Cigna's Strategic Shift: Specialty Pharmacy Growth and Future Performance

Current State and Financial Performance of Specialty Pharmacy

The current state of specialty pharmacy shows a mix of challenges and growth opportunities. Companies like Humana and CVS report strong performance and cost management, while Walgreens emphasizes unique service offerings. However, external factors, such as New York's Medicaid transition, may impact operations.

"• In April 2023, the state of New York removed pharmacy services for certain of our managed care contracts in connection with the state's transition of pharmacy services to Medicaid fee-for-service." --- (CNC, sec filing, 2024/Q1)

"Overall, our pharmacy volumes are in line with plan and we continue to drive lower cost to fill, particularly in our less mature specialty pharmacy business." --- (HUM, earning call, 2024/Q2)

"So on the earlier topic of potential offsets, I wanted to ask on Optum Rx and with the recent level of industry attention kind of on the PBM business as well as kind of specialty pharmacy, how should we think about how those drivers are playing out relative to your expectations, whether it's biosimilars or GLP-1s in terms of that therapeutic category, how should we think about those near-term drivers across Optum Rx?" --- (UNH, earning call, 2024/Q2)

"This increase reflects the return to strong performance in our pharmacy services business in the second quarter, as well as the continuation of this exceptional execution through the remainder of the year." --- (CVS, earning call, 2024/Q2)

"(Photo: Business Wire) Under the new business, Walgreens Specialty Pharmacy has an unmatched offering and is the only specialty pharmacy in the market with the following services and assets at scale: Gene and Cell Services Pharmacy and Innovation Center – a dedicated 18,000-square-foot center in Pittsburgh, PA, with services and capabilities for these emerging therapies, including innovative solutions for managing the complexity of the supply chain, logistics and financing as well as clinical and social needs management to ensure success for patients and partners." --- (WBA, press release, 2024/04/24)

Competitive Landscape in Specialty Pharmacy

The competitive landscape in specialty pharmacy is marked by strong competition, particularly in biosimilars, as noted by CVS. Additionally, disruptions like the Change Healthcare cybersecurity issue have impacted patient access, highlighting challenges within the sector. Companies are also focusing on risk mitigation strategies to navigate these dynamics.

"And so in some regards, you can say that the competitive landscape is clearer air for us." --- (BMY, conference, 2024/06/11)

"Third, you actually have to look at like the competitive landscape in each of these markets." --- (WBA, earning call, 2024/Q1)

"We have strong competition, kind of strong competitiveness with our specialty business, with what we're doing with biosimilars." --- (CVS, conference, 2024/05/29)

"In the U.S., we saw strong new patient volume growth early in the quarter. This was disrupted in February and March by the Change Healthcare cybersecurity issue, which created challenges for some patients trying to fill prescriptions at specialty pharmacies." --- (AMGN, earning call, 2024/Q1)

"As we think about our stand-alone Part D strategy for '25, I would say we're very oriented to risk mitigation, just given the magnitude of the changes and the sensitivity that you will have in terms of the profitability of underlying membership based on sort of the level of utilization and specialty utilizers in particular." --- (HUM, earning call, 2024/Q1)

Regulatory Impacts on Specialty Pharmacy Growth

Regulatory challenges significantly impact specialty pharmacy growth, as highlighted by CVS's struggles in the retail pharmacy sector and Humana's competitive landscape. Centene emphasizes the importance of monitoring state legislation for coverage expansions, while UnitedHealth notes regulatory actions affecting health plans, indicating broader implications for specialty pharmacy operations.

"The Company attributed its results and lowered guidance on the "significant challenges in the U.S. Retail Pharmacy business stemming from a worse-than-expected consumer environment and challenging pharmacy industry trends."" --- (CVS, press release, 2024/08/30)

"Humana's pharmacy business is highly competitive and subjects it to regulations and supply chain risks in addition to those the company faces with its core health benefits businesses." --- (HUM, press release, 2024/07/31)

"Table of Contents We also closely monitor state legislation across our markets and are advocating for and seeing adoption of coverage expansions for Medicaid adult populations (e.g., North Carolina), postpartum, foster care, children, among others, as well as mitigating adverse legislation addressing pharmacy, prior authorization and other issues." --- (CNC, sec filing, 2024/Q1)

"About $220 million of this stems from a regulatory action in Chile, affecting all health plans." --- (UNH, earning call, 2024/Q2)

"Specialty membership decreased 461,500 members, or 9.0%, from March 31, 2023 to March 31, 2024 primarily due to non-renewal of dental and vision plans as a result of exit from the Employer Group Commercial Medical Products business partially offset by growth in dental and vision plans as a result of Medicare Advantage enrollment." --- (HUM, sec filing, 2024/Q1)

Integration of Specialty Pharmacy with Healthcare Services

The integration of specialty pharmacy with healthcare services is emphasized through coordinated care efforts, incentive alignment between primary and specialty care, and comprehensive service offerings that include pharmacy benefits. This approach enhances patient care by ensuring that pharmacy services are effectively integrated into broader healthcare strategies.

