Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Cigna Group (CI, Financial) reported total revenue of $60.5 billion and adjusted earnings per share of $6.72 for the second quarter of 2024.
- Evernorth Health Services demonstrated continued strength with a 12% year-over-year growth in adjusted income.
- The company began dispensing an interchangeable biosimilar for Humira, offering significant cost savings for patients.
- Cigna Healthcare's US employer foundational growth business continues to perform in line with expectations, with strong client demand.
- The company remains on track to deliver full-year adjusted earnings per share of at least $28.40 for 2024, representing over 13% year-over-year growth.
Negative Points
- The Cigna Group (CI) recorded an after-tax net special item charge of $64 million or $0.23 per share in the second quarter.
- There is increased utilization in the book of business, particularly in facility-based services and mental health care, which could impact costs.
- The company faces challenges in the political and media landscape regarding the cost of pharmaceuticals and the role of pharmacy benefit managers.
- The Medicare Advantage business is in the process of being sold, with the transaction expected to close in the first quarter of 2025.
- The individual exchange business saw a reduction in customer volumes due to necessary pricing actions in certain geographies.
Q & A Highlights
Q: Appreciate the commentary on cost trend. Maybe you can give us an update on what you're seeing by business line and also how things have trended 2Q versus 1Q? When you say it's in line with your pricing and your expectations, is that a year-to-date discussion? Or is that where trend is running today coming out of the second quarter? Is that in line? Or is that more or less elevated versus what you expected?
A: Justin, it's Brian. So I'll start by saying we're pleased to have delivered another solid quarter of MCR performance at Cigna Healthcare which ran toward the lower end of our MCR guidance range when you exclude the prior year Medicare risk adjustment revenue impacts in the quarter that I mentioned earlier. Now within the quarter, total cost of care was broadly in line with expectations. There are a few puts and takes that I call out if we get into specific cost drivers. So we continue to see elevated usage of facility-based services, including emergency room. Additionally, we saw a continuation of elevated utilization of mental health care services, which we do see as a positive over the longer term given the correlation to whole person health. You'll recall in the first quarter, I highlighted slowing growth in surgical costs. During the second quarter, we continued to see abatement in the rate of growth of surgical costs although costs still didn't grow. Now taken all together, we are seeing sustained high cost trends, yet these are broadly in line with our guidance as we planned and priced for the elevated utilization levels that began in 2023 to continue throughout 2024. Now specifically in the second quarter, we did not witness aggregate acceleration or deceleration of care patterns within the quarter. I also would not note any month-to-month variability relative to the year-to-date experience that we've seen. So overall, we remain confident in the full year MCR range outlined in our guidance.
Q: I want to start with the 2025 selling season on the pharmacy side. You made comments around GLP-1. We continue to see new indications there. I'm just curious, one, when we think about the opportunities in '25, how would you characterize that to what kind of programs are people buying going into 2025? And then lastly, David, you made a comment that the facts need to be more widely understood when it comes to the pharmacy business. What are your plans around making those facts more wiping known? Because as you know, I agree with you that both Congress as well as the media reports don't fairly reflect what the benefits are of the business.
A: Lisa, it's Eric. I'll start then maybe invite David to add some additional comments on the end here. But overall, our foundational pharmacy benefit services business, Express Scripts is off to a really good start for 2025. We've got strong new sales and our 2025 retention rate is going to be consistent with three years and the mid-90s or better. Stepping back a little bit, Evernorth overall is continues to be well positioned to grow. The specialty business is also positioned for strong growth with significant growth driven by our pharmacy benefits clients electing to use our specialty capabilities as well as strong growth in services sold directly to health systems and other health plans. So overall, we are quite excited about the strength of the solutions and how they continue to resonate with the market overall. The themes or specific programs that I would point to come back to areas that help to make the value of the dollar spent on medicine is more effective. So programs like our EnCircleRx program that helps to effectively manage weight loss medication GLP-1 or our most recent oncology benefit offering that David mentioned a bit ago in his prepared remarks. So targeted specific types of programs that work really well with the broader suite of benefit offerings continue to resonate really well in that scenario we continue to invest in. David, do you want to take a bit on the broader environment comment?
A: I appreciate the call out. First and foremost, let me reiterate we're proud of the work we do daily, and I'm greatly appreciative of our team that gets up everyday serving our patients and customers through employer relationships, health plane relationships, governmental entity relationships and increasingly through partnerships and collaborations to health care professionals. Second, we will and need to continue to innovate for the benefit of those we serve, whether that's through the likes of ClearCareRx, our patient insurance program, our EnCircle program, our independent pharmacy program, all of which are first in the space. Now specific to your question, we challenged ourselves to be much more aggressive and complete relative to communication and engagement in support of our clients, be they employers or health buying customers collaborate even more deeply and intensely with the independent pharmacies and subsegmenting the independent pharmacists who are truly independent and rural working on the hill, of course. And then lastly, more aggressively leveraging credible third-party independent analysis of what our industry does and specifically what we do on behalf of those we serve in a fact-based incredible way. So you should expect to see us a bit more complete and aggressive ensuring that we're amplifying that. But make no doubt, we also need to continue to innovate as we have, and we will continue to innovate for the benefit of those we serve.
Q: I might just flip over and ask you about the any distinctive you're seeing in the health benefit selling season across your book, and a large group and select, et cetera. And then also, you called out for quite a while now, fatigue on point solutions. I wonder, I understand how you're addressing affordability and understand how you addressing behavioral health integration. But on the point solution question, is there anything that is or do you think you'll consider buying some of these point solutions and then offering them as part of your integrated offering? Do you sort of see yourself getting in the middle of helping employers choose between the myriad of point solutions? How are you addressing that?
A: A.J., it's Brian. I'll start on the Cigna Healthcare selling season and buying pattern dynamic. And then I think David will pick up on the second part of your question relative to point solutions and some of our inorganic activities. So as it relates to the Cigna Healthcare selling season, I'll concentrate my comments on the larger end of the US employer market just given the time of the year. We're seeing a relatively consistent number of RFPs this year in comparison to last year at this time. And similarly, in terms of our existing clients, we have a similar amount out to bid as we did last year at this time. So, just for some context on the numbers. Now each of these larger employer clients tend to have unique needs. There's a few areas that thematically I'd call out in terms of what our teams are seeing out in the market. One, as David made reference to earlier, affordability continues to be a key area of focus particularly with the wave of drug innovation, including GLP-1s and gene therapy hitting the market. Secondly, to your point, some of the larger employers are seeking to consolidate vendors or point solutions with those who can supply more integrated offerings. Third, we're seeing mental health and substance of these benefits and programs becoming more
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
