Okay, good morning. Welcome to day two of the Barclays Global Healthcare conference. I'm Steven Valichette, the Healthcare Services Analyst here at Barclays. In our first session this morning, we'll feature Cigna . With us from the company are Matt Manders, the President of Strategy and Solutions, and we also have Will McDonald and Alexis Jones from Investor Relations on the line as well. Thank you for your flexibility around the change in our conference venue this year. Let me turn it over to Matt for a few opening comments.
Thank you, Steve. Good morning. First of all, I appreciate the opportunity to be with you today and everyone else, and very much appreciate the flexibility recognizing the virtual nature of this fireside chat. I think it's a new approach for all of us, but one that I think will be very effective. I just want to make a few brief comments as it relates to The Cigna and really touch upon three headlines as we kick off the morning. First of all, we're carrying very strong momentum from 2019 into 2020. Some of the highlights of our expectations for 2020 include the following, which is we're going to have enterprise revenue growth of 10% to 11%, strong earnings growth for the enterprise of 9% to 13% from our adjusted base, primarily driven by expectations of strong performance in both our health services and our integrated medical businesses.
We also have another year of attractive organic medical customer growth highlighted by 13% to 16% customer growth in our Medicare Advantage business. Adjusted pharmacy scripts of 1.47 billion to 1.5 billion will be driven by organic growth, the completion of The Cigna insourcing, and our recent partnership with Prime Therapeutics. This represents significant growth for us of 20% to 23% in script growth over 2019. Our second headline is that the integration of The Cigna and Express Scripts continues to be a priority for us, and we've had really strong execution on each of our top five integration priorities, and we're really proud of the progress we've made on each. We've delivered outstanding customer service and clinical support, including very strong one-to-one implementations for both 2019 and 2020.
Our medical and pharmacy trends continue to be industry-leading, with a medical cost trend of 4% and a pharmacy commercial cost trend of 2.3% in 2019. Talent is critical to us, and we have very strong employee retention and engagement levels. In fact, they're higher than the pre-combination rates, which were already viewed very strong on both a competitive and a market level. We're delivering on our shareholder synergies, and very importantly, we're keeping the vision top of mind, and we've demonstrated several innovations that we've delivered to the market just within 2019. Our Patient Assurance Program, which makes insulin affordable for our customers and diabetics, caps the out-of-pocket cost at $25 per month. We recently launched our Embark Benefit Protection Program, which will really put life-saving gene therapy in reach for millions in a simplistic, predictable, and affordable manner.
Our digital health formulary helps clients and customers make better decisions from the 300,000+ digital health tools that are out there. As we progress through 2020, Cigna is focused on delivering affordability, predictability, and simplicity. A key tenet and enabler of our strategy is to be the undisputed partner of choice in healthcare. We've broadened our approach to partnership recently, exemplified by our partnerships with Prime Therapeutics, Oscar, and others. We have several that we will discuss as we move into the future. The third headline is we're well positioned for attractive growth across all four of our growth platforms, and our growth is further fueled by our significant free cash flow generation. This year, we will delever to a debt-to-cap ratio in the upper 30s.
Coming out of this accelerated deleveraging, we expect to generate at least $8.5 billion in cash flow from operations in 2021, which will give us strategic and financial strength and flexibility as we deliver in this very dynamic environment. We remain confident in our ability to deliver the $20 to $21 of earnings per share in 2021. Very importantly, we continue our track record of delivering industry-leading cost trends, consistent growth, and effective capital stewardship. I look forward to discussing our strong performance, our recent announcements, and our strategic outlook with all of you today. Steve, back to you.
Okay, great. Thanks. That was an excellent overview of the strategy. Let's start with a few questions on coronavirus, since this seems to be obviously top of mind for investors. Conceptually, it was interesting that one or two other managed care companies at our conference yesterday suggested that for now investors could think of coronavirus as an extension of a flu season. If it proliferated into next year or next year's season, these other managed care companies suggested they could just reprice forward across summer most of their product lines to really offset any higher utilization. I guess I'm curious whether you would share this view conceptually, or would you characterize it differently in terms of how you're thinking about coronavirus right now?
