Cigna’s third-quarter earnings show a drop in income from its pharmacy benefit business

Cigna Group reported good overall third-quarter results yesterday, spurring a modest upward adjustment in its full-year adjusted earnings per share to $30.60, an increase of 15 cents from prior guidance. The healthcare company, which comprises health insurance and one of the “big 3” pharmacy benefit managers (PBMs), Express Scripts, reported yesterday that total revenues increased 5.6% from $69.74 billion during the third quarter of 2025 to $73.68 billion during the third quarter of this year, which the company said reflected increased revenue from premiums and the drug mix of Evernorth, the pharmacy benefits and specialty and care services arm of the company.

But Cigna’s stock price dropped $10.89 to $301.48 during active trading yesterday, and the price closed at $293.59 today.

Beneath the surface of some of the overall numbers are some negative trends. The total number of the company’s pharmacy customers as of Sept. 30, 2026, was 117.7 million, down 5% from the number at the end of 2025. A company news release says the drop reflects “expected client transitions and lower membership from health plan clients.”

Express Scripts, along with the two other big 3 PBMs, Optum Rx and CVS Caremark, have been on the defensive lately with new Department of Labor rules requiring them — and other PBMs — to disclose reams of information about their manufacturer rebates, fees, formulary placement incentives and other forms of compensation to their self-insured employer clients. Other, much smaller PBMs have positioned themselves as fairer, more transparent alternatives to the big 3. The National Alliance of Healthcare Purchaser Coalitions, which represents self-insured employers, reported survey results of its members in August that showed the percentage that used one of the big 3 as its PBM had slipped to 54% in 2026 compared with 63% in 2025.

Cigna reported yesterday that its adjusted income from operations was “stable” at $2.1 billion in the third quarters of both 2025 and 2026. But adjusted, pretax income from operations from pharmacy benefit services — the Express Scripts part of Cigna — fell by 21.5%, from $975 million during the third quarter of 2025 to $765 million during the third quarter. The news release attributes the drop to “large client contract renewals and strategic investments.” Although income from operations dipped, the company news release says that total adjusted revenue from pharmacy benefit services climbed by approximately 9%, from $34.1 billion during the third quarter of 2025 to $37.28 billion during the third quarter of 2026.

Cigna’s specialty drug business had total adjusted revenues of $26.49 billion during the third quarter of this year, a modest 1% increase from the total adjusted revenue during the 2025 third quarter. A note in the news release says that the increase reflects strong specialty distribution revenue growth that was partly offset by lower revenue, a reflection of greater biosimilar and specialty generic adoption, which, the note says, “lowers costs for clients and patients.”

Biosimilars seem to cut both ways

Interestingly, the notes suggest that biosimilars cut both ways. The 15% jump in adjusted income from operations in the specialty drug business — from $928 million in the third quarter of 2025 to $1.06 billion in 2026 third quarter — could also be attributed to higher biosimilar and specialty generic adoption. And one of the “headwinds” listed in the company’s presentation yesterday was a “more limited pipeline of biosimilar and specialty generic launches.”

Most of Cigna’s revenue comes from its pharmacy benefit management and specialty drug business, which are grouped under the Evernorth Health Services division. For example, according to the third quarter results reported yesterday, $37.28 billion, or just over 50%, of the company’s $73.79 billion in total adjusted revenue during the third quarter was from pharmacy benefit services, with specialty drug services accounting for $26.49 billion, or approximately 35%, and Cigna Healthcare, the health insurance business, accounting for $11.71 billion, the remaining 15%.

A company’s presentation yesterday listed as positive “tailwinds” for Cigna continued stop-loss margin improvement for Cigna Healthcare, strong selling seasons for Cigna Healthcare and Evernorth, and its “Accelerate to One” productivity initiative. In addition to the limited pipeline of biosimilar and specialty generic launches, the headwinds were Cigna Healthcare’s exit from the Affordable Care Act market and, for Express Scripts, the “compression of industry rebate pools” and lower employer coverage of the glucagon-like peptide 1 drugs or obesity.