Shares of ‘CVS Stocks’ health insurers with pharmacy benefit management operations took a hit following comments from U.S. President-elect Donald Trump. On Monday, Trump criticized pharmacy benefit managers (PBMs), labeling them as unnecessary “middlemen” who inflate drug prices. He vowed to eliminate their role in the industry.
Prominent companies affected by the remarks include CVS Health (NYSE: CVS), which operates Caremark, as well as Cigna (NYSE: CI), which owns Express Scripts, and UnitedHealth Group (NYSE: UNH), which operates Optum. These companies dominate the U.S. pharmacy benefit management market while also running health insurance and pharmacy businesses.
Role of Pharmacy Benefit Managers (PBMs) PBMs serve as intermediaries that negotiate drug prices with manufacturers and pharmacies. They also design drug coverage lists (formularies) for health insurance plans, particularly for employers and government programs. PBMs play a key role in controlling prescription drug costs and directly reimburse pharmacies for medications included in their contracted terms.
Trump’s Comments Spark Investor Concerns At a press conference held at his Mar-a-Lago resort in Palm Beach, Florida, Trump referred to PBMs as “horrible middlemen” who earn more money than pharmaceutical companies, despite providing limited value. “They don’t do anything except act as a middleman,” he said. Trump’s criticism targeted the perceived lack of transparency and profitability of PBMs.
“I don’t know who these middlemen are, but they are rich,” Trump added, underscoring his view that PBMs unduly benefit from the current system.
Pressure on Drug Prices Trump’s remarks follow his earlier meeting with executives from major pharmaceutical companies, including Pfizer (NYSE: PFE) and Eli Lilly (NYSE: LLY), as well as representatives from the industry lobbying group, PhRMA. He highlighted drug price disparities, emphasizing that U.S. consumers pay significantly more for medications than people in other countries.
The prospect of regulatory changes targeting PBMs has raised concerns for companies like CVS, Cigna, and UnitedHealth. Investors fear that if the role of PBMs is reduced or eliminated, it could impact revenue streams tied to their pharmacy benefit operations.
Market Reaction Following Trump’s remarks, the share prices of health insurers with PBM operations saw declines. The market is closely monitoring potential regulatory changes, as any action to reduce the role of PBMs could reshape the U.S. pharmaceutical supply chain.
Looking Ahead The debate over drug pricing and the role of intermediaries like PBMs is not new, but Trump’s direct criticism of PBMs has intensified scrutiny of their practices. As regulatory changes loom, investors and industry stakeholders will be watching closely for updates on how these proposals could affect the profitability and structure of major healthcare companies like CVS, Cigna, and UnitedHealth.