Big Three PBMs Report Positive 4Q Results, Fire Back at Critics

Despite mostly lukewarm fourth-quarter 2024 results from their parent companies, CVS Health Corp.’s Caremark, The Cigna Group’s Express Scripts and UnitedHealth Group’s Optum Rx showed strong results and optimistic outlooks for 2025. The CEOs of those companies also fired back at PBM criticism, stating that PBMs are crucial to negotiating and keeping drug prices low. PBMs have faced pressure from both lawmakers and the public, including administrative complaints and lawsuits aimed at alleged price fixing and claims of contributing to the opioid epidemic. Federal lawmakers have also pushed for legislation to change PBM business practices and increase transparency — and could include PBM reform measures in a budget reconciliation bill as early as March. “One of the most powerful forces helping to offset rising health care costs are PBMs like Caremark,” CVS CEO David Joyner said during the company’s Feb. 12 earnings call. “These entities remain the only part of the drug supply chain entirely focused on lowering cost but have erroneously been subject to deceptive rhetoric and misinformation.” UnitedHealth Group CEO Andrew Witty said during his firm’s January earnings call that PBMs act on behalf of the ultimate payers — employers, unions, states and others — because they are underwriting the cost of medications for patients. “PBMs are really the only effective mechanism across the system” to keep drug prices down, he added, stating that they “hold the pharmaceutical company to account once it chooses to set its price.” CVS’s Joyner said: “For more than three decades, PBMs have been a proven, unequivocal mechanism to negotiate down the price of drugs for payers and consumers, while promoting better adherence and better health.” Joyner asserted that PBMs are a “critical counterbalance” to what he described as “monopolistic tendencies” of drug manufacturers. “This is why PBMs are needed and why manufacturers fight so hard to limit our capabilities,” he added. Caremark Touts TrueCost, CostVantage After a lackluster third quarter that brought Medicare Advantage woes and a change in CEO, CVS reported fourth quarter 2024 earnings that beat consensus estimates for adjusted earnings per share and medical loss ratio. However, the company’s Health Services division, which includes Caremark and Oak Street Health, Inc., reported a 4% year-over-year decline in revenue, partly driven by an announced loss of a large client. The decrease was partially offset by pharmacy drug mix, increased contributions from health care delivery assets and specialty pharmacy growth. Caremark and CVS’s Cordavis affiliate converted 90% of the PBM’s Humira patients to its white-label biosimilar, Joyner said. The biosimilar’s list price is 80% lower than branded Humira, allowing CVS to offer it to patients at no out-of-pocket cost. CVS executives also touted its TrueCost and CostVantage reimbursement models available through CVS pharmacies. TrueCost will allow for 100% pass-through of drug rebates, Joyner said, and more than 75% of commercial members have two or more elements of TrueCost in their pharmacy benefits. Joyner noted that 100% of commercial prescriptions are contracted through the CostVantage reimbursement system that is based on the underlying cost of the drug plus a defined markup and a dispensing fee. This will allow for more transparency into drug pricing and greater savings for patients, the executives said. Prem Shah, executive vice president and group president, said the company hopes to move Medicare and Medicaid to a “CostVantage-like model” in 2026. “We're trending toward delivering more than $100 million of annualized purchasing improvement across all of our generics to the PBM and payer customers under CVS CostVantage contracts,” Shah added. Optum Rx Bets on Transparency In the fourth quarter of 2024, Optum Rx posted $35.8 billion in revenue, up 14.8% from the prior year period. Total 2024 revenue was $130 billion, and UnitedHealth Group expects Optum Rx to bring in $146 billion in 2025. The PBM filled 422 million prescriptions in 2024 — a 5.5% year-over-year increase. During the Jan. 16 earnings call with analysts, Witty noted the “persistently high” drug prices in the U.S., “leaving American consumers, employers and public agencies to pay disproportionately more than people in other countries.” Witty cited GLP-1 drugs for diabetes and obesity, including one that costs around $900 in the U.S. and “costs about 1/10 of that in Europe.” PBMs play a “vital role in holding these prices down,” he said. “Optum Rx alone delivers many tens of billions of dollars in savings annually vs. the pricing set by manufacturers, including on the GLP-1s,” Witty said. Witty also explained that Optum Rx passes through more than 98% of rebate discounts, noting that the PBM offers other plans that pass through 100% of rebates. The company’s goal is for all plans to pass through 100% by 2028 at the latest. “The hope from management [during a meeting with analysts] was that shifting to a transparent model would drive home the point that PBMs work on behalf of plan sponsors (e.g., employers),” JPMorgan Research analyst Lisa Gill wrote in a Jan. 30 research note. “We continue to see this as a misunderstood aspect of the dialogue around PBMs, and believe that most contracts can be adjusted to reflect regulatory changes without major changes to PBM economics.” Management described Optum Rx as “economically neutral,” Gill wrote, and said that performance will not be affected by the shift to 100% pass-through. Express Scripts Responds to Public Pressure Express Scripts reported a 47.3% year-over-year revenue growth in the fourth quarter of 2024. Its pretax earnings for the fourth quarter totaled $1.2 billion. Nearly 80% of patients spend less than $100 per year at the pharmacy counter with Express Scripts, Cigna CEO David Cordani shared during the company’s January earnings call. Cordani also announced an initiative to drive prices down even further by charging patients no more than the negotiated price for drugs, rather than the higher list price. Express Scripts patients will also receive personalized annual summaries that explain their costs to boost transparency around pricing, citing increased scrutiny around insurer practices following the murder of UnitedHealthcare CEO Brian Thompson in December. “The past several weeks have further challenged us to even more intensely listen to the public narrative about our industry,” Cordani said. “Our commitment will help patients directly benefit further from the negotiations we drive to lower out-of-pocket costs as well as work to further enhance transparency.” And on Feb. 5, Kroger Health announced it inked a new deal with Express Scripts two years after the initial deal ended. Commercial, Medicaid, Medicare and TRICARE enrollees with Express Scripts can immediately begin filling prescriptions at any Kroger Family of Pharmacies location. Express Scripts also became the PBM for Centene Corp. in 2024; CVS previously held that contract.