Cigna’s Rebate-Free Pharmacy Model: What It Really Means for Employers

Last week on October 27, 2025, Cigna announced plans to phase out traditional drug rebates across its commercial health plans by 2027 and expand this “rebate-free” model to Express Scripts clients by 2028. The announcement sparked widespread discussion across the benefits and healthcare community, promising greater transparency, lower out-of-pocket costs for members, and a potential step toward addressing the “gross-to-net bubble” that has long distorted drug pricing.

But is this truly a transformative shift, or a repackaging of existing programs under a new name? Understanding what’s behind the headline is critical for employers and plan sponsors preparing for the next evolution of pharmacy benefit design.

What Cigna’s Rebate-Free Model Actually Means

Cigna’s Express Scripts division will integrate manufacturer discounts directly into the prices patients pay at the pharmacy counter. This structure, known as a point-of-sale rebate model, allows members to see the value of rebates reflected immediately in their prescription costs, rather than having those dollars flow back to plan sponsors behind the scenes.

The new approach also introduces a “cost-plus” reimbursement model for pharmacies and a “lowest-of” pricing rule, which would ensure members pay the lowest available amount, whether that’s the pharmacy’s cash price, a direct-to-consumer price, or their plan’s copay or coinsurance.

The rollout will begin with Cigna’s fully insured population in 2027 and extend to self-funded employer clients in 2028.

Three Realities Behind the Headlines

While the concept of rebate-free pharmacy pricing sounds like a major step forward, several market realities reveal why its impact may be more modest than the headlines suggest.

1. Point-of-sale rebates are not new, and adoption has been limited.

   Similar programs have existed for years across other insurers and PBMs, yet only a small fraction of employers have chosen to implement them. Many plan sponsors rely on rebate dollars to offset overall healthcare costs or reduce premiums, rather than passing those savings directly to the members whose prescriptions generated them. As a result, the transition to rebate-free pricing could have ripple effects on budget forecasting and overall plan financing.

2. Transitioning to the new model will be optional, not automatic.

   Although Cigna has described the rebate-free approach as its “standard” model, employers will have to actively choose to participate. Cigna itself anticipates that only about half of its commercial business may adopt this model by the end of 2028. This phased and voluntary approach suggests that employers may remain cautious, particularly if they depend on rebate revenue to stabilize costs elsewhere in their benefit programs.

3. Transparency challenges persist beyond rebates.

   While shifting rebates to the point of sale provides greater clarity for members, it does not fully address how PBMs earn money today. A growing portion of PBM revenue now comes from specialty pharmacy dispensing, manufacturer fees, and other opaque arrangements through affiliated group purchasing organizations. Without visibility into these revenue sources, plan sponsors still lack the full transparency needed to evaluate whether their PBM is acting in their best interest.

What Employers Should Be Thinking About

For HR and Finance leaders, this development raises important strategic and operational questions.

• How might this model affect your total rewards strategy and employee experience?

• Could it alter premium costs, plan design, or your long-term budgeting approach?

• Are your contracts flexible enough to adapt to changes in rebate and pricing structures?

Even with the promise of lower out-of-pocket costs for members, rebate-free pricing could shift costs in unexpected ways. Employers will need to analyze how this change interacts with their population’s drug utilization patterns, formulary design, and rebate assumptions before making any decisions.

Preparing for What Comes Next

Organizations that stay ahead of these market shifts will be best positioned to manage cost and ensure sustainability. Employers should begin evaluating how their PBM contracts are structured, model potential financial impacts under rebate-free and rebate-based scenarios, and explore more transparent or pass-through models that better align incentives.

It is also worth reviewing how existing plan designs could adapt to this new structure, particularly for specialty drugs, where rebate values are often highest and cost-sharing complexities are most pronounced.

Final Perspective

The traditional rebate system has long faced criticism for its lack of transparency and its tendency to create misaligned incentives between PBMs, plan sponsors, and patients. Cigna’s announcement signals that the market is beginning to shift toward greater clarity and alignment, but meaningful change will depend on how employers respond.

Rebate-free models could represent a step forward in restoring trust and transparency to the pharmacy benefit system, yet they also highlight how complex and interconnected PBM economics have become. As this model evolves over the next several years, employers that proactively evaluate their pharmacy strategy and contract structures will be better equipped to protect both their organization and their members.

The time to start that evaluation is now!