Shares of major U.S. health insurers fell sharply on Monday after President-elect Donald Trump criticized pharmacy benefit managers (PBMs) during a Mar-a-Lago press conference. Trump blamed the “middlemen” for high drug prices in the U.S. and claimed that they make more money than drug companies while doing little in return. He vowed to “knock out the middleman” to bring down drug costs, a promise that shook the healthcare sector.
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PBMs, which negotiate drug prices for insurers, have faced increasing scrutiny from Congress and the Federal Trade Commission. Following Trump’s remarks, stocks for the three largest PBMs–Cigna (CI), UnitedHealth Group (UNH), and CVS Health (CVS)–which are tied to major insurers, took a hit. CVS defended PBMs by stating that their role keeps “pharma price gouging” in check and helps control costs for patients and businesses.
Trump’s comments followed a recent meeting with pharmaceutical executives, including Eli Lilly (LLY) CEO David Ricks and Pfizer (PFE) CEO Albert Bourla, where PBMs were a central topic. Also present were Robert F. Kennedy Jr., Trump’s pick for Secretary of Health and Human Services, and Dr. Mehmet Oz, who has been nominated to lead Medicare and Medicaid. While drugmakers have blamed PBMs for high prices, Trump’s attack signals an early win for the pharma industry.
Public Anger Has Reached a Boiling Point
Unsurprisingly, these remarks 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, as most are showing very little sympathy for Thompson. UnitedHealth has been criticized for practices like prior authorizations and claim denials, which have caused harmful delays and unnecessary suffering for many patients.
Are PBM Stocks Worth Buying?
Despite the growing dissatisfaction among the public, analysts have Strong Buy consensus ratings on the aforementioned PBM stocks, as indicated by the graphic below. In addition, they see the most upside potential from CI stock, as its $397.38 per share average price target implies gains of 44.4% from current levels.
