Cigna Stock Tumbles on Margin Warning for Pharmacy Benefit Services

Cigna shares are up more than 30% since the start of 2022, in stark contrast to those of peers. (Joe Buglewicz/Bloomberg)

Key Points

• Cigna Group reports third-quarter earnings that beat analysts’ estimates.
• Revenue totals $69.7 billion, above Wall Street’s call for $69.6 billion.
• Cigna’s medical loss ratio rises to 84.8% from 82.8% a year earlier.

Cigna Group shares were in freefall on Thursday, after the company said that profit margins for its pharmacy-benefit-services division would slide over the next two years.

The company said it still expected profit growth in 2026. But the warning appeared to muddy the picture for the stock as the earnings worries that have swept the managed-care industry in recent years finally reached Cigna.

Cigna shares were down 17% on Thursday after climbing in the premarket hours because the company’s third-quarter earnings were modestly higher than expected.

Health-services companies with their own large pharmacy- benefit-manager segments were also falling . CVS Health shares were down 3.8% and UnitedHealth Group stock lost 1.8%.

The company issued its warning on an investor call early Thursday. CEO David Cordani said that “given the significant financial and affordability pressures for partners operating heavily in government programs,” the company had “improved the economic terms” of the deals its PBM strikes.

“As a result of these factors, we expect margin pressure within our pharmacy benefit service segment over the next two years,” Cordani said.

PBMs, which negotiate between health plans and drugmakers, have been the target of criticism from policymakers and the drug industry. In their comments on Thursday, Cigna executives linked the PBM margin pressures to trouble in the government-funded insurance sector. Medicaid enrollment is set to contract following passage of the One Big Beautiful Bill Act this year.

The company said that this year, its pharmacy-benefit-services business had negotiated renewals and extensions with its largest clients, the Medicaid-focused insurer Centene and Prime Therapeutics, another PBM. Those renewals appear to have been made on terms that are less-than-favorable for Cigna.

“We have proactively improved the economic terms of the contracts for the benefit of these long-term strategic cleints,” Cordani said.

Cigna also said that the cost of a previously announced shift away from a rebate-centered model for its PBM would also weigh on near-term margins.

“While these are 2026 headwinds, both of them serve to extend the long-term value and durability of our pharmacy benefit services platform for the future,” COO Brian Evanko said on the investor call.

Pharmacy benefit services account for roughly 40% of the company’s earnings, executives said. The company still expects growth in overall earnings per share next year. But Cigna COO Brian Evanko said that Evernorth Health Services, the division that includes Cigna’s PBM, will see its operating income drop in 2026.

The consensus call among analysts was that Cigna’s earnings per share would grow 11.4% in 2026 to $32.98. The company did not offer full financial guidance for 2026 on Thursday.

Prior to the call, Cigna had posted operating earnings of $7.83 a share for the quarter, surpassing analysts’ consensus estimate of $7.64. Revenue was $69.7 billion, slightly ahead of the $69.6 billion consensus estimate.

Cigna’s medical loss ratio, which tracks the proportion of premiums paid out to cover medical costs, rose to 84.8%, worse than the 82.8% ratio the company reported the year prior. Analysts expected a medical loss ratio of 84.3%.

The company maintained its prior 2025 guidance of adjusted income from operations of at least $29.60 per share for the full year.

Cigna has outperformed its peers in recent years, largely avoiding disastrous selloffs like those that have hit UnitedHealth Group, CVS Health, and Humana . Cigna shares were up more than 30% since the start of 2022 as of the end of the day on Wednesday, while UnitedHealth was down almost 30%, Humana was down more than 35%, and CVS slid around 20%.

The report comes amid enormous political uncertainties for the managed-care industry. Federal subsidies for plans sold on the Affordable Care Act marketplaces remain in political limbo, even as open enrollment is set to kick off.

The subsidies that have lowered prices for plans offered on the ACA exchanges are set to expire at the end of the year, and premiums for next year are up 26%, according to the healthcare policy group KFF. Democrats have made their demand to extend those subsidies a key point in the negotiations over the government shutdown.

On Cigna’s second-quarter call, executives said that the company had pulled back sharply on its ACA business, noting that the number of customers it served in plans offered on ACA exchanges was down to fewer than 400,000 from nearly a million as of 2023.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com