Both CVS Health Corp. and Express Scripts Holding Co. reported
strong client retention in the 2019 selling season, and both had rosy outlooks
relating to the effects of their proposed merger and acquisition deals on their
pharmacy benefit management business.
In the first quarter, CVS Health’s overall net revenues increased 2.6% to $45.7 billion, while revenues in the company’s PBM segment increased 3.2% to approximately $32.2 billion, primarily driven by growth in new net business, including additional lives in Medicare Part D and growth in specialty pharmacy.
In the second quarter, CVS Health said, it expects its PBM segment revenues to stay largely the same — in a range of down 1.25% to up 1.5%.
Express Scripts’ first-quarter net income was $623.2 million, an increase of 14%. Its PBM, which said March 8 that it would be acquired by Cigna Corp., reported that its adjusted network claims volume fell about 2% year-over-year, "due primarily to the loss of certain public sector clients in the core business during last year’s selling season."
The PBM said in the second quarter, it expects total adjusted claims to be in the range of $335 million to $345 million, of which $280 million to $290 million would be attributed to its core business.
Evercore ISI analyst Michael Newshel says that the Express Scripts purchase is weighing on Cigna investors despite strong Cigna earnings: "Concerns about the ESRX transaction continue to overshadow positive [Cigna] operating results."
Meanwhile, Cigna remains upbeat about the Express Scripts deal, which will bolster the overall trend of vertical integration in health care. Cigna raised its 2021 earnings per share target to a range of $20 to $21, an increase of $2 to $3 per share from prior guidance, to reflect what it says will be the earnings benefits of the Express Scripts acquisition.
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