UnitedHealth Group signs are displayed on a screen on the floor of the New York Stock Exchange.
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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.
Includes declining stocks UnitedHealth Group, Cigna and CVS Healthwhich operates three of the nation's largest private health insurers and drug supply chain intermediaries called pharmacy benefit managers, or PBMs. They also have pharmacy companies. Shares of the three companies closed down at least 5%.
Stocks' 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 faced long-standing scrutiny from Congress and the Federal Trade Commission over allegations that they inflate drug costs for patients to increase their profits.
The stock moves also come as insurers and their practices face mounting public criticism in the wake of the fatal shooting of Brian Thompson, CEO of UnitedHealth Group's insurance arm, last week. Health stocks had already declined in the days following Thompson's murder.
A Senate bill, sponsored by Sens. Elizabeth Warren, Democrat of Massachusetts, and Josh Hawley, Republican of Missouri, would force companies that own health insurance carriers, or PBMs, to divest their pharmacy businesses within three years, the newspaper reported. Lawmakers told the newspaper that a companion bill is scheduled to be introduced to the House of Representatives on Wednesday.
“PBMs have manipulated the market to enrich themselves by raising drug costs, deceiving employers, and putting small pharmacies out of business,” Warren said in a statement. “Our new bipartisan bill would dismantle these conflicts of interest by reining in these middlemen.”
The statement added that healthcare companies that own both PBMs and pharmacies present “a significant conflict of interest that enables 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 associated with health insurers. Collectively, they administer about 80% of the nation's prescriptions, according to the Federal Trade Commission.
PBMs are at the center of the U.S. pharmaceutical supply chain, negotiating rebates with drug manufacturers on behalf of insurance companies, large employers, and federal health plans. They also create lists of medications or formularies that are covered by insurance and reimburse pharmacies for prescriptions.
The FTC has been investigating PBMs since 2022.
— CNBC's Bertha Combs contributed to this report.
