PBMs Are Major Bright Spot in 1Q Earnings for Cigna, CVS

For two of the largest diversified health care companies, their PBM divisions were a much-touted highlight in the firms’ first-quarter 2021 earnings reports and conference calls.

Cigna Corp. Chief Financial Officer Brian Evanko, during a May 7 conference call with analysts and investors, said the firm’s “favorable first-quarter earnings were primarily driven by strong Evernorth performance, favorable net investment income, and favorable prior year medical cost development.”

Adjusted revenues and adjusted income from operations for Evernorth each grew 13% year over year to $30.6 billion and $1.2 billion, respectively, with Cigna crediting “strong organic growth, including growth in retail network and specialty pharmacy services” and “benefits from the effective management of the supply chain, business growth, and strong performance in specialty pharmacy services.”

During the question-and-answer portion of Cigna’s quarterly conference call, Evanko said Cigna is “really pleased with the strong start to the year in Evernorth,” but he encouraged analysts “not to overreact” to the segment’s performance. He pointed out that Evernorth’s first-quarter 2020 results “did not have contributions from Prime Therapeutics,” a Blue Cross Blue Shield-owned PBM that is now using Express Scripts’ drug-price negotiation services, so the rest of the year probably won’t see a comparable amount of growth.

CVS Sees Growth in Specialty Pharmacy

CVS Health Corp., meanwhile, said that the 3.4% and 2.2% year-over-year increase it saw in overall operating income and adjusted operating income were “primarily due to growth in the Pharmacy Services and Health Care Benefits segments,” which include its PBM Caremark and health insurer Aetna, respectively.

For its Pharmacy Services segment specifically, CVS reported that total revenues increased 3.8% year over year to $36.3 billion, citing “net new business, growth in specialty pharmacy, product mix and brand inflation.” And the segment’s adjusted operating income jumped 27.6% compared to the year prior, “primarily driven by improved purchasing economics and growth in specialty pharmacy.”

However, CVS did see a 1% decline in its number of processed pharmacy claims, which it attributed to “a weak cough, cold and flu season” — a factor that was a major headwind for the firm’s retail business segment.

During a May 4 conference call to discuss first-quarter results, analysts pressed CVS executives about why its PBM business performed so well. President and CEO Karen Lynch said the favorable results were “fueled by strong purchasing economics” as well as “the wrap of our specialty trend programs.” She also cited CVS’s recent drug trend report, which showed an average trend of 2.9%, adding that the firm’s cost-management capabilities are “truly resonating in the marketplace.”

“The integrated value story between medical and pharmacy continues to resonate with our employer groups,” Lynch added.

Alan Lotvin, M.D., president of CVS Caremark, later added that the company is “very aggressive” in touting the benefits of its Specialty Connect and Specialty Expedite programs, which respectively help patients get started on new medications quickly and make it more convenient for them to access their prescribed drugs.

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