Cigna defends decision to end drug rebates amid record Q3 revenues

Cigna Group executives stood firm Thursday on eliminating drug rebates as the best route forward for the entire industry.

For now, Cigna stands alone in ending the rebates in its own commercial health plans in 2027. Instead, the insurer will offer up-front discounts at its pharmacies, a swap executives said will lower costs for patients.

The rebate issue dominated a conference call with Wall Street analysts and overshadowed third-quarter results that saw Cigna post record revenue of $69.7 billion for 2025. Investors did not welcome the rebate news. Cigna shares dropped by about 13% as of early Thursday afternoon.

Cigna Group primarily operates under two main divisions, Cigna Healthcare and Evernorth Health Services, focusing on a variety of health solutions and services globally.

“I'm personally proud of our team's ability to step back and architect the new model of the future that is fee-based, de-link, transparent, and has the mechanism to have lowest available price for the consumer at the counter at each transaction, and it's highly aligned with the regulatory priorities of the day,” CEO David M. Cordani said of the rebate plan.

In announcing the plan Monday, Cigna said the change will apply in 2027 to about 2 million members of its fully insured plans, or those in which Cigna is responsible for the full cost of healthcare.

Most of Cigna's insurance business is managing plans for employers and other groups that cover the medical spending. In 2028, those clients who are also using its Express Scripts pharmacy benefit manager could elect for this benefit, Reuters reported.

Drug companies pay rebates to pharmacy benefit managers after a prescription is filled. Standard industry practice is to trade rebates for a good placement on the health plan's list of covered drugs.

The "big three" PBMs – Cigna's Express Scripts, CVS Health's Caremark, and UnitedHealth Group's Optum Rx – have faced criticism for confusing rebate structures that drugmakers say include fees that drive up prices. President Donald Trump and some legislators blame PBMs and the at times confusing rebate structure for high drug prices.

Cigna began 2025 promising to consider PBM reforms.

In Other News

Shields investment. The September move to invest $3.5 billion in Shields Health is a big part of Cigna’s growth plan, executives said.

The investment boosts Cigna's presence in the fast-growing specialty pharmacy business and comes as Shields transitions to a private company following the acquisition of its former parent, Walgreens Boots Alliance, by Sycamore Partners for $10 billion.

Specialty pharmacies provide specialized services for patients taking complex or high-cost medications. Evernorth, a Cigna subsidiary, operates specialty pharmacy Accredo.

“We are enhancing our ability to serve the provider-administered portion of the specialty market, which today represents approximately 40% of the specialty space,” said Brian Evanko, president and chief operating officer. “This addressable market has strong secular growth, and our investment in Shields will enable us to accelerate our strategy in the hospital and health system segment that Shields serves.”

Quarterly Snapshot

• Cigna Healthcare's medical care ratio was 84.8% for the third quarter of 2025, compared to 82.8% for the third quarter of 2024.
• Total revenues increased 10% relative to the third quarter of 2024, primarily driven by Evernorth Health Services.
• Total customer relationships at the end of Q3 were 182.5 million.
• Total pharmacy customers at the end of Q3 increased 4% from Dec. 31, 2024, to 122.5 million due to new sales and the continued relationship growth.

Management Perspective

“We believe this is the future of where the market is going. We're proud to lead it, and we need to have the capabilities to be able to serve the consumer, the employer and the independent pharmacist with the model.”

–  CEO David M. Cordani on eliminating the pharmacy rebate program

By The Numbers

• Total Revenue: $69.7 billion ($63.7 billion in Q3 2024)
• Net Income: $1.9 billion ($739 million in Q3 2024)
• Earnings Per Share: Adjusted earnings per share of $6.98 ($2.63 in Q3 2024)
• Share Repurchases: not specified
• Dividend Declared: $1.51 per share in Q3 2025
• Stock Price Movement: Shares down about 13% as of early Thursday afternoon.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.