Health Insurer Stocks Tumble as Lawmakers Eye Breakup of Pharmacy Benefit Managers
Shares of major health insurers plunged Wednesday amid mounting pressure from lawmakers and patients seeking to curb the influence of powerful middlemen known as pharmacy benefit managers (PBMs).
UnitedHealth Group, Cigna, and CVS Health, three of the country’s largest health insurers and PBMs, saw their stock prices drop by at least 4.8% in early afternoon trading.
The decline followed the introduction of bipartisan legislation that aims to dismantle the current structure of PBMs, which have come under intense scrutiny for their role in inflating drug costs.
“PBMs have manipulated the market to enrich themselves—hiking up drug costs, cheating employers, and driving small pharmacies out of business,” Senator Elizabeth Warren, a Democrat from Massachusetts and co-sponsor of the bill, said in a statement. Warren stressed that her “new bipartisan bill will untangle these conflicts of interest by reining in these middlemen.”
Legislation Targets Potential Conflicts of Interest
The proposed legislation, first reported by The Wall Street Journal, would require companies that own both health insurers and PBMs to divest their pharmacy businesses within three years. A companion bill is set to be introduced in the House on Wednesday.
The bill’s authors argue that the current system creates a harmful conflict of interest where PBMs prioritize profits over patients. Understanding the basics: PBMs negotiate rebates with drug manufacturers on behalf of insurers, large employers, and federal health plans. They also create formularies, which dictate which medications are covered by insurance plans. Critics argue this power grants PBMs significant influence over patient access to affordable medications.
“My new bipartisan bill will untangle these conflicts of interest by reining in these middlemen,” Warren added in the release. “Healthcare companies that own both PBMs and pharmacies are a gross conflict of interest that enables these companies to enrich themselves at the expense of patients and independent pharmacies.”
Industry Faces Scrutiny Amid Public Outrage
This legislative drive arrives at a time when insurance companies are already facing heightened public criticism following a recent tragedy. Last week, the CEO of UnitedHealth Group’s insurance arm, Brian Thompson, was fatally shot in Pennsylvania. Health stocks had already seen declines in the days following Thompson’s death.
The largest PBMs – UnitedHealth Group’s Optum Rx, CVS Health’s Caremark, and Cigna’s Express Scripts – collectively administer about 80% of the nation’s prescriptions, according to the Federal Trade Commission (FTC), which has been investigating PBMs since 2022.
The FTC, along with lawmakers, is focused on understanding how PBMs use their market power and raising concerns about a lack of transparency in their pricing practices.
