December 12th 2024.
According to a recent report from CNBC, the stock prices of UnitedHealth Group, Cigna, and CVS Health have dropped by 5% following the assassination of their CEO, Brian Thompson, and the introduction of a new bill aimed at dismantling pharmacy benefit managers (PBMs). These three companies are among the largest private health insurers and drug supply chain intermediaries in the nation, and they also happen to own their own pharmacy businesses. The drop in stock prices is being attributed to the bipartisan bill, which aims to address long-standing concerns about PBMs causing a rise in drug costs for patients in order to increase their own profits.
Spearheaded by Democratic Senator Elizabeth Warren of Massachusetts and Republican Senator Josh Hawley of Missouri, the new bill would require companies that own PBMs to sell off their pharmacy businesses within three years. Senator Warren stated that this legislation seeks to address conflicts of interest within the industry, particularly with regards to companies like UnitedHealth Group's OptumRx, CVS Health's Caremark, and Cigna's Express Scripts, which are connected to or owned by health insurers. She also expressed concerns about PBMs manipulating the market and driving up drug costs for their own gain.
In addition to the introduction of the new bill, the assassination of UnitedHealth's CEO has also been cited as a potential reason for the drop in stock prices. Brian Thompson was reportedly murdered in December 2024 by 26-year-old Luigi Mangione in what appears to be a targeted attack in New York City. The incident caused United Healthcare's stock to take a nearly 13% decline in just one week.
Other insurers, such as Humana and Centene, also saw a decline in their stock prices by 3%. According to healthcare equity strategist Jared Holz, this may be due to the "renewed rhetoric" surrounding insurance companies. He stated, "I think the response investors have had is, 'Do we want to own this category of stocks if there's going to be this now renewed negative focus on the industry?'"
The Federal Trade Commission has been investigating PBMs since 2022 and has found that they are responsible for processing approximately 80% of the country's prescription drug claims. They sit in the middle of the drug supply chain in the U.S. and negotiate rebates with drug manufacturers on behalf of insurers, large employers, and federal health plans. They also create lists of covered medications and reimburse pharmacies for prescriptions.
The recent events involving the assassination of a CEO and the introduction of a new bill targeting PBMs have caused major disruptions in the healthcare insurance industry, with significant consequences for stock prices. It remains to be seen how these developments will continue to affect the industry and its players in the coming months.
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