Steve, regarding the coronavirus, as you can imagine, we're monitoring the situation, and we're focusing on supporting our customers, our clients, and our employees. It's moving minute by minute, day by day at this point in time. I first would want to highlight saying last week, last Thursday, we were the first organization to come out and declare that we were fully covering the testing and treating it as a preventive care benefit, waiving all copays and all cost shares. Second of all, the organization quickly positioned a 24/7 customer resource center so that people that had questions, comments, or concerns could immediately get advice and direction or be directed to the areas where they could get the information. From an employee perspective, our first focus was to remove concentration risk.
Very similar to what others have done, we've limited travel to business critical, and we've activated our business continuity plans. In terms of financial impact, which is where you went, at this point, we're not expecting a material financial impact to The Cigna overall. As you know, we recently reaffirmed our 2020 earnings guidance and continue to be very excited about our growth across all four of our growth platforms. In terms of your specific question, as you know, we have businesses both inside the U.S. and outside the U.S. With our international business, we have both a global health benefits business and a local supplemental benefits business. With the latter, we offer a wide range of supplemental individual products. As you know, we have quite material business operations in Asia, in China, and Korea specifically.
As it relates to China, what we've seen there is we've seen lower levels of elective discretionary utilization as people are really avoiding hospitals overall and healthcare facilities. We're also seeing some dampening on the revenue side from new sales. All in all, outside the U.S., we would not expect a material financial impact to the total enterprise based upon the dynamics. I think your question on where you referred to some of the other companies was more what was happening within the U.S. Within our integrated medical, very similarly to others, we would really expect to see the coronavirus to unfold much like the flu. As you know, over time, Cigna has never really pointed to the flu as a key driver to our earnings, even in years where they're more severe than other years.
As you size it and we think about it, we think about the full range impact in terms of our MCR, medical cost ratio, or medical trend. For us, it's usually relatively muted. It's usually in the single to low double-digit basis point range, so not a significant event. We continue to see the coronavirus in that context. Now, back to the second part of your question, which is obviously if this would persist over time, from our viewpoint, we could obviously adjust that in the commercial pricing more quickly and then certainly for our governmental business on the annual basis. I would highlight for Cigna , we've historically been less exposed to this based upon the mix of our business and the nature of how our book of business has been positioned.
Once again, we stressed the flu for us, high single digits, low double-digit basis points as it relates to our MCR and our medical cost trend.
Okay, great. All right, that's certainly some helpful comments around that. One other question around coronavirus is whether or not you can discuss whether you have any reinsurance arrangements that you would have in place today to protect against any sort of severe outbreak. Some companies have said yes, some have said no within the industry. Just curious to get your view around that.
Steve, our perspective on that is we don't use reinsurance. Our book is large enough to absorb risk of this nature. Very importantly, we have very strong capital levels. Cigna , as an organization, does not invoke or leverage reinsurance in this space.
Okay. One other question around coronavirus, this pertains more to the PBM side of your business. Anecdotally, we had heard some chatter and obviously some growing investor questions around the potential for drug shortages as a lot of API or bulk material, the manufactured drugs, is sourced from China and other parts of Asia. I guess I'm curious whether or not this could impact your PBM mail order business and what you might have to prepare for potential drug shortages, given some of the dynamics right now.
Yes, Steve, I think we're very well positioned in this place, and I think we have a competitive differentiation. Long ago, we established a risk monitoring tool that actually provides predictive analytics all the way back to where the raw materials for the drug originate. Very specifically, the point of origin, where do the raw materials come from? What are the implications of that if anything is happening across the globe? As a result of that, we have very early indications in terms of where that could potentially happen. You can imagine, we take the necessary actions to ensure that we are well positioned as it relates to our supply on hand for our mail orders so that we're not exposed. We've actually shared our approaches with the FDA, and they were very impressed with what we've done and the nature of the predictive analytics that we use here.
All right, great. Kind of bouncing around here a little bit. A lot of the managed care executives from the industry met with Vice President Mike Pence yesterday. To the extent that The Cigna was present there, which I believe you guys were, I'm curious whether the discussions were mainly around insurance coverage for coronavirus, or were there other factors as well? Just curious if there's any additional color around what came out of those meetings.
