Core Viewpoint - Cigna Group plans to eliminate prescription drug rebates in many of its commercial health plans by 2027, transitioning to a rebate-free model to lower patient costs at the pharmacy counter through up-front discounts instead of delayed rebates [1][2][3] Group 1: Changes in Cigna's Business Model - The elimination of rebates is expected to create a significant shift in the financial dynamics among drugmakers, insurers, and employers, with the value of drug rebates and discounts reaching $356 billion last year [3][4] - Cigna aims to provide an average 30% discount on brand medications for patients with high-deductible plans, enhancing affordability [6] - The initial rollout will affect approximately 2 million fully insured health plan members, with a broader implementation for Express Scripts clients starting in 2028 [7] Group 2: Market Context and Reactions - The decision aligns with the Trump administration's efforts to reduce drug prices, as Cigna's CEO praised Trump's actions to lower costs for brand-name medicines [8][9] - Cigna's Express Scripts is the largest pharmacy benefit manager (PBM), facing scrutiny from lawmakers and the Federal Trade Commission regarding the rebate system's impact on drug prices [8][10] Group 3: Industry Implications - Other PBMs, such as Optum Rx and CVS Caremark, are also adapting their models in response to regulatory pressures, with some moving towards passing rebates directly to clients [11] - Cigna will need to renegotiate contracts with drugmakers and health plans to implement the new model, which is expected to be welcomed by drugmakers as it may encourage patients to fill prescriptions [12][13] - The goal is to have half of employer and health plan clients adopt the new model within three years, with Express Scripts serving around 100 million members [13] Group 4: Future Considerations - While eliminating rebates could potentially raise premiums for some clients, Cigna's leadership does not anticipate an increase in costs [14] - The company acknowledges that rebates will still exist for the foreseeable future, but aims to transition to a more transparent pricing approach [15] - Cigna has also opened new revenue streams from drugmakers through fees that resemble rebates but are structured differently, indicating a shift in compensation models [16][17]