Health-care stocks fall after Warren PBM bill, Brian Thompson shooting

Shares of major health-care firms fell as much as 5% on Wednesday as investors feared pressure from lawmakers and patients could force changes to their business models.

The declining stocks include UnitedHealth Group, Cigna and CVS Health, which operate three of the nation’s largest private health insurers and drug supply chain middlemen called pharmacy profit managers, or PBMs. Additionally they own pharmacy businesses. Shares of all three firms closed at the very least 5% lower.

The stock response on Wednesday seemed to be in response to latest bipartisan laws that goals to interrupt up PBMs, which was first reported by The Wall Street Journal. PBMs have faced yearslong scrutiny from Congress and the Federal Trade Commission over allegations they inflate drug costs for patients to spice up their profits. 

The share moves also come as insurance firms and their practices face heightened public criticism following the fatal shooting of Brian Thompson, the CEO of UnitedHealth Group’s insurance arm, last week. Health stocks had already fallen in the times after Thompson’s killing.

A Senate bill, sponsored by Sens. Elizabeth Warren, D-Mass., and Josh Hawley, R-Mo., would force the businesses that own health insurers or PBMs to divest their pharmacy businesses inside three years, the Journal reported. The lawmakers told the Journal that a companion bill is scheduled to be introduced within the House on Wednesday.

“PBMs have manipulated the market to complement themselves—mountaineering up drug costs, cheating employers, and driving small pharmacies out of business,” Warren said in a release. “My latest bipartisan bill will untangle these conflicts of interest by reining in these middlemen.”

The discharge added that health-care firms that own each PBMs and pharmacies are a “gross conflict of interest that permits these firms to complement themselves on the expense of patients and independent pharmacies.”

The biggest PBMs — UnitedHealth Group’s Optum Rx, CVS Health’s Caremark and Cigna’s Express Scripts — are all owned by or connected to health insurers. They collectively administer about 80% of the nation’s prescriptions, in accordance with the FTC.

PBMs sit at the middle of the drug supply chain within the U.S., negotiating rebates with drug manufacturers on behalf of insurers, large employers and federal health plans. Additionally they create lists of medicines, or formularies, which can be covered by insurance and reimburse pharmacies for prescriptions.

The FTC has been investigating PBMs since 2022. 

— CNBC’s Bertha Coombs contributed to this report.