David Cordani
President and Chief Executive Officer at The Cigna Group
Thanks, Ralph. Good morning, everyone, and thanks for joining today's call. We began 2023 with momentum. And in the first quarter, we again delivered strong performance and continued our long track record of innovating for customers, clients and partners. Today, I'll discuss some of the key drivers fueling our growth during the quarter and I'll also talk about how we're leading the way to address evolving stakeholder needs with a flexible and agile model, providing multiple avenues to deliver and capture value. Specifically, I'll describe how the durable and flexible pharmacy benefit services we offer continue to drive in the marketplace. Brian will provide additional detail about our financial results and discuss our outlook for 2023, and then we'll take your questions.
With that, let's get started. In the first quarter, we delivered $46.5 billion in total revenues, $5.41 in adjusted earnings per share, and we are raising our full year 2023 guidance for adjusted EPS, revenue and customer growth. We are pleased with the strong start across Evernorth Health Services and Cigna Healthcare. And we look forward -- as we look forward, we expect another very good year for the Cigna Group. Evernorth comprising pharmacy benefit services, Specialty Pharmacy and Evernorth Care, again contributed strong growth while retaining, expanding and winning new relationships for the employers, health plans and governmental organizations we serve.
Our foundational Pharmacy Benefit Service business continued its strong performance, demonstrating the value we provide to our clients and patients. Specialty Pharmacy, which accounts for approximately 40% of Evernorth's total revenue drove outsized growth with a continued rise in new-to-market specialty drugs and increasing demand. Evernorth Care represents one of our most significant long-term growth opportunities given the growing needs in virtual care as well as, for example, behavioral health services.
In Cigna Healthcare, our health benefits platform, we achieved another quarter of revenue and customer growth with strong performance across our U.S. commercial, U.S. government and international health businesses. With our focus on affordability and disciplined pricing, we are pleased with our medical cost performance and our medical care ratio, which was 81.3%. Our U.S. commercial business is on pace for another good year. Our affordability initiatives continue to strengthen our overall competitive position, and this has helped fuel our strong customer growth. Our momentum also is a reflection of how employers of all sizes rely upon our consultative approach and the breadth of our solutions to support the health, engagement and productivity of their workforces.
In U.S. Government, our Medicare Advantage business is achieving above-market growth in 2023 and from our high-quality and affordable plans, our geographic expansion and the maturation of markets we previously expanded into. In the dynamic individual exchange market, we also have substantial growth in our individual and family plan business, allowing us to bring Cigna Healthcare capabilities to a larger customer base. And in International Health, our earnings growth has been strong for the past few years, and we expect positive top-line and bottom-line contributions again in 2023 and given our high-quality and localized health insurance solutions supported by our global provider network. Overall, we're pleased with the quality, strength and resilience demonstrated in our results. And importantly, how they position us for another year of sustained growth and attractive value creation.
Looking ahead, we are confident in our increased outlook for the year as well as our ability to sustainably deliver 10% to 13% compounded EPS growth over our strategic horizon, along with providing an attractive dividend. Today, I want to spend a few minutes on Express Scripts, our pharmacy benefits business within Evernorth, including our recent announcements about how we are continuing to provide greater affordability, choice and transparency for our clients and customers. Pharmacy services have an essential and impactful role in a time when in medical care, physical or behavioral are increasingly relying upon the use of pharmaceutical interventions. It's also important to recognize that successful care coordination programs for pharmacy services often create significant benefit and value for the medical services.
We recognize the ongoing attention and legislative debate regarding the rising cost of prescription drugs. We are taking an active leadership role, and I want to be clear about how we are using our differentiated capabilities to create and capture value out of the drug supply chain on behalf of our clients and customers. First is the strength of our model. which is to deliver solutions and care coordination that address specific client needs and expand relationships with our full suite of services and capabilities, fueling our sustained attractive growth over time. Second, we are committed to enabling and prioritizing choice for our clients as we drive down costs. And third, we continue to build on our long track record of innovation to drive greater affordability, access, transparency and improved clinical outcomes.
Stepping back, our pharmacy benefit service business is achieving attractive growth because we're able to secure a diverse group of any growing client base, leading with the strength of our supply chain, clinical and care management programs. With our proven model, Express Scripts' client retention rates are consistently in the mid-90s or higher, and we've been able to continuously grow our pipeline and win new business from medium-sized to the largest employers, from local health plans to national players and even the largest government-sponsored programs.
We've expanded our efforts to advocate on behalf of our clients and customers, particularly as it relates to financing models, which are key areas of focus for some of the current legislative proposals. Express Scripts' business model starts with the commitment to enabling and prioritizing choice in benefit design and financing options for clients who are the primary financers of their employee benefit programs. This includes providing them the option to finance the cost of their programs by allowing us to share in the discounts we secure on their behalf, be it rebates or spread pricing. Our clients choose amongst these models based upon their needs for managing risk and greater predictability for their pharmacy costs as well as their cash flow.
