Cigna leans on commercial business, pharmacy benefits after Medicare sale

By Khushi Mandowara and Sneha S K

(Reuters) -Cigna said on Friday it expects higher pricing for some commercial health insurance plans and strength in its pharmacy benefit management (PBM) business from biosimilar and weight loss drugs, to help drive growth this year.

Shares of the company rose 6.3% after Cigna raised its 2024 profit forecast, just two days after agreeing to sell its Medicare business, which catered to adults aged 65 and above, to Health Care Service for $3.3 billion.

Humana, which is a large player in the Medicare Advantage (MA) market, last month warned that higher costs due to increased care among older adults will hit its 2024 and 2025 profit.

But Cigna is shielded from such a hit as it has a much smaller presence in the MA market, and will fully exit the business when it completes the sale early next year.

"We concluded that our Medicare businesses ... would require sustained investments and focus, and capital as well as dedicated resources that were disproportionate with their size within the Cigna Group's portfolio," said CEO David Cordani.

Cigna executives said that growth in its PBM business in 2024 would be driven by powerful new GLP-1 weight loss drugs from Eli Lilly and Novo Nordisk, as well as biosimilar drugs, which are cheaper, close copies of complex biological treatments.

PBMs have been boosted by the launch of nine biosimilar drugs to AbbVie's best-selling drug Humira last year.

PBMs negotiate drug prices for insurers, create lists, or formularies, of medications covered by insurance and reimburse pharmacies for patients' prescriptions.

In the fourth quarter ended Dec. 31, Cigna's medical care ratio, the percentage of premiums spent on medical care, came in at 82.2%, below LSEG estimates of 84.2%.

This helped Cigna report a 35% jump in profit to $6.79 per share, on an adjusted basis, beating analysts' estimates by 25 cents.

(Reporting by Khushi Mandowara and Sneha S K in Bengaluru; Editing by Shinjini Ganguli)