Q2 2024 Earnings Summary
- Cigna's EnCircleRx program for GLP-1 management has gained significant traction, with over 2 million covered lives, reflecting strong client demand for innovative solutions that address high-cost medications .
- Express Scripts, Cigna's foundational pharmacy benefit services business, is off to a strong start for 2025, with strong new sales and a retention rate in the mid-90s or better, indicating continued growth and client trust in their offerings .
- Cigna is seeing strong growth in their Select segment, with a 7% year-over-year growth in customers within the under-500 employer market, demonstrating their ability to gain market share and meet the needs of smaller employers .
- Increased affordability concerns due to expensive drugs like GLP-1s and gene therapy may pressure margins as clients focus on cost containment. Larger employers are emphasizing affordability, particularly with the wave of drug innovation hitting the market.
- Changes in Medicare Part D due to the Inflation Reduction Act may lead to significant disruption, potentially impacting Cigna's Evernorth business and Part D plan offerings. The Act is causing PDP premiums to rise meaningfully, creating disruption for seniors and requiring bid adjustments.
- Elevated medical costs due to increased utilization and inflation in provider contracts may impact Cigna's medical loss ratio (MLR), potentially pressuring margins in the second half of 2024 and beyond. Provider contract inflation is working its way through, and elevated levels of utilization are expected through 2024.
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Cost Trends and Guidance
Q: Are cost trends in line with expectations?
A: Total cost of care was broadly in line with expectations, with elevated facility-based services and mental health utilization (see ). Surgical cost growth is slowing, but overall trends are sustained yet within guidance. Confident in full-year MCR range outlined (see ). -
GLP-1 Growth Opportunities
Q: What's the outlook for GLP-1 programs and coverage?
A: We're excited about GLP-1 opportunities. Programs like EnCircleRx help manage weight loss medications (see ). Over 2 million covered lives in EnCircle program (see ). 50% of plan sponsors now cover GLP-1s for weight loss, with utilization growing (see ). -
HUMIRA Biosimilars Strategy
Q: How is the HUMIRA biosimilar strategy affecting results?
A: We're well-positioned with interchangeable biosimilar HUMIRA through Quallent Pharmaceuticals, now at 20% share after 5 weeks (see ). Adoption is consistent with expectations, improving affordability for clients (see ). -
Marketplace Exchange Margins
Q: How are marketplace margins shaping up for the year?
A: Individual exchange business performing as expected, with only a small unfavorable risk adjustment true-up (see ). Expect to land slightly below our long-term target margin range of 4% to 6% (see ). -
Medical Loss Ratio Outlook
Q: Why is second-half MLR higher than the first half?
A: Higher second-half MCR due to pre-pandemic seasonality, normalization of stop-loss utilization, and one extra business day in Q3 (see ). Confident in full-year MCR guidance and pricing to forward-looking cost trends (see ). -
Membership Trends
Q: What are current membership trends?
A: Exchange membership declined due to strategic pricing actions, but expect strong growth in Select segment with 7% year-over-year growth in under-500 employer customers (see , ). -
Part D and IRA Impact
Q: How does the Inflation Reduction Act affect Part D sponsors?
A: The IRA will cause PDP premiums to rise, leading to disruption for seniors (see ). We're helping clients navigate changes with proven capabilities in Part D (see ). -
Potential Impact of ICRA
Q: How might ICRA affect the small group market?
A: View ICRA as a niche market for employers under 50 employees, financially immaterial to us (see ). Our exchange business allows participation if it gains momentum (see ). -
Pharmacy Payment Models
Q: Any updates on pharmacy payment model negotiations?
A: We offer clients a range of network options and reimbursement types (see ). ClearCareRx provides transparent pricing and is generating interest (see ). -
Point Solutions and Acquisitions
Q: Will you acquire point solutions to integrate offerings?
A: We've built capabilities organically but remain open to acquisitions (see ). Through Cigna Ventures, we partner with point solutions to innovate (see ). -
Guidance Reaffirmation
Q: Why didn't you raise guidance this quarter?
A: Despite a strong quarter with some timing benefits, we're reaffirming full-year guidance of at least $28.40 EPS, representing over 13% growth (see ).