Washington, D.C. — Following news that insurance conglomerate Cigna Group, which owns the second-largest pharmacy benefit manager (PBM) Express Scripts, will transition to a rebate-free business model, the American Economic Liberties Project released the following statement.

“Cigna’s promise to abandon manufacturer rebates is a red herring. Instead of lowering prices for patients and health plan sponsors, the policy change will help Cigna sidestep regulatory scrutiny of rebates while maintaining its major profit drivers: administrative fees, including those related to its Swiss subsidiary Ascent Health Services, and mail-order and specialty pharmacy services,” said Emma Freer, Senior Policy Analyst for Healthcare at the American Economic Liberties Project. “Indeed, a Cigna executive recently told shareholders that he expects the new policy will generate ‘comparable’ profits as the rebate model it will replace. That means the high drug prices Americans face won’t be going anywhere.”

PBMs are middlemen who negotiate prescription drug benefits on behalf of health plans with drug manufacturers and pharmacies. The “Big Three” PBMs – CVS Caremark, Cigna Group’s Express Scripts, and UnitedHealth Group’s OptumRx – control nearly 80% of U.S. prescription drug claims. They leverage their market power to demand rebates from manufacturers, which result in higher list prices and thus higher costs for patients and health plan sponsors.

As regulatory scrutiny of rebates has increased in recent years, the Big Three PBMs have invested in alternative revenue streams, including so-called PBM group purchasing organizations (GPOs), like Cigna’s Ascent. These offshore PBM GPOs negotiate rebates with manufacturers on behalf of their affiliated PBM, charging the manufacturers administrative fees that are insulated from rebate reform legislation, contractual pass-through requirements, and domestic taxes.

PBMs’ evolving business model underscores the need for more structural solutions in addition to banning rebates. Such solutions include the bipartisan, bicameral Patients Before Monopolies Act. Introduced in December 2024, the groundbreaking bill would force insurers and PBMs to divest their pharmacy businesses within three years, eliminating the conflicts of interest that have inflated drug prices and driven independent pharmacies out of business.

Learn more about the Break Up Big Medicine initiative to address healthcare consolidation here.

Learn more about Economic Liberties here. 

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.