UnitedHealth Group signage is displayed on a monitor on the floor of the New York Stock Exchange.
Michael Nagel | Bloomberg | Getty Images
Shares of major health care companies fell as much as 5% on Wednesday as investors feared that pressure from lawmakers and patients could force changes in their business models.
The declining stocks include UnitedHealth Group, Cigna And CFS healthwhich operate three of the nation's largest private health insurers and drug supply chain intermediaries called pharmacy benefit managers, or 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 faced years of criticism from Congress and the Federal Trade Commission over accusations that they inflate drug costs for patients to boost their profits.
The stock moves also come as insurance companies and their practices face increased public scrutiny following last week's fatal shooting of Brian Thompson, the CEO of UnitedHealth Group's insurance arm. Healthcare stocks had already fallen in the days following Thompson's killing.
A Senate bill sponsored by Sens. Elizabeth Warren, D-Mass., and Josh Hawley, R-Mo., would force companies that own health insurers, or PBMs, to divest their pharmacy operations 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 by driving up drug costs, defrauding employers and driving small pharmacies out of business,” Warren said in a news release. “My new bipartisan bill will untangle these conflicts of interest by reining in these middlemen.”
The release added that healthcare companies owning both PBMs and pharmacies pose 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. According to the FTC, they collectively administer about 80% of the country's prescriptions.
PBMs are at the center of the U.S. drug supply chain, negotiating rebates with drug manufacturers on behalf of insurers, large employers and federal health care plans. They also create lists of medications, or formularies, that are covered by insurance and reimburse pharmacies for prescriptions.
The FTC has been investigating PPE since 2022.
— CNBC's Bertha Coombs contributed to this report.
