Mar 8, 2017

Why one bank is telling investors to avoid pharmacy benefit managers

Jeff Roberson / AP

Financial analysts at the investment bank Robert W. Baird & Co. sent a strong message this week to Wall Street investors: Don't touch pharmacy benefit managers.

"We would not currently invest in PBMs, despite depressed valuation, strong cash flow and potential tax reform benefits that bulls reasonably cite." — Robert W. Baird analysts

Why the caution? In two words: drug prices. Drug companies, pharmacists and lawmakers have thrown pharmacy benefit managers into the spotlight, arguing the middlemen encourage the use of high-priced drugs to reap bigger profits. The industry — which is dominated by Express Scripts, CVS Health and UnitedHealth Group's OptumRx — argues it keeps insurance premiums at bay by negotiating discounts with drug makers and pharmacies.

A handful of other investment firms encourage buying pharmacy benefit managers' stocks. But Baird analysts said the "whirlwind of negative headlines," including a plethora of lawsuits from pharmacies (such as this one against Express Scripts) and criticism of controversial clawback payments, makes the industry way too risky right now.

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World coronavirus updates: Confirmed cases top 1.2 million

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens and confirmed plus presumptive cases from the CDC

The number of novel coronavirus cases surpassed 1.2 million worldwide Saturday night, as Spain overtook Italy as the country with the most infections outside the U.S.

The big picture: About half the planet's population is now on lockdown and the global death toll was nearing 64,800, by Sunday morning, per Johns Hopkins data.

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The big picture: President Trump said Saturday America's is facing its "toughest" time "between this week and next week." Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said U.S. deaths are expected to continue to rise during this period.

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