A bipartisan group of lawmakers, led by Senators Elizabeth Warren (D-Mass.) and Josh Hawley (R-Mo.), have introduced legislation to break up pharmacy benefit managers (PBMs), according to the Wall Street Journal. PBMs are the middlemen who negotiate drug prices for insurers. The bill would force companies that own both PBMs and pharmacies to sell off their pharmacy divisions within three years. A similar House version, backed by Reps. Jake Auchincloss (D-Mass.) and Diana Harshbarger (R-Tenn.), reflects the rising frustration with PBMs’ role in increasing drug costs and squeezing independent pharmacies.
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The legislation follows years of investigations by Congress and the Federal Trade Commission into PBMs, including CVS Health’s (CVS) Caremark, Cigna’s (CI) Express Scripts, and UnitedHealth’s (UNH) OptumRx. These companies control a significant share of the prescription drug market and often steer patients toward their own mail-order or retail pharmacies. Critics, including doctors and patients, argue that PBMs inflate drug prices, overcharge for treatments like cancer medications, and force higher out-of-pocket costs by limiting access to cheaper alternatives.
Supporters of the bills point to historical precedents like the Volcker Rule, which prevented banks from engaging in proprietary trading after the 2008 financial crisis. The senators argue that prohibiting joint ownership of PBMs and pharmacy businesses would eliminate conflicts of interest and improve competition, ultimately lowering prescription drug costs.
A Response to Public Anger
Unsurprisingly, these bills are seen as a response to growing public anger over the affordability of healthcare. Indeed, the murder of UnitedHealth CEO Brian Thompson has led Americans to voice their frustrations with insurance providers. UnitedHealth has been criticized for practices like prior authorizations and claim denials, which have caused harmful delays and unnecessary suffering for many patients.
Is UNH Stock a Buy?
Despite the growing dissatisfaction among the public, analysts have a Strong Buy consensus rating on UNH stock based on 18 Buys, one Hold, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 1% decline in its share price over the past year, the average UNH price target of $624.63 per share implies 16.4% upside potential.
