Reminder: Call Tomorrow @ 10am ET | Cigna: The Right Strategy (For Now)

At CI, the Evernorth/Express Scripts segment is a little bit of the tail that wags the dog. The combined effects of drug price inflation and utilization have fueled the top line. That effect makes the street nervous as Senate Finance and states push forward on regulating Pharmacy Benefit Managers. However, it is one of the eternal truths of policy making that its speed (slow) allows industry to bake into their models those things that might mute the blow. That has certainly been the case with CI's approach to its PBM business. 

Nonetheless, some drug inflation is bound to moderate under the Inflation Reduction Act's Medicare Part D redesign and inflation caps on drug covered under Part B and C. That leaves drug prices paid by commercial insurers with little to no regulation beyond what a specific plan sponsor would want to do. Since rebates, fixed to drug prices, are typically passed along to the plan sponsor, the incentives to intervene in any market reaction to the IRA are, shall we say, mixed.

Meanwhile, CI is adopting the HUM strategy to shift pharmacy customers to medical membership albeit with perhaps a little less urgency. Shifting pharmacy customers to medical plan membership allows plan sponsors to reap the benefits of better adherence and care coordination. It also is a higher margin business for CI.

For good reason CI has appeared on Tom Tobin's microquad screen. According to our Insured Medical Consumer Model, employer sponsored insurance enjoyed a growth spurt in 2021 that persists despite the availability of other insurance modalities like ACA exchange plans and Medicaid. Drug inflation, as measured by PCE, remains elevated on a YoY% basis. Those things all point to a long.

Join us for more next week. 

Emily Evans
Managing Director – Health Policy


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