Cigna (CI) Unit Unveils Pricing Model for Pharmacy Clients

The pharmacy benefits management branch of The Cigna Group's CI Evernorth segment, Express Scripts, recently launched a pricing option, Express Scripts ClearNetwork. The model follows a cost-based pricing approach for prescription drugs and pharmacy services and can be availed for all prescription drugs related to the covered generic, branded and specialty medication list of a plan sponsor from early 2024. The new option is being rolled out across an extensive network of 65,000-plus retail pharmacies in the Express Scripts network.

The pharmacy pricing model considers the lowest of numerous established third-party industry benchmarks, like Predictive Acquisition Cost, National Average Drug Acquisition Cost and Wholesale Acquisition Cost, and evaluates the acquisition cost for an individual drug. Subsequently, Express Scripts’ client base, which consists of employers, government organizations and health plans, is required to make a simple payment of the expected acquisition cost.

Additionally, the clients have to bear a nominal amount of pharmacy and administration expenses. As part of the costs, a fee is directed toward the pharmacy for the dispensing of medications. A second fee that is at most 15% of the drug cost is also charged but this fee is distributed among participating pharmacies so that they can earn a reasonable profit. The same fee is also shared with Express Scripts in order to meet their claim management and network services costs.

The new launch therefore seems to be a win-win situation for Express Scripts’ clients and their employees and members. While the client base is expected to benefit from a simplified break-up of their prescription drug payments and the capability to provide tailored pharmacy benefits, their employees and members are likely to enjoy easy access to their required medications on the back of the broad pharmacy network of the Evernorth unit.

The business scale, relationships and in-depth understanding of the pharmaceutical supply chain possessed by Express Scripts may have eased the launch of the new pricing model. The availability of such useful tools may retain existing customers and lure new ones into buying prescription medicines from the pharmacy network of Cigna. This, in turn, is expected to drive pharmacy revenues of CI, which contribute a significant portion to the overall top line. Pharmacy revenues accounted for 69.8% of CI’s revenues in the first nine months of 2023.

The pharmacy benefit manager boasts a credible suite of transparent drug pricing options, one among which, named ClearCareRx, was launched this April. It also takes several measures to address the individual needs of its clients and enable them to save costs on prescription drug purchases. This July, Express Scripts announced that it will add three biosimilars, Hyrimoz, Adalimumab-adaz and Cyltezo to the preferred product list on its National Preferred Formulary with an aim to generate cost savings for clients.

It seems that pharmacy benefit managers are putting their best foot forward to enhance access to vital medicines, provide more choices and generate cost savings for their client base and the announcement of Optum Rx, a pharmacy benefit manager and an unit of the UnitedHealth Group’s UNH Optum segment, a few days ago bear testament to the same. The sub-unit transferred eight insulin products to the tier one or preferred status on its standard formulary, which means consumers will have to pay the lowest cash price for availing the life-saving medication.  

Shares of Cigna have gained 13.6% in the past six months compared with the industry’s 12% growth. CI currently carries a Zacks Rank #3 (Hold).

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Stocks to Consider

Some better-ranked stocks in the Medical space are Ligand Pharmaceuticals Incorporated LGND and Elevance Health, Inc. ELV. While Ligand Pharmaceuticals currently sports a Zacks Rank #1 (Strong Buy), Elevance Health carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ligand Pharmaceuticals’ earnings surpassed estimates in each of the last four quarters, the average surprise being 67.19%. The Zacks Consensus Estimate for LGND’s 2023 earnings indicates a 6.5% rise from the year-ago actual. The consensus mark for LGND’s 2023 earnings has moved 2.4% north in the past 60 days.

The bottom line of Elevance Health outpaced estimates in each of the trailing four quarters, the average surprise being 2.91%. The Zacks Consensus Estimate for ELV’s 2023 earnings indicates a 13.5% rise, while the same for revenues suggests an improvement of 9.2% from the respective year-ago actuals. The consensus mark for ELV’s 2023 earnings has moved 0.3% north in the past 30 days.

The Elevance Health stock has gained 3.5% in the past six months. However, shares of Ligand Pharmaceuticals have declined 26.8% in the same time frame.

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UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report

Cigna Group (CI) : Free Stock Analysis Report

Ligand Pharmaceuticals Incorporated (LGND) : Free Stock Analysis Report

Elevance Health, Inc. (ELV) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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