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Diving brief:

• Cigna CEO David Cordani threw cold water on speculation that the health insurer is interested in acquiring rival Humana during a call with investors Thursday.
• Despite reports earlier this fall that the two payers had reopened negotiations, Cigna plans to use its excess cash to repurchase shares, Cordani said in discussing Cigna’s third-quarter results.
• Cigna at your fingertips beat Wall Street’s expectations in the quarter with revenue of $63.7 billion, up 30% year-over-year after strong demand for specialty drugs drove growth in its health services division . However, a billion-dollar investment loss linked to the decline in value of the VillageMD primary care chain sent Cigna’s profit down to $739 million from $1.4 billion in the same period last year.

Dive Overview:

Cigna continues to avoid the significant pressures that have hit its health insurance peers this year. The majority of the Connecticut-based payer’s business is with employer clients, which has shielded Cigna from the worst of Medicare Advantage’s turbulence.

Cigna – who is exit Medicare coverage completely – seems uninterested in returning to the fray by acquiring Humana, despite Bloomberg report in October that the two companies had resumed discussions around a potential transaction.

“We don’t comment on rumors, but what I will do is be very clear about the actions we are pursuing,” Cordani said. “We continue to deploy our excess free cash flow for share repurchases (and) going forward, we plan to continue to actively repurchase our shares.”

Humana stock fell 4% in pre-market after the comments, although the company’s shares recovered slightly after the market opened.

Meanwhile, Cigna’s health services division Eternal North – which includes Express Scripts, a leading pharmacy benefits manager – continues to reliably grow revenue. Eternal North “anchored” Cigna’s results in the quarter, Cordani said.

Evernorth’s results were boosted in the quarter by Express Scripts, despite antitrust regulators’ growing criticism of pharmaceutical intermediaries. During Thursday’s call, Cordani skewered recent efforts by the Federal Trade Commission to crack down on PBMs, following through on his promise earlier this year to defend lucrative business more vigorously.

“We disagree with the unfounded claims” made by the FTC, Cordani said, arguing that PBMs improve affordability and competition in the drug supply chain.

Express Scripts grew its adjusted revenue 50% year over year thanks to migration of a health insurer Centene lucrative prescription drug contractwhich boosted the PBM results in 2024.

However, PBM’s margins declined, with Express Scripts reporting adjusted operating income growth of 9%. The lower margin trajectory is surprising given the costs of implementing the massive plan Centene contracting is expected to slow down, according to Jefferies analyst David Windley.

Cigna “may have barely met low expectations,” Windley wrote in a Thursday note.

Evernorth also includes a specialty pharmacy Accredoresponsible for medical services EviCore and Cigna’s other healthcare service product lines.

Evernorth’s specialty services and care business grew its adjusted revenue and adjusted operating income 23% year over year, significantly above its historical performance and long-term guidance. Cigna’s term for the company.

“While we expected strong contributions during the quarter, this performance was better than expected,” CFO Brian Evanko said on the call.

Management attributed this growth to strong demand for specialty drugs, particularly for inflammatory, oncological and neurological conditions, as well as increasing adoption of biosimilars.

Evernorth continued to see adoption it’s interchangeable biosimilar for the immune disease drug Humirawhich became available to eligible individuals Accredo patients for an out-of-pocket cost of $0 in June. A third of Accredo-eligible patients are currently taking the copied drug, Cordani said.

Evernorth also plans to offer a biosimilar for the immunosuppressant Stelara in 2025, also for $0 out of your pocket.

“I could imagine us using this manual and this approach for biosimilars as we look ahead to the years ahead,” Eric Palmer, President and CEO of Evernorth, said during Thursday’s call.

Evernorth is also banking on the continued adoption of GLP-1, medications traditionally used for diabetes that have shown effectiveness in a variety of use cases, including weight loss.

In March, Cigna announced a cost-sharing agreement for the GLP-1 covered by a disease management program, to protect health plan customers and employers from soaring drug costs – and ensure Eternal North can benefit from continued demand.

This program, called EncircleRx, has already touched nearly 8 million lives, according to Palmer. This is a significant jump from EncircleRx’s 2 million enrollees in August.

However, demand for specialty drugs, which boosted Evernorth’s results, has put pressure on Cigna’s insurance segment, which provides health care coverage to 19 million people.

Cigna Healthcare’s adjusted revenue increased 3% year over year, but adjusted operating income fell 4% due to rising medical costs.

“Overall, we view this as a fairly strong quarter that should leave the company with a reasonable setup through (the fourth quarter) and 2025,” wrote Lisa Gill, an analyst at JP Morgan , in a note on the results.

Cigna also continues to face the ripple effects of its $2.5 billion investment in VillageMD two years ago.

The insurer invested in VillageMD, a network of medical chains majority-owned by Walgreens, with the goal of creating value-based care arrangements connecting its doctors to Evernorth.

However, Cigna found itself an unwitting victim of VillageMD’s declining value, which also led to Walgreens plans to offload the supplier as a whole.

Cigna’s $1 billion write-off this quarter builds on first Write-off of $1.8 billion in May stemming from VillageMD’s lackluster growth and the decision to close a number of underperforming clinics.

“In hindsight, the timing of (the investment), given the disruption in the sector walk …turned out to be poorly timed,” Cordani said.

Cigna reiterated its forecast for 2024 following the results.