting firm McKinsey said in an April report that half of the U.S. health care organizations it surveyed had already implemented generative AI in at least some use cases, while another 37% were pursuing proof-of-concept projects not yet in production. This suggests health care companies now view generative AI as a core competency rather than an experiment.

Health care leaders see the greatest potential for generative AI in improving administrative efficiency, McKinsey found, but they face challenges involving trust, safety, and governance in addition to operational integration.

For the major health care names reporting in the next week or so, analysts* expect the following:

• Centene (CNC): Reporting July 28 before market open with an expected EPS of $1.09, up from $1.01 a year earlier, on revenue of $47.6 billion, down 2.3% year over year.
• AbbVie (ABBV): Reporting July 31 before market open with an expected EPS of $3.60, up 21% year over year, on revenue of $16.8 billion, up 8.6% year over year.
• Pfizer (PFE): Reporting August 4 before market open with an expected EPS of $0.68, down 12.7% year over year, on revenue of $14.4 billion, down 1.6% year over year.
• Merck (MRK): Reporting August 4 before market open with an expected EPS of –$0.28, down from $2.13 a year earlier, on revenue of $16.4 billion, up 3.8% year over year.
• Amgen (AMGN): Reporting August 4 after market close with an expected EPS of $5.61, down 6.8% year over year, on revenue of $9.4 billion, up 2.7% year over year.
• LLY: Reporting August 5 before market open with an expected EPS of $6.01, down 4.7% year over year, on revenue of $20.7 billion, up 32.8% year over year.
• CVS (CVS): Reporting August 5 before market open with an expected EPS of $1.84, up 1.4% year over year, on revenue of $100.1 billion, up 8.4% year over year.
• NVO: Reporting August 5 before market open with an expected EPS of $0.78, down 12.4% year over year, on revenue of $11.0 billion, down 5.8% year over year.
• McKesson (MCK): Reporting August 5 after market close with an expected EPS of $9.61, up 16.4% year over year, on revenue of $103.8 billion, up 6.1% year over year.
• GILD: Reporting August 6 after market close with an expected EPS of –$7.29, down from $2.01 a year earlier, on revenue of $7.4 billion, up 4.5% year over year.

*Note: Average analyst earnings and revenue estimates are as of July 16, 2026, courtesy of Schwab.com, and are subject to change.