Health-care stocks fall after Warren PBM bill, Brian Thompson shooting

Healthcare Stocks Fall as Lawmakers Introduce Bill to Break Up Pharmaceutical Benefit Managers

Shares of major health-care companies fell as much as 5% on Wednesday, as investors feared pressure from lawmakers and patients could force changes to their business models. UnitedHealth Group, Cigna, and CVS Health, which operate three of the nation’s largest private health insurers and drug supply chain middlemen, or PBMs, were among the hardest hit. Their shares closed at least 5% lower.

The stock reaction appeared to be in response to new bipartisan legislation that aims to break up PBMs, which was first reported by The Wall Street Journal. PBMs have faced yearslong scrutiny from Congress and the Federal Trade Commission over allegations they inflate drug costs for patients to boost their profits.

Proposed Legislation

A Senate bill, sponsored by Sens. Elizabeth Warren, D-Mass., and Josh Hawley, R-Mo., would force the companies that own health insurers or PBMs to divest their pharmacy businesses within three years. The lawmakers told the Journal that a companion bill is scheduled to be introduced in the House on Wednesday.

Criticism of PBMs

"PBMs have manipulated the market to enrich themselves—hiking up drug costs, cheating employers, and driving small pharmacies out of business," said Sen. Warren in a release. "My new bipartisan bill will untangle these conflicts of interest by reining in these middlemen."

Healthcare Companies

The largest PBMs — UnitedHealth Group’s Optum Rx, CVS Health’s Caremark, and Cigna’s Express Scripts — are all owned by or connected to health insurers. They collectively administer about 80% of the nation’s prescriptions, according to the FTC.

FTC Investigation

The FTC has been investigating PBMs since 2022.

Conclusion

The proposed legislation and public criticism of PBMs have sent shockwaves through the healthcare industry, leading to a sharp decline in the stocks of major healthcare companies. As lawmakers and patients continue to scrutinize the industry, it remains to be seen how these changes will impact the future of healthcare in the United States.

Frequently Asked Questions

Q: What is the purpose of the proposed legislation?
A: The proposed legislation aims to break up PBMs, which are accused of inflating drug costs and manipulating the market.

Q: Which companies will be affected by the proposed legislation?
A: UnitedHealth Group, Cigna, and CVS Health, which operate three of the nation’s largest private health insurers and PBMs, will be among those affected.

Q: What is the role of PBMs in the healthcare industry?
A: PBMs sit at the center of the drug supply chain in the U.S., negotiating rebates with drug manufacturers on behalf of insurers, large employers, and federal health plans. They also create lists of medications, or formularies, that are covered by insurance and reimburse pharmacies for prescriptions.