Yes, Steve. First of all, in terms of The Cigna 's representation, Tim Wentworth participated in a briefing with the White House with both President Trump and Vice President Pence, along with representatives from, as you know, many health service providers, AHIP, and the Blue Cross Blue Shield Association. The way I would characterize the discussion yesterday is, first of all, an appreciation of the public-private partnership that's in play here. As you can imagine, the focus was very much on the consumer and the patients that are being impacted by this condition. I would highlight and say the majority of the focus was on companies agreeing to covering the patient costs for testing so that the patients and the people inflicted with this were not experiencing any cost.
Second of all, there is a deep focus on elimination of surprise billings, once again through the lens of the consumer. There were also discussions in terms of pursuing and leveraging alternative forms of care delivery, specifically as it relates to telehealth. I would say the majority of the conversation was around the consumer itself, how the industry can partner in to make the experience and address the situation in the most effective manner from that context. The other item I would highlight would be working together collectively and sharing of information so that we can understand in terms of what's transpiring in the market as it relates to the populations and how they're being impacted from it. That would be what we've taken from the primary focus of the conversations.
Okay, great. As we shift gears and discuss the merger of The Cigna and Express Scripts, 2019 ended up being a pretty strong year with EPS growth of 20%. I feel like most of the questions around the ability for legacy Express Scripts to grow organically have been put behind us now, thank God, following a ton of questions around that in the first half of last year. As we now look into 2020, perhaps you can just give us a little more color on what will keep some of the momentum going for the organic growth outlook for the health services or mainly PBM segment this year.
Sure, Steve. First of all, thank you. We are really excited about the growth path in health services, and frankly, we're very excited that the questions have been answered also. As you know, when we did execute on the combination with Express Scripts, this was an asset that the market frankly really didn't believe could grow. I'm pleased to say, as you've highlighted, we have met our commitments in 2019. Very importantly, we've introduced attractive guidance for earnings and script growth in 2020. The growth in this business in 2020 will really be supported by the 20% to 23% script growth, which is really going to be the three dimensions that I touched upon earlier. Just to re-highlight, we will complete the insourcing of the Cigna scripts from Optum RX, which will have a significant impact. In addition to that, continuing with very attractive and strong organic growth.
Thirdly would be the Prime Therapeutics collaboration, which we expect will come online in the second quarter of this year. Also, the growth will be continued with strength from our industry-leading specialty pharmacy with Accredo. The way we think about it, we're very pleased with how we're executing on our core capabilities and very importantly, expanding our services platform. We're also continuing to innovate as the organizations have come together. Once again, I would highlight for you some of our innovations that transpired in 2019. Once again, the Patient Assurance Program, which we were a leader in this space in terms of capping the copays on the insulin. The Embark Benefit Protection Program, which is really about saving people's lives or significantly providing life-altering gene therapies, and very importantly in this case, at no cost to the customer and a very predictable fixed PMPM cost to our employer clients.
Most recently, in the latter part of 2019, we launched our digital health formulary, which is really about curating. As you know, a consumer out there is being bombarded by apps all over the place as it relates to health digital apps. We're working through them to help them navigate to make healthcare as affordable as possible while ensuring the clinical efficacy. The reason why we highlight these innovations is not necessarily that any single one of them is the triggering point of the growth, but it's really to show you that in addition to the core capabilities, the expansion of our services platform, we're innovating very heavily so that we can drive more affordability, predictability, and simplicity, and in turn giving us the right to continue to grow as we go into the future.
Okay, excellent. Sticking with health services, based on our inflow from investors, it seems like a lot of investors are still trying to better understand the collaboration with Prime Therapeutics, given that it is a PBM that competes with Express Scripts in the marketplace. I'm wondering if you can provide a little more color on the strategy and why there are not any conflicts of interest that could be viewed as challenging in this situation.
Yes, so once again, we are really excited about the collaboration with Prime. We view this as a significant strategic validation of really our focus, once again, of one of our key strategic enablers of being an undisputed partner of choice in healthcare. We see this slightly different than those that have questioned it, and that is we see this as an increased opportunity to serve Prime's 28 million customers. By doing so, we're increasing our scale so that we can leverage this for the use of all of our customers, including the new 28 million that we will have with Prime, and have the opportunity to expand our relationship with Prime over time as we demonstrate the ability to partner with them and to deliver the value.
