That pushes us to the high end of the range from an EPS growth standpoint versus the low end of the range. The other items that we’ve talked about are largely contemplated in the core parts of our business and the core parts of our operations on a go-forward basis. And as Brian and I both noted, we’ll give you more detailed guidance on our fourth quarter call, as we typically do.
Operator: Our next question comes from AJ Rice with UBS.
A.J. Rice: Just to maybe continue to focus on some of those potential tailwinds for next year. I think the investment to get that large Centene contract up and running for this year was about $0.50 drag roughly $200 million pretax. When you think about that for next year, should we just assume that, that drag goes away? I know PBM contracts typically ramp up over time. Or is there some potential level of profit contribution, so the swing is greater than $0.50? And then on the biosimilar comment. I know this year, in the second half, you’d included some benefit from the HUMIRA conversion or having some biosimilar competition. Should we think of — what you’re thinking about as a tailwind of just annualizing that? Or are there other opportunities that go beyond just annualizing the second half benefit from that HUMIRA conversion?
David Cordani: AJ, it’s David. You’ve packed a lot in there. I’m going to ask Brian to start by framing the economics year-over-year on the Centene relationship, our investment, the year-over-year performance, et cetera. Asking to transition that over to Eric, he could talk about how the relationship is going importantly. And I’ll ask Eric to amplify a little bit relative to the biosimilar impact we’re seeing in the latter part of this year and into next year. Brian?
Brian Evanko: As it relates to the Centene economics, your math is broadly right. We continue to expect to spend about $200 million this year in the process of preparing for the onboarding. We expect next year to be approximately breakeven or slightly positive. So that’s the way to think about the modeling of that, ’25, we continue to expect, it will be at run rate profitability. As it relates to the biosimilars component, for ’24, we expect it to largely be a HUMIRA driven biosimilar story. So that the ’25, and thereafter biosimilars will be further accretive to Evernorth in time, but ’24 is really going to be primarily driven by the annualization of the HUMIRA related biosimilar benefit. Eric, do you want to pick up?
Eric Palmer: Sure. we’ve said from the beginning that the adoption of biosimilars is going to be more extended and slower process. And the experience to date has been consistent with our expectations. We’ve driven meaningful savings for the benefit of our customers and clients so far this year, and we continue to see this opportunity ramp throughout the course of next year, and as part of the market ongoing. We’ve talked in other settings about the meaningful opportunity for biosimilars, not only for [indiscernible] but for other conditions, and expect there to be more competition over time where up to 25% or 30% of the spend in the specialty market, we’ll have competition, compared to something like less than 10% today. So in short, this is an area that we’re well positioned to drive meaningful value for the benefit of our customers and clients that we have seen unfolding consistent with our expectations.
And we’re positioned to lead through over the course of the coming years.
Operator: Our next question comes from Stephen Baxter with Wells Fargo.
Stephen Baxter: I was hoping you could expand a little bit on the MLR outperformance in the quarter. I guess, could you talk a bit more about what you saw on utilization? I guess, how did the seasonal patterns and the third quarter compared to a more normal pre-COVID environment? And then, it looks like you assumed a decent step-up in Q4, pretty consistent with what you’ve seen in the past couple of years. Can you talk a little bit about the assumptions there on utilization?
Brian Evanko: It’s Brian. So I’ll start again, just reiterating how pleased we are to have delivered another strong quarter of MCR performance in Cigna Healthcare, which was favorable to expectations and drove really the income outperformance that we saw in the Cigna Healthcare segment. Just as a reminder, if you rewind the clock a bit here, we planned in price for more normalized utilization levels coming into 2023. And our claims experience is largely consistent with that expectation. Now within the quarter specifically, our government product lines, you can think of the Medicare lines and individual exchange lines ran largely in line with expectations, while our U.S. commercial business drove the favorability in the medical care ratio.
As it relates to the full year MCR outlook, we have improved the expectation by 15 basis points at the midpoint, reflecting the favorable third quarter experience, but no significant change in our fourth quarter MCR outlook compared to our prior expectations. So that’s the way I’d encourage you to think about the 3Q versus 4Q dynamics. As it relates to specific utilization patterns and categories and such, I actually wouldn’t call out any specific categories in terms of driving outsized favorability. We did see some modest amount of inpatient favorability in the third quarter, particularly on higher unit cost procedures, which did contribute to that MCR outperformance. But I’d also note that our site of care strategies continue to produce really strong results.
A tangible example we often talk about is shifting inpatient procedures to outpatient, for example, on orthopedics. But the site of care strategies have advanced in many other areas as well. For example, Pathwell Specialty, which I talked about earlier, program we introduced that optimizes CytoCare for high-cost infusions of specialty drugs. Historically, these have been administered in the hospital outpatient setting. However, certain patients can experience equal or better clinical quality at a lower cost by having the infusion in their home. So that’s just an example of something that has continued to build over time and contributed to the favorable MCR performance we saw in the quarter. So just to summarize, we’re pleased with the performance, U.S. commercial drove the majority of the favorability in the third quarter.
And as noted, the fourth quarter MCL is very consistent with our prior expectations.
Operator: Our next question comes from Josh Raskin with Nephron Research.
Joshua Raskin: I didn’t hear in the prepared remarks anything about commercial, large group membership to start the year. So I’m curious on that. But my real question is, if you could compare and contrast the traction you’re getting around VillageMD in the commercial markets versus the Medicare markets, I’d be specifically interested in the appetite from large employers. And if there’s any sort of pull for demand? Or are you getting more traction when you’re presenting what those arrangements can look like?
David Cordani: Josh, it’s David. Let me speak to the commercial large market, and then frame your specific question relative to early traction with Village. And then I’m going to ask Eric to just describe a little bit more broadly the evolving relationship and the strategic work we continue to advance with Village. First, specific to the commercial marketplace and the selling season. You did miss it, we didn’t profile the 2024 outlook in any level of detail. Stepping back, as Brian noted in his prior comment, we’re really pleased with the 2023 results, now increasing the outlook for our overall lives for our Cigna Healthcare care portfolio, yet again, in excess of 1 million half lives, and coming off of a 2022 number, approaching 1 million lives.
