Andrew Witty: Right. Thanks, John. Next question?
Operator: We’ll go next to Erin Wright with Morgan Stanley.
Erin Wright: Great. Thanks so much for taking my question. So a question on Optum Rx. Over the past year, there’s been some evolving dynamics around — news flow around the regulatory changes for PBMs unbundling. There were some news flow there as well as pharmacy reimbursement model changes, such as cost plus type of approach? I guess how are you thinking about potential implications of some of these dynamics, if any at all? And do these dynamics have a material impact on Optum Rx? Or how are you thinking about those profit drivers remaining intact kind of going forward for the PBM? Thanks.
Andrew Witty: Erin, thanks so much for the question. Let me ask Heather to give you some comments there. As you know, Heather’s been very, very involved with the various legislative processes, and it’d good to get her perspective on that.
Heather Cianfrocco: Sure. Thanks. So maybe just quickly, I’ll say, completely respectful of the evolving dynamic and just make the headline that our business is incredibly dynamic. I’d be remiss if I don’t say, again, at this juncture, that we continue to engage because it’s incredibly important to note that in a space where affordable drugs — affordable prescription drugs to consumers is on everybody’s mind, including ours, and that’s what the PBM is built to do. We are really pressing to make sure that policymakers understand that it’s important to preserve choice for clients. It’s important to make sure that we preserve value-based structures, because we know that value base is the way to ensure that we deliver lower price — lower-cost drugs.
And we can’t break that alignment of incentives where PBMs work with payers to reduce costs. And that it is incredibly important that discounts remain, because there’s no indication that rebates drive list prices up. The PBMs work as a counterweight against high drug cost. That being said, you’ve seen in our model held diverse the business is. And across Optum Rx, across the PBM, across the pharmacy services, it’s a multitude of businesses. And we really listen to our clients. We exist on behalf of our clients, and we compete in a highly competitive market. And we win because our model translates. It translates in transparency, it translates in innovation and it translates in partnership to our clients. So we’ll follow the client will be incredibly respectful of the legislation, but I feel really good that we act quickly, we act responsibly, and we work towards value.
And you see that in the results. You see that in the growth. But most importantly, you see that in the client validation of the model. So I feel good about where we’re positioned. I feel good about the experience in 2023 as a guide to that, but really confident in the growth in ‘24.
Andrew Witty: Heather, thanks so much. And Erin, thanks very much for the question. I’m sure there’ll continue to be debate around this area. High drug cost, of course, is a big issue for everybody. First and foremost, we need to see list prices come down. That’s the most important thing that can make a big difference here. I would say that as you look at all the different ideas, which float up from time-to-time around reform in this area, there really isn’t anything that we don’t offer in some form or fashion to our clients and our customers. And the reality is we think that’s the right position. We think we should be offering a portfolio of different tools, different product designs, which allows people to choose what’s right for them.
Because what a state wants, what a union wants, what a corporation wants differs. And it’s super important that their views are taken into account here. We believe we do that well in the diversity of our product offering, and that’s what’s underpinning our record growth and it underpins our confidence for ‘24. Appreciate that, Erin. Next question?
Operator: We’ll go next to Nathan Rich with Goldman Sachs.
Nathan Rich: Great. Good morning. Thanks for the question. I wanted to ask on the Medicare AEP enrollment that you talked about, the 100,000 lives that you added. I guess were there any differences in terms of what consumers responded to this year or differences in the retention rate relative to what you’re expecting? And just can you help us think about the drivers of membership growth over the year as you needed to get to the guidance that you gave for the full-year?
Andrew Witty: Yes, Nathan, thanks so much for the question. Let me ask Tim Noel to give you that.
Tim Noel: Yes. Thanks for the question, Nathan. So once again, the Medicare environment, selling environment is highly competitive. And we probably saw one of the more aggressive years of pricing that we’ve ever seen in the 2024 session. We guided at investor conference to growth of 450,000 to 550,000 lives, which is a little bit more modest than we have grown in past years, but it’s reflective of our response to the new risk model changes, what we saw in outpatient utilization patterns early in ’23 and reflecting that into 2024 pricing. And as we close out AEP, I would say that we were a little bit light against what we were thinking, kind of, end of November. Most of that actually is in the group business, some of the very aggressive benefits, a little bit more switching, drove some of our term rates a bit higher in AEP than we were initially thinking.
