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Trump Win Boosts Insurers, Ratchets Up Expectations for Deals

(Bloomberg) -- Donald Trump’s re-election rippled through the health-care landscape as the new administration is expected to pull back on Biden-era measures affecting US health insurers, drug prices and public-health leadership.

Insurers focused on the Medicare market jumped on the expectation that the government will pay higher rates to companies that provide private versions of the US health program for seniors. UnitedHealth Group Inc. shares rose as much as 6.6% when markets opened Wednesday in New York, while shares of Humana Inc. gained as much as 12%. CVS Health Corp. shares added as much as 14%, their biggest intraday gain in 24 years. 

Companies that depend on Medicare for revenue have struggled in recent months under the Biden administration’s stricter federal reimbursement rules, which followed allegations that the industry exaggerates patient illnesses to boost revenue. Trump is considered more friendly to the industry, and the Project 2025 policy blueprint written by his advisers calls for default enrollment into private Medicare plans. Trump sought to distance himself from the document.

Rising costs of patient care and tighter federal reimbursements have dragged on the earnings of companies that sell private Medicare Advantage plans. CVS cut its 2024 forecast three times this year before finally pulling it entirely in October, citing medical costs in the Aetna insurance unit. 

Industry Deals

Trump is also seen as less likely than the Biden administration to oppose health-industry deals. Bloomberg News has reported that Cigna Group revived informal merger talks with Humana after discussions fell apart last year. However, Cigna Chief Executive Officer David Cordani appeared to throw cold water on that prospect last week when he noted problems in the Medicare market that have led to share declines at Humana, and said his company would use excess cash to buy back its own stock. 

UnitedHealth has been pushing for US officials to give its blessing to a $3.3 billion planned purchase of Amedisys Inc., a provider of home health services. The Justice Department’s antitrust division has been investigating the deal for more than a year.

“There is no doubt this administration – at least on paper – will be far more amicable when it comes to business combinations,” Mizuho’s Jared Holz wrote in a note.

Meanwhile, shares of insurers that sell private versions of Medicaid, the joint state-federal program for low-income people, fell on the expectation that the next administration will pull back on funding. Centene Corp. fell as much as 7.5%, and Molina Healthcare Inc. slid as much as 7.9%.

Both companies also sell Affordable Care Act plans supported by expanded federal subsidies that Republicans opposed. Republican House Speaker Mike Johnson promised “massive reform” to the law if the GOP took control of government, though a previous effort to repeal it under Trump failed.

Drug Pricing

Donald Trump’s election victory will intensify concern among Democrats that he may try to weaken or dismantle drug-pricing measures in the Inflation Reduction Act, President Joe Biden’s signature legislation package. Trump has said little about his plans regarding the 2022 law, which allows Medicare to negotiate drug prices that have been on the market for years without facing low-cost generic competition. 

Drug companies have filed lawsuits over the IRA, saying that sales reductions from its measures crimp their capacity to develop breakthrough treatments that improve lives and cure diseases. The Biden administration has countered that the drug industry has inexorably raised prices for medicines while extending patents past their normal duration. The law’s pricing provisions will reduce the federal deficit by $237 billion over a decade, according to the Congressional Budget Office.

Democrats consider Trump an enemy of the IRA. Still, repeal seems unlikely under his administration, according to Bloomberg Intelligence analyst Duane Wright. The new president’s staffers may be more friendly to the industry than he is, and seek compromises on pricing, Wright said. 

“I don’t think he’d want to be seen as softer on drug pricing than Biden,” Wright said in an interview before the election. Even if the IRA doesn’t exactly square with Trump’s approach “he can still use the law to achieve some of the same objectives.”

Senator Bill Cassidy, a physician who’s currently the ranking member of the Senate Health, Education, Labor and Pensions Committee, is poised to replace Vermont’s Bernie Sanders as chairman next year as Republicans claimed control of the chamber. While Sanders made tackling high drug costs a major priority, Cassidy isn’t expected to scrutinize pharmaceutical executives to the same degree. 

Public Health

In addition to industry-related changes, Trump’s win will likely mean the ouster of the Centers for Disease Control and Prevention Director Mandy Cohen. The CDC could also be forced to abandon its wide-ranging public health strategy.

While Trump said little about his plans for the agency on the campaign trail, he proposed cutting the CDC’s budget during his previous term in office. The Heritage Foundation’s Project 2025 calls for the CDC to be split into two entities, with one focused on publishing data about diseases and the other making only limited public health recommendations.

The proposal echoes a popular criticism of the CDC: that it wasn’t ready for the pandemic because it tackles too many health threats. To that end, House Republicans are pushing a bill that would cut the agency’s budget by $1.8 billion, or 22%, ending programs to address the health effects of climate change and deaths related to firearms, opioids, tobacco and HIV. 

In September, several former CDC directors published an opinion piece in Stat, arguing that the agency had saved millions of lives by addressing a wide range of health threats and that paring it would be “misguided.”

“Limiting our health defense to just some threats would be like allowing our military to protect us from only some types of attack, telling the National Weather Service to warn people about tornadoes but not hurricanes, or allowing doctors to treat only some diseases,” the former CDC directors wrote.

--With assistance from Madison Muller.

©2024 Bloomberg L.P.