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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

Scoop: Trump-backed Perdue says he wouldn’t have certified Georgia 2020 results

Perdue at a December 2020 campaign event in Columbus, Ga. Photo: Elijah Nouvelage/Getty Images

Georgia gubernatorial candidate David Perdue wouldn’t have signed the certification of the state’s 2020 election results if he had been governor at the time, the former Senate Republican told Axios.

  • “Not with the information that was available at the time and not with the information that has come out now. They had plenty of time to investigate this. And I wouldn’t have signed it until those things had been investigated and that’s all we were asking for," he said.

Why it matters: There has been no evidence widespread fraud took place in Georgia's elections last year and the November results were counted three times, once by hand.

Beijing Olympics: These countries have announced diplomatic boycotts

Photo: Zhang Qiang/VCG via Getty Images

Several countries, including Canada and Australia, have announced they will join the U.S. in a diplomatic boycott of the 2022 Beijing Winter Olympics to protest human rights abuses committed by China's government.

Driving the news: Leaders have faced pressure from human rights groups and others to boycott the Games, pointing to the ongoing genocide of Uyghurs and other Muslim minorities in China's Xinjiang region and other abuses.

Biden directs federal government to become carbon neutral by 2050

President Biden speaking to reporters outside of the White House on Dec. 8.

President Biden signed an executive order Wednesday that requires the federal government achieve multiple goals related to reducing its carbon emissions, including achieving net-zero emissions by 2050.

Why it matters: Meeting the objectives of the order would require a massive investment by the federal government to buy electric vehicles, upgrade buildings and change how it procures electricity.