Cigna braces for headwind as it gears up to onboard Centene PBM members

Cigna's Express Scripts subsidiary scored an "exciting strategic win" in securing a pharmacy benefit management contract with Centene, but executives said that the contact will initially be a financial headwind.

CEO David Cordani said on the company's earnings call Thursday that Cigna expects the onboarding process to serve as a one-year headwind before the contract takes full effect in 2024. The contract with Centene represents about 20 million members who will need to be onboarded.

The contract is one of the largest to change hands in some time, and is valued at about $35 billion. Centene previously contracted with CVS Health's Caremark for PBM services, but took bids to address costs as part of its ongoing value-creation plan.

Cordani said tailwinds heading into 2023 include anticipated growth at both Cigna Healthcare and Evernorth, as well as the potential for new biosimilars to hit the market.

"Overall, our strong performance in the quarter and throughout the year shows how we are addressing the most pressing needs of our clients," he said.

Cigna beat the Street on both profit and revenue for the third quarter, according to Zacks Investment Research.

The insurer reported $2.8 billion in profit for the quarter, up from $1.6 billion in the third quarter of 2021. In addition, Cigna posted revenues of $45.3 billion, up slightly from $44.3 billion in the prior-year quarter, according to its earnings report (PDF) released Thursday.

In the release, Cigna touted both the performance of its health plan and its Evernorth business.

“We built on our momentum from the first half of 2022 with strong execution in the third quarter across our businesses and a continued focus on serving customers and clients with our differentiated health and well-being solutions,” said Cordani in the release. “We’re leveraging capabilities across Evernorth and Cigna Healthcare as we innovate to further improve affordability, guide patients to the most effective treatments and improve the vitality of the customers we serve.”

At Evernorth, adjusted revenues were up 6% to $35.7 billion on the back of "organic" growth in specialty pharmacy, according to the report. Evernorth's Express Scripts added about 5 million members compared to the prior-year quarter, reaching pharmacy membership of 108.7 million.

As Evernorth continues to grow, Cigna has looked for ways to harness the combined powers of its health plan and Evernorth. For example, at the end of the quarter the company unveiled Pathwell, a new concierge care platform that integrates Evernorth's analytics, digital solutions and clinical expertise with the network and medical benefits of its health plan.

Adjusted revenues were also up at Cigna Healthcare, increasing 2% year over year to $11.8 billion. Cigna's medical membership sits just shy of 18 million.

On the back of its performance in the quarter, Cigna boosted its guidance and now expects $23.10 in earnings per share for the full year. The company is also projecting at least $179 billion in revenue for 2022.