(Bloomberg) -- A bipartisan coalition of US lawmakers has drafted legislation that would force prescription drug middlemen to divest pharmacies they own.
Some of the largest US health-care companies own pharmacy benefit management units that negotiate drug prices for employers and other customers. If enacted, the policy would compel CVS Health Corp., Cigna Group and UnitedHealth Group Inc. to shed drug-dispensing operations that have become profit centers for the vertically integrated conglomerates.
The proposed legislation is backed by senators including Democrat Elizabeth Warren and Republican Josh Hawley along with Republican Representative Diana Harshbarger and Democratic Representative Jake Auchincloss. Allowing companies to simultaneously own PBMs — which set payments for dispensing medications — and pharmacies creates a conflict of interest that drives profits at the expense of patients and independent pharmacies, according to a statement from Warren’s office Wednesday.
CVS pays independent pharmacies more for services than its own retail drugstores, according to a spokesperson. “Any policies that would limit our ability to negotiate with drugmakers and pharmacies would ultimately increase the cost of medicine,” CVS spokesperson David Whitrap said in an email, “and in many cases, serve as a handout to the pharmaceutical industry.”
Shares of CVS and Cigna each fell as much as 5.3% as of 11:50 a.m. in New York. UnitedHealth shares dropped as much as 5.6%, and Humana Inc. shares lost as much as 3.6%.
The bill is set to be introduced later Wednesday, a spokesperson for Warren’s office said. It’s unlikely the legislation will advance before Jan. 3, when the current congressional session ends. The sponsors could re-introduce the bill, however, in the new Congress.
The legislation “to restrict PBM operations and broader healthcare vertical integration is unlikely to gain traction, although it is hard to dismiss outright,” analysts from Leerink Partners wrote in a note.
Aggressive Proposal
It’s one of the most aggressive proposals from lawmakers yet to rein in the industry, going beyond regulating pharmacy benefit managers’ practices to trying to force a breakup of their operations.
“PBMs have manipulated the market to enrich themselves — hiking up drug costs, cheating employers, and driving small pharmacies out of business,” Warren said in the statement.
The legislation has the backing of the American Economic Liberties Project, a group focused on competition policy, and the National Community Pharmacists Association, a group of independent drugstores, among other organizations, Warren’s office said.
The main trade group for pharmacy benefit managers said lawmakers need to weigh the impact on patients.
“Our value is in helping patients conveniently, safely, and affordably access prescription drugs,” Greg Lopes, a spokesperson for the Pharmaceutical Care Management Association said in an email. “Congress should be thoughtful in understanding that before they take away consumers’ ability to access their medicines how and where they’d like.”
--With assistance from Megan Scully.
(Updates with details from release and industry response starting in third paragraph.)
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