On Monday, Cigna revealed a significant shift in its approach to pharmacy benefits, opting to eliminate traditional manufacturer rebates. Instead, they will adopt a “rebate-free” strategy, featuring a point-of-sale (POS) rebate system coupled with a cost-plus reimbursement model for pharmacies. This change is meant to benefit patients by extending the savings that pharmacy benefit managers (PBMs) negotiate with drug manufacturers directly to the point of sale. By doing this, patients could potentially see their out-of-pocket costs decrease, addressing the ongoing issue of inflated out-of-pocket expenses.
However, there are important nuances to consider. Here are three crucial points that suggest this new initiative may not be as groundbreaking as it seems, and they raise questions about Cigna’s profit model, particularly reflecting the increasing complexity during this period. Tomorrow, they will announce their third-quarter financial results, which could shed more light on these issues.
Cigna’s Express Scripts, part of the Evernorth Health Services division, has attempted to change how plan sponsors manage pharmacy benefits before. The insights provided below might help you decide if this latest initiative is a true reform or just another optimistic venture.
Cigna is launching a “transparent, no-kickback pharmacy benefits service.” The details include integrating manufacturer discounts directly into the pricing of prescriptions, which means that patients would benefit directly from rebates that are currently negotiated behind the scenes. This could lead to lower out-of-pocket costs, addressing the gross-to-net bubble.
Cigna aims to implement this model for fully insured customers starting in 2027, with plans to extend it to commercial clients in 2028. It’s worth noting that Cigna only has around 2 million fully insured patients, significantly fewer than many competitors. However, forwarding the rebate values directly to patients could lower out-of-pocket expenses, improve adherence to medication, and ultimately favor Cigna’s own fully insured sector.
There’s potential in this model. Long-time observers of the drug channel might recognize similarities to the controversial 2018 proposal, “A system without kickbacks: A negotiated discount model for the pharmaceutical channel.” Yet, Evernorth’s current initiative overlooks three critical issues.
First, is this merely another POS rebate program?
Second, how many plan sponsors are currently employing a no-rebate model? Evernorth’s announcement references the no-rebate solution as “standard” starting in 2028, implying that it is optional. The uncomfortable reality is that most commercial plan sponsors use rebates primarily to offset general medical expenses and lower premiums, rather than to reduce pharmacy costs for patients receiving those rebates.
The transition to 2028 may give Cigna time to renegotiate its contracts and encourage clients to adopt the new model. Yet, analysts predict that only about half of commercial bookkeeping will shift by 2031. Some research indicates that while POS rebates can reduce some members’ out-of-pocket expenses, they might also lead to higher overall premiums.
This trade-off is a significant reason for the limited acceptance of POS rebates. According to a 2024 Mercer study, a mere 14% of employers have shared rebates at the point of sale or plan to do so by 2025. Additionally, the proposed “lower” structure raises concerns about its practicality. Will Express Scripts and its commercial partners truly utilize out-of-pocket support funds, or will this model not apply to all specialty drugs?
A lack of clarity about future changes suggests adoption might be slow. Cigna hasn’t indicated any immediate changes. Ascent Health Services, which manages rebate negotiations for Express Scripts, operates from Delaware but is officially based in Switzerland—a location known for its financial transparency but also a bit of irony considering the complexity here.
Lastly, does this initiative genuinely tackle the transparency issues surrounding Express Scripts?
Rebates are no longer PBMs’ main source of income, which now leans more heavily on specialty drug dispensing and manufacturer fees—areas often obscured for plan sponsors. Employers and policymakers are increasingly frustrated with this lack of clarity, which has opened avenues for a new generation of PBMs that focus on clearer business models.
Recent findings from the Pharmaceutical Strategies Group highlight this transparency challenge, indicating that perceptions around PBM revenue clarity are dismal. Only 15% of clients of major PBMs like CVS Caremark, Express Scripts, and Optum Rx feel that their revenue streams are transparent. Among smaller PBMs, fewer than half express confidence in their revenue transparency.
Evernorth’s new approach seems designed to counter this negative perception. In theory, as long as plan sponsors buy into the new narrative, Express Scripts could compete more effectively against smaller PBMs that promote clearer business practices.
We’ve seen Express Scripts make bold promises before, only to be met with market realities. Looking back to 2018, they initiated two significant efforts toward a “world without rebates.” Yet seven years later, many of the same issues still exist.
However, external pressures are mounting to address the gross-to-net bubble. Recent shifts, such as the American Rescue Plan Act and the Inflation Control Act, have made it clear: change is on the horizon.
Evernorth’s new model might signal a real progression, or it could simply be another in a series of attempts to promise transparency while adding layers of complexity. Either way, the discussion about the gross versus net pricing issue is indeed ongoing.
