Insurer-Affiliated PBMs Propel Parent Firms' Revenues in Third Quarter

by Jane Anderson

Large insurer-affiliated PBMs saw strong results for the third quarter of 2020, in several cases driving revenues for parent companies that are grappling with various disruptive effects of the coronavirus pandemic.

At CVS Health Corp., which reported earnings on Nov. 6, total revenues increased 3.5% year over year to $67 billion, and the company posted earnings per share (EPS) of $1.66, beating analysts' estimates.

"Our pharmacy services segment delivered double-digit operating income growth versus [the] prior year, reflecting strength in specialty along with favorable purchasing economics, and our 2021 [PBM] selling season is wrapping up quite nicely, with $3.3 billion of net new business," President and CEO Larry Merlo said.

Still, SVB Leerink equities analyst Stephen Tanal said in a Nov. 6 investor note that CVS's Caremark business remains at risk from state-level initiatives involving Medicaid pharmacy benefits.

Cigna Corp.'s new Evernorth segment, which includes the company's Express Scripts PBM business, its Accredo specialty pharmacy division and its eviCore utilization management business, drove strong third-quarter earnings that beat analysts' expectations.

Evernorth helped to boost Cigna's overall revenues to $40.8 billion, said Citi analyst Ralph Giacobbe in a Nov. 5 investor note. Revenues for the Evernorth segment were $29.83 billion, a 20% increase year over year.

Evercore ISI analyst Michael Newshel said in a Nov. 5 investor note that Evernorth showed higher script volume and a slightly better margin than anticipated in the quarter, along with lower corporate expenses than expected.

UnitedHealth, which also handily beat analyst expectations with earnings of $3.51 per share, brought in $65.1 billion in the third quarter, representing an 8% increase year over year. However, the $3.51 adjusted EPS is a 10% drop from last year's third-quarter earnings.

Health insurer Anthem, which has launched its own in-house PBM, IngenioRx, reported third-quarter adjusted EPS of $4.20, a decline of 14% year over year that reflected the company's obligations to pay out its $594 million share of a recently settled lawsuit against Blue Cross and Blue Shield plans.

Anthem's revenues increased by 15.9% year over year to $30.6 billion, which Chief Financial Officer John Gallina attributed largely to growth in the firm's Medicare and Medicaid businesses, although he also gave a nod to "pharmacy revenue related to the launch of IngenioRx."

From RADAR on Drug Benefits