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The shares of CVS Well being Company (NYSE:CVS) fell within the morning hours Tuesday after Centene (CNC) introduced that the Specific Scripts unit of Cigna (CI) secured its new pharmacy advantages administration (PBM) contract.
Different well being insurers with PBM models, Elevance Well being (ELV) and UnitedHealth Group (UNH), additionally trended decrease after the information.
Per the phrases of the deal, ranging from January 2024, Specific Scripts of Cigna’s (CI) Evernorth unit will handle pharmacy advantages for practically 20M Centene (CNC) members.
Nevertheless, Wall Avenue analysts mentioned the setback is unlikely to trigger a big loss to CVS. In accordance with JPMorgan’s Lisa Gill, the contract would have added solely a minor contribution to CVS in 2024.
“Whereas this information is disappointing for CVS, we consider that the corporate had anticipated that, even with retention of the contract, it might have had a decreased contribution in 2024 and included that expectation within the steerage ultimately yr’s analyst day,” Gill argued.
Nevertheless, Cowen analyst Charles Rhyee with an Outperform ranking on CVS, argued that the contract loss represents “one other headwind to 2024.”
“We acknowledge the lack of CNC presents one other problem to CVS, nevertheless consider the affect is less complicated to offset, given the character of how this contract was managed (i.e., a whole lot of variable prices might be remedied),” Rhyee wrote.
CVS shares dropped in early October after Medicare the Facilities for Medicare & Medicaid Companies (CMS) downgraded the Star ranking of its Aetna nationwide most popular supplier group (PPO) plan.
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