Get the latest market trends in your inbox

Stay on top of the latest market trends and economic insights with the Axios Markets newsletter. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Denver news in your inbox

Catch up on the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Des Moines news in your inbox

Catch up on the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Minneapolis-St. Paul news in your inbox

Catch up on the most important stories affecting your hometown with Axios Minneapolis-St. Paul

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tampa-St. Petersburg news in your inbox

Catch up on the most important stories affecting your hometown with Axios Tampa-St. Petersburg

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

A robot at a pharmacy benefit manager sorts drugs. Photo: Stan Honda/AFP via Getty Images

The specter of banishing back-end drug rebates and more aggressive state action has unnerved pharmacy benefit managers heading into 2019.

The big picture: This uncertainty has PBMs on the defensive and appears to be chipping away at their profitable businesses.

Driving the news: It has not been a fun few weeks for the drug pricing middlemen.

  • CVS Health rolled out profit estimates for 2019 that were well below what Wall Street had expected, due in part to its PBM proactively passing more rebate dollars to employers and insurers. Executives also said CVS won't keep as much money on some generic drugs through a practice known as "spread pricing."
  • Cigna CEO David Cordani recently said the Trump administration's proposed rebate rule would "not have a meaningful impact on our growth or earnings trajectory," even now that the company has acquired Express Scripts. But analysts are not convinced.
  • Diplomat Pharmacy lost a lot of employer customers within its recently acquired PBM business, and it anticipates writing down a "significant portion" of the PBM's $630 million value.
  • Activist investor Starboard Value is breathing down the neck of Magellan Health, which owns a PBM with $2.5 billion of annual revenue, and is encouraging a sale due to the company's "poor performance."

That's not all: States continue to be the most aggressive force challenging PBMs.

The bottom line: The rebate rule and general scrutiny on PBMs "poses meaningful risk to [their] profit models," analysts at Robert W. Baird & Co. wrote in an investor note last week.

Yes, but: The rebate rule likely won't go into effect for a while, and these companies are not going to sit on their hands.

  • If the rebate rule is implemented, UnitedHealthGroup, which owns OptumRx, "would adjust accordingly," and it helps that Medicare Part D — which the rule would affect — is "a relatively small part" of UnitedHealth, Cantor Fitzgerald analyst Steven Halper wrote to investors after meeting with the company's top executives.

Go deeper

USAID chief tests positive for coronavirus

An Air Force cargo jet delivers USAID supplies to Russia earlier this year. Photo: Mikhail Metzel/TASS via Getty Images

The acting administrator of the United States Agency for International Development informed senior staff Wednesday he has tested positive for coronavirus, two sources familiar with the call tell Axios.

Why it matters: John Barsa, who staffers say rarely wears a mask in their office, is the latest in a series of senior administration officials to contract the virus. His positive diagnosis comes amid broader turmoil at the agency following the election.

Bryan Walsh, author of Future
6 hours ago - Health

COVID-19 shows a bright future for vaccines

Illustration: Annelise Capossela/Axios

Promising results from COVID-19 vaccine trials offer hope not just that the pandemic could be ended sooner than expected, but that medicine itself may have a powerful new weapon.

Why it matters: Vaccines are, in the words of one expert, "the single most life-saving innovation ever," but progress had slowed in recent years. New gene-based technology that sped the arrival of the COVID vaccine will boost the overall field, and could even extend to mass killers like cancer.

7 hours ago - Health

Beware a Thanksgiving mirage

Illustration: Sarah Grillo/Axios

Don't be surprised if COVID metrics plunge over the next few days, only to spike next week.

Why it matters: The COVID Tracking Project warns of a "double-weekend pattern" on Thanksgiving — where the usual weekend backlog of data is tacked on to a holiday.