Cigna will spend $200 million next year to integrate its pharmacy services into Centene’s book of business, executives announced during the insurer’s third-quarter earnings call Thursday.
The company announced last month that its Express Scripts pharmacy benefit manager subsidiary won the contest to manage prescription drugs for Centene’s more than 20 million policyholders, which Cigna estimates represents $40 billion in annual drug spending. The for-profit insurer beat out CVS Caremark, Cetene’s current PBM.
The $200 million pre-tax integration costs will present a headwind for Cigna in 2023, CEO David Cordani said during the call. The contract will provide a revenue boost in 2024 and Cigna aims to strengthen its partnership with Centene over time, he said.
Growth in pharmacy services drove up Cigna’s net income 70.1% to $2.76 billion on revenues of $45.2 billion during the third quarter. A $1.4 billion after-tax gain from the sale of its Asia-Pacific and Turkey accident and health business to Chubb also contributed to higher earnings.
Cigna’s membership increased 5.5% to 17.9 million, driven by growth in the commercial segment and partially offset by a decline in government enrollees, which the company attributed to the divestiture of its Texas Medicaid business last year.
The company remains open to acquisitions, particularly those that would support its government-sponsored insurance and pharmacy businesses, but has no interest in joining the bidding wars that have attracted competitors such as CVS and UnitedHealth Group, Cordani said. “We remain quite open to M&A,” he said. “We do not deem it to be a silver bullet; it’s a part of the growth-support strategy.”
The introduction of biosimilars for AbbVie’s Humira next year should save Cigna money, Cordani said. The rheumatoid arthritis treatment is the highest-grossing drug of all time and the largest contributor to drug price inflation, according to a congressional investigation. A year-long course of the brand-name biologic drug can cost more than $84,000. Still some payers and patients may be hesitant to adopt lower-cost biosimilars because of questions about interchangeability.
Cordani declined to say if the biosimilars for Humira would be placed on Cigna’s national formulary for 2023, which it will reveal later this month.
Despite recent lawsuits against Cigna’s commercial and government-sponsored commercial health plans, the legal exposure faced by the company has not changed, Cordani said. The Justice Department sued Cigna last month, alleging the company exaggerated Medicare Advantage members’ illnesses to generate additional revenue.
The Justice Department has sued several Medicare Advantage carriers on similar grounds. In September, the American Medical Association and the New Jersey and Washington state medical societies joined a class-action lawsuit that alleges Cigna shorted providers on pay and left patients inappropriately exposed to balance bills.
“Given the strategic position of our franchise being more service-based, I would make the argument the legal exposure footprint — on a relative basis to the space — is lighter,” Cordani said. “But no doubt, it’s an active space. It has been, is and will continue to be.”