Cigna's Medicare Presence and the Changing Landscape of Drug-Benefit Managers

Cigna's Medicare Presence and the Changing Landscape of Drug-Benefit Managers

Introduction:

Cigna, a leading carrier with a significant presence in Medicare, recently reported its Q3 2023 results. The report highlighted various aspects of the company's performance, including the growth in Medicare Advantage members, a decrease in Medicare Supplement and Medicaid members, an increase in total revenues, and growth in total operating profit. Additionally, the report shed light on the healthcare segment's revenues, loss ratio, expenses, and operating profit. While Cigna's numbers reflect its success, it's important to analyze the broader healthcare landscape and the changing dynamics of drug-benefit managers.

Cigna's Medicare Advantage and Medicare Supplement:

Cigna experienced an 11% growth in Medicare Advantage members, which increased from 541,000 to 599,000 year-over-year. However, there was a 4% decrease in Medicare Supplement and Medicaid members, declining from 487,000 to 468,000. It's worth noting that the majority of this decrease can be attributed to Medicare Supplement based on NAIC numbers. Despite the decline, Cigna's Medicare Advantage growth demonstrates the company's strong position in the market.

Financial Performance:

Cigna reported an 8% increase in total revenues, rising from $45.3 billion to $49.0 billion year-over-year. It's important to mention that a significant portion of Cigna's revenue comes from its Pharmacy Segment. Additionally, the company's total operating profit grew by 5%, from $2.14 billion to $2.24 billion year-over-year, with a profit margin of 4.6%. While the growth is commendable, it's crucial to assess the factors contributing to these financial outcomes.

The Role of Drug-Benefit Managers:

The frustrations expressed by employers and unions regarding drug-benefit managers are starting to impact the sector responsible for controlling spending on retail prescription drugs. Employers and unions have raised concerns about higher-cost drugs due to drug-benefit managers pocketing a portion of the negotiated rebates with pharmaceutical manufacturers. Transparency regarding fees and revenue sources is also an area of concern.

Drug-Benefit Managers' Approach:

Companies like Caremark, OptumRx, and Express Scripts (Cigna Group's subsidiary) argue that they save customers money and provide employers with information and options to tailor drug benefits to suit their workers' needs. These middlemen negotiate with drugmakers to determine the cost of each prescription and pass on the rebates they secure. However, there is a lack of clarity regarding the fees and other sources of revenue for these managers.

The Impact on Retail Prescription Drug Spending:

The frustrations expressed by employers and unions highlight the need for change in the industry. Private insurance retail drug spending has consistently increased by an average of 3% annually over the past decade. With the Centers for Medicare and Medicaid Services projecting retail prescription drug spending to reach $411.6 billion this year, it is crucial to find solutions to control costs effectively.

Actionable Advice:

• 1. Encourage Transparency: Employers and unions should advocate for increased transparency from drug-benefit managers regarding fees and revenue sources. This will allow for a better understanding of the impact on drug costs and enable more informed decision-making.

• 2. Explore Alternatives: Employers and unions should consider partnering with smaller pharmacy benefit managers that commit to passing through all negotiated rebates. This approach, as seen in the case of Foot Locker hiring Navitus Health Solutions, can lead to reduced drug spending and better cost management.

• 3. Foster Collaboration: Employers, unions, drug-benefit managers, and pharmaceutical manufacturers should collaborate to develop innovative solutions that prioritize cost containment without compromising the quality of care. This collaboration could lead to more sustainable pricing models and better outcomes for patients.

Conclusion:

Cigna's strong performance in the Medicare space reflects its success as a carrier. However, the changing landscape of drug-benefit managers necessitates a closer examination of the industry's practices. Employers and unions are seeking greater transparency and cost control measures, highlighting the need for collaboration and exploration of alternative solutions. By taking actionable steps towards transparency, exploring alternative partnerships, and fostering collaboration, stakeholders in the healthcare industry can work together to address the challenges surrounding drug-benefit management and retail prescription drug spending.