Cigna Group (NYSE:CI) is adopting a strategy inspired by entrepreneur Mark Cuban to streamline the pricing of medicines, marking a shift in response to challenges posed by emerging competitors. In the coming year, Cigna’s subsidiary, Express Scripts, plans to offer employers and health plans the option of paying pharmacies up to 15% above their wholesale costs, plus an additional fee for dispensing medicines. This departure from the traditional model, where employers pay pharmacies based on an average discount, aims to bring more transparency to drug pricing.
Express Scripts, a dominant player in the pharmacy benefits industry with over 98 million customers, anticipates widespread participation from pharmacies in its new network due to improved payment rates. The model shares similarities with Mark Cuban’s Cost Plus Drug Company, launched about two years ago, which sells medications at a set markup on the pharmacy’s cost.
The 15% markup will be divided between Express Scripts and the pharmacy, mirroring the structure of Cuban’s company. Cigna’s offering extends beyond Cuban’s model, encompassing various prescription types, including brand and generic drugs, through Cigna’s mail-order and specialty pharmacies. While Cigna emphasizes increased transparency, it stops short of guaranteeing lower drug prices, stating that savings for employers and health plans may vary.
The pharmaceutical benefits industry is currently undergoing a period of upheaval. Earlier this year, Blue Shield of California redirected some of its business away from CVS Health Corp.’s pharmacy benefit manager to a select group of companies, including Cuban’s, aiming to achieve annual savings of up to $500 million. Simultaneously, the Federal Trade Commission is investigating the business practices of pharmacy benefits managers, and Congress is contemplating new regulations for the industry.
Express Scripts, the second-largest pharmacy benefit manager in the United States after CVS’s Caremark, seeks to address concerns about the industry’s complexity, which often conceals methods used by companies to drive up costs for patients. Cigna’s move aligns with a broader trend in the industry, where stakeholders are increasingly questioning existing practices and pushing for greater transparency. Cigna’s shares experienced a 2.2% decline following the announcement.
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