It’s open season on pharmacy benefit managers (PBMs) in the race to presidency in 2020. But Cigna’s CEO David Cordani is still feeling good about pulling the trigger on its acquisition of major PBM player Express Scripts for $54 billion in 2018.
“The early impact of Express Scripts is positive,” Cordani told Yahoo Finance YFiAM on Thursday. Cordani said the combined company has already moved quickly to release new services around diabetes.
Cordani adds that continued execution around Express Scripts will be important in getting investors comfortable with the combined company.
The addition of Express Scripts — a deal that closed in December 2018 — added a jolt to Cigna’s business in the first quarter. Total revenue rose to $33.4 billion from $11.4 billion a year ago. Cigna (CI) said it saw strong organic growth in pharmacy customers and the number of prescriptions filled within its Express Scripts business. Client retention for Express Scripts is in the 96% to 98% range looking out into 2020, Cigna said.
Cigna reported first quarter adjusted earnings of $3.90 a share, beating Wall Street estimates for $3.74 a share. For the full year, Cigna now sees earnings in a range of $16.25 to $16.65 compared to $16.00 to $16.50 previously.
Cigna shares fell 4.3% in early afternoon trading despite the profit beat and guidance lift. It continues a downward move in the stock (-19% year-to-date) as investors fret about the longer-term outlook of PBMs such as Express Scripts and ones owned by Walgreens Boots Alliance and CVS Health.
Recently, the Trump administration proposed a rule to eliminate rebates to PBMs from drug manufacturers in an effort to lower drug price costs. The proposal — which is gaining traction in Washing D.C. — could remove a key profit center for PBMs.
Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi
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