"CPESN® pharmacies integrate with other healthcare providers on the patient's care team to coordinate medical treatment." --- (HUM, press release, 2024/04/02)

"Its specialty plans include the Child Welfare Specialty Plan serving children in or adopted from the state's Child Welfare system; the Serious Mental Illness Specialty Plan for people living with serious mental illness; and the Children's Medical Services Health Plan, operated by Sunshine Health on behalf of the Florida Department of Health for children and adolescents with special healthcare needs." --- (CNC, press release, 2024/06/06)

"It's the incentives, the incentive alignment with our primary care practices, but it's all of those other elements that are important for primary care and specialty care." --- (UNH, conference, 2024/05/29)

"The Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, medical management capabilities, Medicare Advantage and Medicare Supplement plans, PDPs and Medicaid health care management services." --- (CVS, sec filing, 2024/Q1)

"The program supports nearly 26,000 Arizonans who are elderly and/or have a physical disability (E/PD) with physical and behavioral healthcare, as well as provides pharmacy benefits." --- (CNC, sec filing, 2024/Q1)

Innovations Driving Specialty Pharmacy Growth

Innovations in specialty pharmacy growth are driven by enhanced consumer engagement, the evolving role of pharmacists in providing equitable care, and targeted product design aimed at delivering long-term value. These factors collectively contribute to improved patient outcomes and lower healthcare costs, fostering growth in the sector.

"And as we know, consumers and patients who interact with the healthcare system will deliver lower costs, will have improved quality and eventually continue to drive growth for our company because of the better outcomes and because of the better retention that we have with them." --- (CVS, conference, 2024/05/29)

"The company's pharmacists are playing a more critical role in healthcare than ever before, providing a wide range of pharmacy and healthcare services, including those that drive equitable access to care for some of the nation's most underserved populations." --- (WBA, press release, 2024/05/02)

"So all that is to say, I think it bodes well in terms of being able to design products as we go into the 2025 cycle and drive further focus in the book on that population to continue to yield those members to whom we feel like we're going to deliver the best value over the long term." --- (CNC, earning call, 2024/Q1)

Risks and Challenges in Specialty Pharmacy Expansion

Cigna's specialty pharmacy expansion faces risks related to stable partnerships, appropriate funding, and membership selection. Companies emphasize the need for careful risk management and balancing short-term growth with long-term sustainability to mitigate exposure and liability risks in this evolving landscape.

"Folks are looking for a real stable partner to be able to grow with. We have worked with them continuously in terms of our contracts, both looking at the benefit and funding changes and ensuring that the funding level is appropriate for the risk that we're taking on, and to be able to provide very high quality care across our membership." --- (UNH, earning call, 2024/Q1)

"And I think I did mention that we were able to run risk scores by member and the mechanics and how that rips through the -- not just the risk scores, but also the timing of members with cost share, and getting to the maximum out of pocket, or the MOOP." --- (CNC, earning call, 2024/Q1)

"As we said before, selection in terms of your underlying membership is really important, and we each have a little bit of a different product strategy, which may have caused us to approach the bids differently.I would say broadly, I think the industry was focused on mitigating some of the increased exposure and liability risk that we all have in the way that the program will be constructed for '25.With the information that was released this week on the benchmarks, as we've all seen, it does suggest that the direct subsidy maybe is going to be higher than what certainly analysts had expected." --- (HUM, earning call, 2024/Q2)

"Obviously, it's phased in over three years. We want to make sure we don't do anything that chases short-term growth, for example, but puts a lot -- puts at risk long-term sustainability." --- (UNH, earning call, 2024/Q1)

"How are the higher than anticipated risk scores that you referred to in the prepared remarks impacting your view of the v28 headwinds in '24 and '25?" --- (HUM, earning call, 2024/Q2)