What Express Scripts’s move to eliminate rebates means for the industry

In an unparalleled move, Express Scripts announced plans to get rid of a key part of US drug pricing: rebates.

The pharmacy benefit manager (PBM), which is owned by health insurance giant Cigna, announced in late October that its Cigna Healthcare plans will adopt a “rebate-free” model for fully insured members beginning in 2027, and the model will become the standard for all its Evernorth pharmacy benefit clients in 2028.

In an Oct. 27 press release, Cigna Group Chairman and CEO David Cordani credited President Trump for “taking decisive action” to lower costs, though he did not name a specific move that prompted the company to eliminate rebates. The Trump administration has announced a number of steps in recent months geared toward lowering drug prices.

“This new approach will cut out the complex postpurchase rebate process by making the discounted price of the drug readily available and transparent from the start,” the press release stated.

How rebates work. Typically, drug manufacturers pay PBMs a rebate in exchange for placement on formularies, or lists of drugs that insurers agree to cover. The rebate amount is calculated as a percentage of the drug’s list price, but it’s not known how much drugmakers usually pay in rebates, as that’s considered a trade secret.

In theory, part of those rebates are passed on to insurers to help keep drug costs down, but PBMs have faced criticism for allegedly keeping rebates high to boost their own profits.

Industry responses. Eric Levin, CEO of Scripta Insights, an employer benefit company that helps employees navigate prescription savings, told Healthcare Brew the move is unlikely to have much impact on Cigna’s earnings until 2028.

In the company’s Q3 earnings call on Oct. 30, President and COO Brian Evanko said Cigna will “incur short-term investment and transition costs” and that the Evernorth division expects operating income to be “slightly down” next year. But overall, the company anticipates earnings growth in 2026.

How pharma manufacturers will be impacted by the lack of rebates remains uncertain, Levin said, because Cigna could still charge a rebate at the time a medication is dispensed, something known as a point-of-sale rebate. Though it’s not clear if it would take that approach, as it’s not a widely adopted practice among PBMs, he said.

Cigna could also charge employers higher administrative fees, Levin added. However, the move will likely result in greater cost transparency for drugmakers, he said.

Express Scripts said in its release that the lack of rebates would support local pharmacies. And while the National Community Pharmacists Association, a trade group representing independent pharmacies, expressed cautious optimism, the group said in a statement on X it’s still unclear “whether this is a genuine transformation” or whether it’s simply a move to relieve pressure PBMs have been facing from state and federal governments.

The pharma industry, on the other hand, lauded the move, with Alex Schriver, SVP of public affairs at PhRMA, the industry’s largest trade group, saying in a statement shared with Healthcare Brew that “sharing savings with patients is a step in the right direction that will lower the out-of-pocket costs for patients at the pharmacy.”

Express Scripts claimed in its release that the move will reduce monthly drug costs for brand-name prescriptions by an average of 30% for people with high-deductible health plans.

As for insurers, Chris Bond, spokesperson for industry trade group America’s Health Insurance Plans, told Healthcare Brew it can’t comment on the business moves of specific health plans, but added payers are “working with policymakers to promote the commonsense bipartisan reforms needed to restore competition and move toward drug prices that are based on clinical value rather than drugmakers’ lobbying and marketing campaigns.” 

Zooming out. Cigna isn’t the only PBM to announce a big policy change recently.

In March, Optum Rx announced it was moving to a cost-based reimbursement model, which the company claimed would boost pharmacy finances and alleviate drug shortages, and before that, CVS moved to a cost-based model called CostVantage in December 2023.

Some states are also shifting to a single PBM system in an effort to reduce their Medicaid drug costs, putting pressure on PBMs to update their business models, Modern Healthcare reported last month.