Shares of CVS Health Corp (NYSE: CVS) and
Express Scripts Holding Company (NASDAQ: ESRX) spiked down Wednesday on fears that President Donald Trump may target
pharmacy benefit managers (PBMs) for their role in inflating drug prices.
A note from Height Analytics first exposed talk out of D.C. and speculated two motives for federal action.
One possibility is that Trump suspects collusion between PBMs and drug manufacturers surrounding pricing; another is that the
president, on this suspicion, is attempting to prompt direct negotiation of prices.
Height put the activity in the context of industry criticism.
Pharmaceutical players will recall a recent Congressional hearing on EpiPens during which Mylan N.V. (NASDAQ:
MYL) CEO Heather Bresch triggered federal scrutiny of PBMs.
At the time, Bresch raised red flags among lawmakers through her presentation on the industry’s rebate structure.
To compound the issue, the Centers for Medicare and Medicaid Services recently reported that drug price increases and related
rebate increases have expanded federal expenditures for the Part D program while bolstering PBMs and insurers.
As the largest competitors in the expansive market, CVS and Express Scripts would take the brunt of any government heat, and
it’s possible their stock action will alone attest to regulatory activity.
UnitedHealth Group Inc (NYSE: UNH) also has
some PBM assets, but its stock did not move as sharply on Wednesday's news.
As of publication, Express Scripts was trading down 2 percent, while CVS was down 1.85 percent.
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