January 30, 2025

Cigna to ‘listen to the public narrative,’ promises pharmacy benefit reforms

Cigna executives kicked off Thursday’s earnings call with their response to pharmacy benefit manager critics.

The health giant will implement a series of reforms to give Express Scripts customers “improved predictability” with prescription drug prices, said David Cordani, chairman and CEO of The Cigna Group.

Customers will pay less for drugs and “will fully benefit from our lower net negotiated prices,” Cordani said.

“We will also expand the benefit summaries and disclosures we provide. Patients will receive a personalized summary that details their annual total prescription drug costs, plan-paid amounts and the savings we deliver. Plan sponsors will also receive an enhanced report beyond what Express Scripts already provides, including additional transparency on costs.”

Cordani referenced the “tragic murder” of UnitedHealthcare CEO Brian Thompson on Dec. 4 and the ensuing criticism of the health insurance industry.

“The past several weeks have further challenged us to even more intensely listen to the public narrative about our industry,” Cordani said. “At The Cigna Group, we’re further accelerating improvements and innovations to increase transparency, expand support and drive even greater accountability.”

In December, Sens. Elizabeth Warren, D-Mass., and Josh Hawley, R-Mo., introduced a bill in the Senate that would require healthcare companies that own health insurers or PBMs to sell pharmacy assets within three years. A companion bill was also introduced in the House.

The legislation, if passed, would be a massive shakeup for the U.S. pharmacy supply chain, cutting off revenue and market power for PBM giants and the conglomerates that own them.

Cigna owns Express Scripts, one of the “big three” PBMs that control about 80% of the market with CVS Caremark and Optum RX.

In recent years, PBMs have been hit with a barrage of criticism from antitrust regulators, state and federal lawmakers, independent pharmacies and patient advocates for business practices that detractors say drive up drug costs for Americans.

Prescription drug benefits are the most used healthcare benefit, Cordani said, about 15 times per year per person. Approximately 80% of Express Scripts patients spend less than $100 out of pocket per year for prescriptions, he added. The CEO did not put a number on negotiated prescription drug rebates passed on to the customer, only saying that “the vast majority” are.

Cordani acknowledged that GLP-1 drugs, a class of medications used to treat type 2 diabetes and obesity, are far more expensive for Americans than in other countries. “This is not acceptable, nor sustainable,” Cordani said.

Other Cigna news

Medicare sale to HCSC. Cigna agreed to sell its Medicare business to Health Care Service Corporation (HCSC) in January 2024. The deal includes Medicare Advantage, Part D, supplemental benefits, and CareAllies.

The acquisition remains on track to close in the first quarter of 2025, pending regulatory approval from one state, said Brian Evanko, president and CEO of Cigna Healthcare. The “majority” of the sale proceeds will go toward share repurchases, he added.

“We did see attractive growth in this business, specifically in the geographies and the products where we were targeting. In particular, we were pleased to see net growth coming primarily from HMO products in our more mature markets,” Evanko said. “So, the business is on solid footing. We’re tracking for attractive growth in 2025 and we’re ready to hand it off to HCSC.”

Stop-loss troubles. Higher stop loss medical costs impacted Cigna Healthcare’s 2024 financial results. Stop-loss insurance is a product that protects against catastrophic or unpredictable losses. It is purchased by employers who have decided to self-fund their employee benefit plans.

Cigna saw unexpectedly higher expenses from significant health issues like cancer and “cardiac surgical events,” Cordani explained. Those costs were absorbed more easily among the larger Cigna health insurance population but hit harder in the smaller stop-loss segment.

“We are taking corrective actions on this near-term pressure and expect to recapture margin over the next two years,” Cordani told analysts.

Quarterly Snapshot:

• Total revenues for 2024 increased 27% to $247.1 billion
• Shareholders’ net income for 2024 was $3.4 billion, or $12.12 per share
• Adjusted income from operations for 2024 was $7.7 billion, or $27.33 per share
• 2025 adjusted income from operations is projected to be at least $7.9 billion, or at least $29.50 per share
• Board of Directors declared an 8% increase in the quarterly dividend to $1.51 per share and approved an increase of $6 billion in incremental share repurchase authorization, bringing total authorization to $10.3 billion

Management Perspective:

“Through a dynamic environment, we are continuing to focus on building a sustainable model for healthcare by addressing the areas that matter most to our patients and clients, including greater transparency, support, and value.”

David Cordani, chairman and CEO of The Cigna Group

By the numbers:

• Share Repurchases: 20.9 million shares in 2024 at a cost of $7 billion
• Dividend Declared: cash quarterly dividend of $1.51 per share
• Stock Price Movement: Stock is down 8.6% overnight to $277.11

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