In January 2024, Cigna announced its $3.7 billion deal to sell its Medicare business to Health Care Service Corporation (“HCSC”), overcoming a number of interested buyers. The sale, expected to close in the first quarter of 2025, has HCSC acquiring several of Cigna’s businesses. Specifically, HCSC will take over Cigna’s Medicare Advantage, Part D, Supplemental benefits, and CareAllies businesses following the deal’s closing. Additionally, HCSC has entered into a four-year arrangement where Evernorth, a Cigna subsidiary, will continue providing pharmacy services to Cigna’s Medicare plans should the sale successfully close as anticipated.
Impact on Pharmacy Businesses
With Cigna’s sale of its Medicare business comes several potential concerns that could significantly impact pharmacies. Specifically, concerns surrounding the Inflation Reduction Act’s (the “IRA”) influence on Cigna’s decision to sell off all its Medicare businesses to likely focus on its business that does not face such federal regulation. The IRA enabled the Department of Health and Human Services (“HHS”) to establish a negotiation program for high-priced, single-sourced drugs. With several of the provisions contained within the IRA taking effect over the next several years, pharmacies may interpret Cigna’s decision to sell as a telling sign of what is to come regarding higher or lower reimbursement rates for pharmacies as Pharmacy Benefit Managers (“PBMs”) lose the role they played in negotiating the prices of eligible drugs under Medicare.
Additionally, the transaction raises concerns that Cigna is shedding its Medicare business in response to recent actions taken by Congress to regulate PBMs and their nefarious spread pricing tactics. Spread pricing occurs when PBMs charge plan sponsors a higher price for a patient’s medication than they pay the dispensing pharmacy, and keep the difference, known as the “spread,” for themselves. The steps Congress has taken would only allow PBMs to collect limited administrative fees rather than exorbitant fees charged to increase the PBMs personal profit.
Finally, Cigna’s recent announcement has added further fuel to speculation that Cigna is parting with its Medicare business to position itself for the potential purchase of another PBM entity in the coming years. Such a move would provide Cigna with more control in the PBM industry, a strategic move as the federal government increases regulation over eligible drugs under Medicare and PBMs look to makeup the profit elsewhere.
How Frier Levitt Can Help
If you are interested in learning more about how this sale may impact your business, or if your pharmacy is facing network interruption because of this transition, please contact Frier Levitt to speak with an attorney today. Our attorneys possess the necessary skills and experience to navigate Cigna’s changing Medicare Advantage offerings and their transition to HCSC.