What I would ask you to reflect as you think about this question is not just this collaboration, but some of our other collaborations, whether it's with Oscar inside the U.S., NIB outside the U.S., Uli Health, all of our collaborative cares, they're all about our demonstrations on how we're going to approach partnership differently and really seek opportunities to create new and unique differentiated values. It's our view that affordability is so critical that these unique partnerships give us the ability to create unique value and to deliver that to even a broader population of individuals. We expect that the marketplace has always been competitive, will continue to be competitive. We're not taking the orientation of looking at this as really a threat by our competitor.
We're viewing it as an opportunity to have mutual value creation, to enhance affordability for all of our customers as well as the Prime customers, and then very importantly, may have an opportunity to expand the relationship with them as we move into the future.
Okay, great. Final question on health services before we dive into the commercial health insurance segment. I'm just curious if you have any preliminary views on the 2021 PBM selling season.
Steve, specific to the 2021 PBM selling season, we kind of bifurcate this and we think about it in the channels. The first channel is really the health plan relationships, and then the second channel for us is the corporate relationships. As you can imagine, the health plan selling season takes place earlier because of the size, the scope, the shape, and the complexity of those relationships. Our health plan selling season is really substantially complete at this point through the renewal cycle. The message that I would give you at a macro level is we feel really great about the outcome, and we're seeing continued strength with our health plan clients. When you flip it over to the corporate selling season, as you can imagine, we're in full steam of that right now. At this point, we think we're on pace to have another very good year.
Our value proposition is resonating extremely well in the marketplace, and we're seeing a lot of excitement around the new innovations that we've put in the marketplace: Patient Assurance Program, Health Connect 360, Embark, Safeguard RX Bronze, and most recently our digital health formulary. Overall, I think the message is we're progressing really well through the selling season, and we're very excited about the path that we're going to have as we go forward.
Okay, great. For The Cigna core health insurance operations, there are some investors that every year still worry at least a little bit around the commercial pricing environment. I'm curious to get your latest views on this and perhaps break it down into large group versus small to mid-size employers.
Yeah, I think the short answer here for us is we really haven't seen or experienced any meaningful change in the competitive environment in the US commercial marketplace overall, which I think broadly addresses your question. As you know, this has been a competitive market for years, but it's been a rational one, and we're continuing to see that. Frankly, I wouldn't highlight or call out or peel out any notable broad changes in the competitiveness of the market. If you really reflect on the last 10 years and you think about how we've performed in what I would view as a competitive rational market, we've had double-digit customer growth in our select segment year after year, and we've delivered organic commercial customer growth every year.
From our perspective, we continue to expect strong growth in the select segment as our value proposition continues to resonate, and we continue to guide all-in commercial medical customer growth to the tune of 180,000 to 230,000 customers for 2020, which we believe is both a strong result and a continued validation of our strategy. Very strong growth in select, overall growth in commercial, and the market continues to operate, we believe, in a competitive but rational manner.
Okay. Also around commercial, at the last Cigna analyst meeting back in May of 2019, Matt, you talked about healthcare affordability challenge really in three phases. It was somewhat confusing because the words all sound similar, but you had a transactional phase from 2000 to 2010, you had a transitional phase 2010 to 2020, but then probably most importantly, you had this, you know, what you call transformative phase from, you know, really for the next 10 years from now through 2030. Since we're kind of at another major pivot point around this, maybe you can give us an update on the progress of Cigna's quote-unquote, "transformative initiatives" to improve medical cost trends from, call it, 3%-4% down to your goal of CPI by really by next year.
Yeah, first of all, I appreciate the question and certainly the commonality of the T word in the three phases from that context. If you take a step back, if you think about when we talk about the transformative phase, it really aligns with the timing of when we entered in the combination with Express Scripts, and we had three distinct goals at that point in time. First is around improving affordability, recognizing that pharmaceutical costs continue on a trajectory and are trending towards being about 25% of the total medical cost equation, and that two-thirds of the pharmacy costs are really being driven by specialty pharmacy. The second real distinct goal we had was around improving clinical quality and recognizing that the largest driver of gaps in care is pharmacy and continues to be pharmacy.
