2024-07-12 12:39:02 ET
Summary
- Pharmacy Benefit Managers are increasingly in the spotlight of regulators and the media, potentially leading to government intervention.
- Express Scripts, Cigna's PBM, is responsible for nearly 75% of the company's revenue, which raises the question of whether CI stock is still a safe investment.
- This article discusses the potential implications in a scenario-based approach, focusing on segment profit, consolidated profit, dividend safety, and valuation.
- In addition, I share my thoughts on the recent opioid litigation in Arkansas and explain why I continue to sleep well with my investment in Cigna.
Introduction
On July 9, the Federal Trade Commission ((FTC)) released its " interim staff report on prescription drug middlemen ", detailing how Pharmacy Benefit Managers (PBMs) profit on both sides of the trade - by driving up drug prices and putting pressure on smaller, non-chain pharmacies. Of course, this is nothing new to anyone who has studied the business model of PBMs like Express Scripts, which is owned by The Cigna Group ( CI ), but regulatory and media attention is obviously increasing.
The New York Times, for example, published a rather detailed article on the subject three weeks ago, referring to PBMs as " The Opaque Industry Secretly Inflating Prices for Prescription Drugs "....
Read the full article on Seeking Alpha
For further details see:
Cigna: Game Over For PBMs?