Healthcare stocks fall after Warren PBM and Brian Thompson shootings
UnitedHealth Group signage is displayed on a monitor on the floor of the New York Stock Exchange.
Michael Nagle | Bloomberg | Getty Images
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.
Declining stocks include UnitedHealth Group, Cigna And CVS Healthwhich operate three of the country's largest private health insurers and intermediaries in the drug supply chain, known as Pharmacy Benefit Managers (PBMs). They also own pharmacy companies. Shares of all three companies closed at least 5% lower.
The stock reaction on Wednesday appeared to be in response to new bipartisan legislation aimed at breaking up PBMs, which was first reported by The Wall Street Journal. PBMs have been under scrutiny for years by Congress and the Federal Trade Commission over allegations that they drive up drug costs for patients to boost their profits.
The stock moves also come as insurance companies and their practices face increasing public criticism following last week's fatal shooting of Brian Thompson, the CEO of UnitedHealth Group's insurance division. Health scores had already fallen in the days after Thompson's killing.
A Senate bill introduced 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 Journal reported . Lawmakers told the Journal that a companion bill will be introduced in the House of Representatives on Wednesday.
“PBMs have manipulated the market to enrich themselves – driving up drug costs, defrauding employers and driving small pharmacies out of business,” Warren said in a press release. “My new bipartisan bill will untangle these conflicts of interest by curbing these middlemen.”
The press release added that healthcare companies owning both PBMs and pharmacies represents a “gross conflict of interest that allows these companies to enrich themselves at the expense of patients and independent pharmacies.”
The largest PBMs — UnitedHealth Group's Optum Rx, CVS Health's Caremark and Cigna's Express Scripts — are all owned by or affiliated with health insurers. Together, they manage about 80% of the nation's prescriptions, according to the FTC.
PBMs are at the heart of the U.S. drug supply chain, negotiating discounts with drug manufacturers on behalf of insurers, large employers and federal health plans. They also create lists of medications or prescription lists that are covered by insurance and reimburse pharmacies for the cost of prescriptions.
The FTC has been investigating PBMs since 2022.
— CNBC's Bertha Coombs contributed to this report.
