Shares in health Insurers fell again. On Tuesday, Pfizer’s (PFE) CEO, Albert Bourla, revealed that President-elect Trump is very committed to a reform in the pharmacy benefit managers. Trump views PBMs as middlemen.
UnitedHealth Group (UNH) led the decline, closing at $485.52 and down by 2.6%. NH stock is now 23% below its 52-week high and -14% on the week.
Cigna (CI) lost up to 4.1% before closing down by 2.81%. CVS Health (CVS) also fell on the day. Markets fear that Trump’s commitment to reforming the prescription drug middlemen would hurt profits in those firms. Presumably, it would decrease the cost of healthcare for Americans.
Last week, a bipartisan group of lawmakers introduced a bill. It sought to break up PBMs from their pharmacy business. This would disrupt companies like CVS, which may rely on the profitability of the former to offset shrinking margins in drugstores.
In Europe, Novo Nordisk’s (NVO) obesity drug price fell. This happened after those countries negotiated the pricing directly with the firm.
Contrarian Bet
Investors may bet that the separation of PBMs will not happen. The government may not know enough about why PBMs and drugstores are structured together. Disrupting it could lead to worsening service quality for drugstores, for example. For now, markets are selling these stocks to avoid the political risks attached to the sector.