December 12, 2024
Healthcare Stocks Plummet Amid CEO Assassination And Targeted Legislation From Lawmakers
Think there is more behind the stock drop?
Stocks from UnitedHealth Group, Cigna, and CVS Health dropped 5% following the assassination of CEO Brian Thompson and a new bill that seeks to eliminate pharmacy benefit managers (PBMs), CNBC reported.
The three companies operate as the nation’s largest private health insurers and drug supply chain middlemen. They also own pharmacy businesses. The stock drop is being labeled as a response to a new bipartisan bill targeting the break up of PBMs after facing decades-long backlash from lawmakers and the Federal Trade Commission (FTC) due to allegations they cause an increase of drug costs for patients to boost their profits.
A Senate bill, sponsored by Massachusetts’ Democratic Sen. Elizabeth Warren and Republican Sen. Josh Hawley of Missouri, forces companies that own PBMs to divest their pharmacy businesses within three years. In a statement, Warren said the legislation would “untangle” certain conflicts of interest, such as UnitedHealth Group’s OptumRx, CVS Health’s Caremark, and Cigna’s Express Scripts, which are either owned by or connected to health insurers. “PBMs have manipulated the market to enrich themselves—hiking up drug costs, cheating employers, and driving small pharmacies out of business,” the Senator said.
“My new bipartisan bill will untangle these conflicts of interest by reining in these middlemen.”
Another stock drop reason seemingly falls behind the assassination of United Health’s CEO Brian Thompson. Thompson was allegedly murdered by 26-year-old Luigi Mangione in early December 2024 in what is believed to be a targeted attack in New York City. On the day the shooting took place, according to The Independent, United Healthcare’s stock opened at $610.79. One week to the day of the incident, the stock took close to a 13% decline to $537.82.
Fellow insurers like Humana and Centene also took hits in their stock, and had a 3% decline. Healthcare equity strategist for Mizuho Financial Group, Jared Holz, thinks the drop is a response to “renewed rhetoric” surrounding insurance companies. “I think the response investors have had is, ‘Do we want to own this category of stocks if there’s going to be this now renewed negative focus on the industry?’” Holz said.
The FTC has been investigating PBMs since 2022 and found they collectively sent out approximately 80% of the nation’s prescriptions, sitting in the middle of the center of the drug supply chain in the U.S. It was found the groups negotiated rebates with drug manufacturers on the insurer’s behalf in addition to large employers and federal health plans. They also create lists of medications covered by insurance and reimburse pharmacies for prescriptions.
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