For context, across the breadth of our Express Scripts pharmacy benefit service portfolio today, over 95% of rebate dollars are passed through to clients. The key point is that each client chooses the financing mechanism that works best for them. They have choices in how they pay for the value we deliver and many find that using rebate sharing or spread pricing generate a stronger level of aligned incentives in addition to being able to plan for predictable cash flow that it generates. Proposes to limit the availability and scope of these options will result in less choice for thousands of employers, health plans and government the clients we serve and increase their costs over time.
As it relates to Express Scripts, we are confident in our ability to earn sustainable and attractive margins for our services under a variety of legislative scenarios. We are able to create value through the breadth of our capabilities from supply chain to benefit design, driving competition amongst drug manufacturers to bring cost down and deliver better health outcomes through our clinical programs.
One area of focus for multiple stakeholders has been the amount of income we earn for rebate retention and retail spread. To put this in context, we expect about 20% of Evernorth's 2023 pre-tax adjusted earnings to come from Express Scripts' retention of rebates and retail spread. This percentage has trended down over time, and we expect it to continue trending downwards. This is fueled by our ongoing innovation and greater diversification of our Evernorth businesses.
I would also remind you that these financing options that we provide to clients are developed in exchange for lower service fees. So said otherwise, if these programs decrease further over time, fee-based income would increase. Therefore, we are confident that some of these payment vehicles will reduce or remove our regulatory change or client preference. Express Scripts has a broad set of capabilities that create value and will continue to earn an attractive return.
Let me provide some specific examples that reinforce our flexibility in durable model and how we tap into our long track record of innovation for better outcomes on behalf of our customers and clients who are seeking greater affordability and transparency for prescription drugs. First, we are taking several steps to expand transparency. Express Scripts' new ClearCare Rx fully demonstrates the flexibility we have for prescription drug benefits, where clients pay exactly what Express Scripts pays pharmacies for prescriptions. They received 100% of drug rebates that Express Scripts obtained by negotiating with pharmaceutical companies.
They pay one service fee to cover the administration of pharmacy benefits, product services, reporting analytics, and the programs supported by a fully audible mechanism. In addition, clients also benefit from guarantees to keep Express Scripts accountable for clinical and financial performance measures, including improvements in overall [Technical Issues] rates and patient outcomes. Additional steps to drive even greater transparency include providing clients with enhanced financial and fee disclosures regarding their spread pricing programs when they exist.
Along with today's release about our first quarter financial results, you will also find additional disclosures we are providing about Express Scripts model in our quarterly regulatory filings and on our new microsite. We will also offer a new digital pharmacy benefit statement for customers, starting in 2024. The statement will share drug pricing information, out-of-pocket costs and the net value delivered by Express Scripts on behalf of customers.
With respect to the broader issue of drug pricing, to be clear, we are fully aligned with lowering cost of prescription drugs for customers. For example, Express Scripts patient assurance program launched in 2019, capped out-of-pocket costs for eligible members of select diabetes and cardiovascular medications. In 2022 alone, customers taking insulin saved more than $18 million because of this program. Now with the introduction of our new co-pay insurance plan, we are taking further action to cap out-of-pocket costs for customers in client prescription drug benefits. At $5 for generic drugs, $25 for preferred brand medications and $45 for preferred specialty medications.
Finally, we also have a series of groundbreaking initiatives to further support pharmacists in the rural communities across the United States. We are offering increased reimbursement to true independent pharmacies and partnering opportunities to expand their clinical practices to further support care needs of the local communities. We are also convening an advisory committee of community pharmacies. These initiatives will encourage better care, expanded access to lower prices for rural Americans as well as increasingly more sustainable revenue stream for independent pharmacists. We are encouraged by how our recent actions have been received by a wide range of stakeholders, including clients, our pharmacy network partners and policymakers. They recognize our commitment as the leader and trusted partner that continues to create value through our deep expertise in designing programs for specific client needs, driving innovation and broadening our reach.
In summary, we are demonstrating our leadership in the competitive pharmacy benefits market that is such a critical building block for the American healthcare system. We are serving specific client needs through the strength of our model and the effectiveness of our care coordination programs, allowing us to drive sustained attractive growth. We are continuing to advocate for clients and their ability to choose the appropriate of programs that work best for the business as we help lower costs. And we are continuing to innovate in driving greater affordability, transparency and improved outcomes for those we serve.
Now let me briefly recap our performance for the quarter and our outlook. In the first quarter, we continued to execute and perform well. We deliver for our customer clients and partners and our business kept our commitment to our shareholders. We delivered adjusted EPS of $5.41 per share, and we're pleased to have increased our full year outlook for adjusted EPS, revenue and customer growth as well as an improved medical care ratio. We are confident in our ability to continue to deliver and capture value into the dynamic and changing environment. We have shaped our business model to navigate varying economic conditions and our differentiated capabilities within Evernorth to provide us with the flexibility to meet unique client needs and potential changes caused by regulatory requirements. Additionally, our business is driving growth that is generating strong cash flows and we are confident that we will further create value through successful and effective capital deployment.
With that, I'll turn the call over to Brian.
