Cigna CFO says push to control specialty drug costs drove Express Scripts acquisition

PILLS MONEY cost opioid
Cigna's CFO said the insurer's deal with Express Scripts will "meaningfully move the needle on affordability." (Pixabay)

Skyrocketing specialty drug costs were a primary reason behind Cigna’s decision to purchase Express Scripts, even though the insurer has an in-house pharmacy benefit manager, Cigna’s chief financial officer said on Tuesday.

Express Scripts offered the “single best capability to meaningfully move the needle on affordability,” in large part because of its experience with specialty pharmaceuticals, CFO Eric Palmer told investors at the Goldman Sachs Annual Global Healthcare Conference.

That includes Cigna’s in-house PBM, which it supplements through a contract with OptumRx to manage Cigna's retail pharmacy network for commercial plans. Palmer said Express Scripts' ability to manage specialty drugs is “really a difference maker” in the transaction.

Conference

13th Partnering with ACOS & IDNS Summit

This two-day summit taking place on June 10–11, 2019, offers a unique opportunity to have invaluable face-to-face time with key executives from various ACOs and IDNs from the entire nation – totaling over 3.5 million patients served in 2018. Exclusively at this summit, attendees are provided with inside information and data from case studies on how to structure an ACO/IDN pitch, allowing them to gain the tools to position their organization as a “strategic partner” to ACOs and IDNs, rather than a merely a “vendor.”

“It’s not something that’s part of our arrangement with Optum,” he said. “Moving from our capability to Express Scripts’ capability is meaningful.”

RELATED: 5 interesting plot twists in the Cigna-Express Scripts deal

Cigna’s focus on specialty pharmacy costs is no surprise given the rapid rise in costs over the last several years. Projections indicate that cost growth isn’t slowing anytime soon.

“Express Scripts’ capability as it relates to specialty pharmacies are important now and even more important in the future,” Palmer said.

However, critics of the deal, valued at $67 billion, have raised concerns that the combined companies will stifle competition without a payoff for consumers. Palmer said the deal would ultimately improve affordability for consumers.

Cigna favors provider partnerships over acquisition

Meanwhile, Palmer noted that Cigna doesn’t plan to jump on the bandwagon when it comes to making provider acquisitions. The company’s main competitors—including UnitedHealth, Humana and Anthem—have purchased provider groups during the first half of 2018.

“Our orientation has been that we were able to be most effective in driving partnerships rather than owning the groups directly,” Palmer said. “We would expect to continue on that path.”

Editor's Note: This article has been updated to clarify Cigna's relationship with OptumRx.

Suggested Articles

Humana is teaming up with telehealth company Doctor on Demand to launch a new virtual care model focused on primary care.

A federal judge in Pennsylvania has tossed UPMC’s class action suit against the state’s attorney general.

Seema Verma said Thursday that while the Trump administration has focused on voluntary payment models to date, that is likely to change.