Shares of pharmacy benefit managers (PBMs) tumbled after President-elect Donald Trump announced plans to eliminate what he termed “horrible middlemen” in the drug industry. CVS Health Corp., UnitedHealth Group Inc., and Cigna Group saw declines as investors reacted to these comments, which signal ongoing political scrutiny in the sector.
Insurer stocks fall as Trump vows to “knock out middlemen”
Trump’s remarks came during a press conference held at his Mar-a-Lago club in Palm Beach, Florida. He emphasized the role of middlemen in inflating drug prices and stated: “We’re going to knock out the middleman.” Specifically targeting the largest PBMs, which control significant portions of the U.S. pharmacy benefit market, Trump’s statement followed a dinner with leaders from Pfizer Inc. and Eli Lilly & Co., where discussions focused on high drug costs in the U.S. Compared to other countries, Americans pay significantly more for medications, a discrepancy Trump aims to address.
The stock performance reflected investor concerns, with CVS shares dropping as much as 5.35%, Cigna falling 2.6%, and UnitedHealth declining 3.54%. A report from BNN Bloomberg indicated that Congress is contemplating measures that could alter how PBMs are compensated, further prompting a response from stock markets. In light of these potential policy changes, the Pharmaceutical Care Management Association, representing PBMs, warned that such moves would raise overall costs.
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A bipartisan legislative effort was also recently introduced, seeking to compel companies owning insurers and PBMs to divest their pharmacy operations. This proposal, if enacted, could disrupt a key profit segment for health conglomerates. According to a 2017 analysis by researchers at the University of Southern California, PBMs typically have lower profit margins than drug manufacturers.
Trump’s characterization of PBMs as excessively profitable aligns with increasing criticism from both sides of the political spectrum, as the health industry grapples with rising public outcry over drug pricing. The Federal Trade Commission (FTC) has intensified scrutiny of these entities, launching a suit in September against major PBMs like Caremark, Optum, and Express Scripts for allegedly manipulating access to affordable insulin and steering patients toward pricier alternatives.
In the wake of the President-elect’s announcement, industry representatives defended the role of PBMs. A CVS spokesperson reiterated the company’s commitment to leveraging market competition to combat what they describe as drug price gouging. They expressed a willingness to engage with policymakers on their impact in facilitating lower drug costs for Americans.
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Featured image credit: Myriam Zilles/Unsplash
