Healthcare Stocks Dip as Senators Push to Break Up Pharmacy Benefit Managers

Pharmacy benefit manager shares dropped sharply Wednesday as lawmakers introduced bipartisan legislation requiring health insurers and PBMs to divest pharmacy operations within three years. The proposal intensifies scrutiny of the PBM industry's influence over drug pricing.

Bipartisan Bill Targets Vertical Integration in Healthcare

According to Reuters, following the presentation of a bipartisan measure on Wednesday, which would compel health insurers or drug intermediaries to sell off their pharmacy businesses, shares of companies owning pharmacy benefit managers declined.

The majority of pharmacy benefit management (PBM) in the US is controlled by CVS Health’s Caremark, Cigna’s Express Scripts, and UnitedHealth Group’s Optum. All three of these parent firms also own health insurance businesses.

Following the initial reporting of the bill in the Wall Street Journal, all three firms' shares fell by 4.8% to 5.5%.

The bill, which is being co-sponsored by Republican Josh Hawley and Democratic Elizabeth Warren in the United States Senate, would require, within three years, that companies that own health insurers or pharmacy benefit managers sell their shares in pharmacies.

Healthcare Stocks React to Bipartisan Proposal

This bill will be submitted in Congress with the support of Republican Diana Harshbarger and Democratic Jake Auchincloss.

Pharmacy benefit managers (PBMs) mediate pricing negotiations for prescription prescriptions between insurance companies, pharmacies, and pharmaceutical companies. PBMs then pay pharmacies directly for the medications covered by their contracts.

They have already been investigated for the impact they have on the cost of prescription drugs.

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

Other Insurers Feel the Ripple Effect of PBM Legislation

Other insurance companies' stock prices dropped 1% to 3%. This included Centene, Elevance, and Humana, Investing.com shares.

"The latest introduction of potential legislation to restrict PBM operations and broader healthcare vertical integration is unlikely to gain traction, although it is hard to dismiss outright," Michael Cherny, an analyst at Leerink Partners, said.

Insurance company stock has taken a beating following last week's shooting death of UnitedHealth health insurance unit CEO Brian Thompson outside a Manhattan hotel.