Cigna’s New PBM Contract With Centene Brings Up-Front Capital Costs
Centene Corp. recently announced that it will shift the bulk of its pharmacy benefits business to Cigna Corp.’s Express Scripts PBM; while discussing Cigna’s latest quarterly results, the carrier’s executives told Wall Street analysts that the deal will likely be a drag on profitability in 2023. Health care insiders tell AIS Health, a division of MMIT, that regulatory compliance, temporarily elevated staffing needs, tech-related capital costs and manufacturer contracting transitions are the likeliest sources of overhead that the deal will generate.
Cigna executives told investors during a Nov. 3 conference call that the Centene deal, which analysts generally praised, would have some start-up costs. Centene Chief Financial Officer Drew Asher said during an Oct. 25 conference call with investors that “we have about $40 billion plus or minus of gross [drug] spend, and almost all of that is [currently] with Caremark,” CVS Health Corp.’s PBM. Cigna CEO David Cordani said that the deal will cover “approximately 20 million Centene members.”