The third goal was really to dramatically expand our access to care so that we can enable better predictive and analytical capabilities as we move into the future and combining the information that we have. The headline for you would be, in the short run, and as we've laid out these 10-year periods of transformative period, we're really seeing benefits across all three of these areas. As I mentioned earlier, but to reiterate, we've had seven years of industry-leading medical cost trend, and Express Scripts has really driven leading pharmacy cost trend where they had 0.4% commercial trend in 2018 and 2.3% commercial trend in 2019, which I know we recently published. My comments to you would be the goal of driving towards CPI continues to be a steadfast focus to the organization.
We continue to see improvements post the combination of Cigna and Express Scripts, and we continue to innovate along that path in order to achieve our goals. Lastly, I would just highlight we recently had our client forum where we get to sit down with many of our largest clients. I would just say some of our largest and most engaged clients are seeing trends already below CPI. In fact, I had the pleasure of sitting down with several that actually had experienced negative trends. Those that are leveraging our most advanced consumer engagement, health improvement, and aligned to our value-based relationships are really seeing a great outcome.
Okay, quickly on individual Medicare Advantage, Cigna's now moved past Inspire issues. How are you trying to differentiate yourself in terms of benefit design? Do you have a strong tilt towards HMO versus PPO product offerings within MA? I know you discussed bringing some new PPO solutions to the market this year, just kind of curious to get your latest on your strategy within individual MA overall.
Post our Investor Day in May, I'm delighted to say we're really excited about our growth path in Medicare Advantage. We talked at our Investor Day that we were going to have a 10% to 15% annual customer growth over the next five years. We also said that in 2020, which was year one, we'd be on the low end of that range as we really stepped into this accelerated growth path. As we've progressed through the annual enrollment period, we now expect in 2020 that our Medicare Advantage customer growth is going to be 13% to 16%. Back to where your question is, we've invested in the benefit design so that we can really put forth an outstanding value proposition for our Medicare Advantage customers. Our growth is coming across multiple dimensions.
It's continued growth in our existing geographies, which is really our individual HMO products, further expansion of our individual HMO products into new geographies. As you mentioned, we've introduced individual PPO products in eight states for 2020. When you combine the expansion with the work that we've done on the benefit designs, we've also been aided with the improved pharmacy cost position with the combination with Express Scripts. All three of these factors go into play in terms of our ability and the performance that we will have for 2020. As we look forward, we expect to continue this acceleration of Medicare customer growth to the 10% to 15% annually on average. Once again, we will continue to grow in our existing geographies with HMO offerings, which, as you know, really leverage our unique advanced position collaborative models that we have in place.
Very importantly, we will expand to new geographies, and we will do so on both an individual HMO and the PPO side. One key component that really positions us for strong growth as we go forward is we will leverage our strong star ratings both at the individual market and at the corporate level. For example, in 2021, we will have 87% of our customers in four-star plus plans, and the overall corporate rating will be four and a half stars. Really strong position there, and that will enable us to introduce new products, new capabilities, and really expand our addressable market share. One of the things that we did talk about during the Investor Day was we weren't covering a sizable portion of the addressable market share.
With these expansions, by 2025, we expect to be competing for about 15 million of the Medicare Advantage purchasers, which is about 50% of the Medicare Advantage market. The way I would want you to think about it is from 2019 to 2025, that will be a four-fold expansion for us. Great trajectory for 2020. Begin the expansions, and we'll continue as such through 2025, targeting our 10% to 15% annual customer growth range.
Okay, final real quick question here. Balance sheet's getting a lot better with debt pay down, more cash coming in the door from divestitures. In light of that, what are the priorities for The Cigna from an M&A perspective? Seems like investors still want you guys to focus on government health insurance footprint. I'm curious if that's a particular priority.
Yeah, so just real quick, 2020 at a macro level, deleveraging is our top capital priority. Apart from that, we will invest back in our businesses. Secondly, we focus on strategic M&A. Third is returning capital to the shareholders. In terms of the areas that we are focused on in terms of potentially investing through M&A in the future, I would highlight global, seniors, care coordination and facilitation, digital and digital analytics, and very importantly, state-based risk programs. That will be our focus as we go forward. As you mentioned, we're very pleased with our deleveraging aspects and well positioned for 2021, where we will generate in excess of $8.5 billion of operating cash flow.
Okay, great. With that, I think we're out of time. I'd like to thank you, Matt, for your time today, and everyone, enjoy the rest of the virtual conference. Thanks.
Thank you very much, Steve.