Jul 12, 2019

Health care middlemen surge on rebate rule death

Expand chart
Source: FactSet; Chart: Axios Visuals

President Trump's decision to withdraw the rule that would've overhauled behind-the-scenes drug rebates led to huge stock gains yesterday for health insurance companies and pharmacy benefit managers, which have suffered since the rule was first proposed in January.

The big picture: The health care industry's largest middlemen dodged a giant bullet since rebates are an important part of their businesses. But they are not out of danger, as states and Congress are working to change how they influence the price of drugs.

Driving the news: Cigna, which recently bought Express Scripts for $67 billion, surged the most of any health insurer with a 9% boost in its stock price Thursday.

  • Anthem, Humana, CVS and UnitedHealth Group all picked up a lot of ground as well.

Between the lines: The rebate rule raised fears that drugmakers would engage in "tacit collusion," as Northwestern University health economist Craig Garthwaite recently wrote.

  • That plus the imminent threat health insurers and PBMs would raise drug premiums allowed the industry to escape any changes to a system that many believe is flawed.

Yes, but: PBMs have already faced new state regulations and still could run up against seismic changes at the federal level.

  • A new Senate bill would eliminate the practice of "spread pricing" and would require every rebate dollar to flow back to employers.

Go deeper

White House regroups on drug prices

President Trump and HHS Secretary Alex Azar. Photo: Chip Somodevilla/Getty Images

The Trump administration is looking for Congress to implement major changes to how the federal government pays for drugs, following a week of setbacks to its drug pricing agenda.

Yes, but: The major exception to this is the administration's proposal to tie what Medicare pays for some drugs to rates in other countries.

Go deeperArrowJul 12, 2019

UnitedHealth's political and financial heft just keeps growing

UnitedHealth's headquarters in Minnesota. Photo: Bruce Bisping/Star Tribune via Getty Images

UnitedHealth Group's stock fell 2.3% yesterday even though the company continues to print money and raised its profit projections for the rest of the year.

The big picture: Wall Street is quibbling over the "quality" of UnitedHealth's earnings beat, but that doesn't really matter. UnitedHealth remains the most financially powerful private entity in the U.S. health care system, and any reforms would be up against its growing empire.

Go deeperArrowJul 19, 2019

Health care hopes Q2 quells jittery market

Health care earnings season starts in earnest this week. Photo: Drew Angerer/Getty Images

Johnson & Johnson today kicks off second-quarter earnings for a health care industry that has been fighting Wall Street jitters despite record-level profits.

The big picture: Wall Street has low expectations for all of corporate America in Q2, but health care may be different. A lot of the industry isn't affected by the Trump administration's trade war with China, and all available data suggests health care spending is not meaningfully slowing down.

Go deeperArrowJul 16, 2019