UnitedHealth Group (UNH) stock is continuing its drawdown Thursday after lawmakers introduced a bipartisan bill aimed at prohibiting the joint ownership of pharmacy benefit managers (PBMs) and pharmacies.
The bill, the Patients Before Monopolies (PBM) Act, was introduced by Senators Elizabeth Warren, D-Mass., and Josh Hawley, R-Mo., and Representatives Diana Harshbarger, R-Tenn., and Jake Auchincloss, D-Mass. The act would prohibit the parent company of a PBM or an insurer from owning a pharmacy business and would require that the business in violation of the bill, if passed, would have to divest its pharmacy business within three years.
"Over the past decade, pharmacy benefit managers – the middlemen between pharmacies and insurance companies – have morphed into large healthcare conglomerates that exercise control over every link in the prescription drug delivery chain," the lawmakers said in a joint press release.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"Today, the largest healthcare conglomerates each own a PBM – which pay for pharmacy services – as well as the pharmacy chains that provide those services. This inherent conflict of interest results in higher drug costs for patients and fewer independent pharmacies, but bigger profits for the corporate healthcare giants," the add.
UnitedHealth's PBM, Optum Rx, is the second-largest pharmacy benefits manager in the United States with a 20.8% market share. This falls just behind CVS Health's (CVS) Caremark unit with a 21.3% market share, according to Fierce Healthcare.
"We would expect passage of this proposed bill as uncertain, and would likely be part of a broader PBM reform which might also be linked to a drug pricing bill," says Bernstein analyst Lance Wilkes. "We would expect this type of legislation to more likely be evaluated in the next two years, and would see PBM reforms such as prohibiting retail spread and retained rebates in favor of administrative fees, as likely to be included in this type of reform."
Is UnitedHealth stock a buy, sell or hold?
UnitedHealth shares were up more than 18% on a total return basis (price change plus dividends) for the year to date in mid-November, but have nearly erased this gain following the fatal shooting of the CEO of its insurance unit. Indeed, the healthcare stock is clinging to a 2.9% lead at last check.
Still, Wall Street remains bullish on Dow Jones stock. According to S&P Global Market Intelligence, the average analyst target price for UNH stock is $636.20, representing implied upside of about 20% to current levels. Additionally, the consensus recommendation is Strong Buy.
Financial services firm Argus Research is one of those with a Buy rating on UNH and recently raised its price target on the large-cap stock to $670 from $600.
"Despite an outlook for 2025 from Buy-rated UnitedHealth Group that fell short of the Street’s expectations, we believe the long-term growth engines for UnitedHealth remain intact," wrote Argus Research analyst David Toung in a December 4 note. "Management acknowledges that the outlook is conservative, leaving room for outperformance, in our view. The company has numerous levers to pull to improve operating margins over the next 12 months."
Related content
-
Do You Really Need That Wine Cellar?Home Features Wine cellars are a popular feature in high-end houses. Will installing one in your home increase its value, or would you be better off with a cheaper solution?
-
Think a Repeal of the Estate Tax Wouldn't Affect You? WrongThe wording of any law that repeals or otherwise changes the federal estate tax could have an impact on all of us. Here's what you need to know, courtesy of an estate planning and tax attorney.
-
Stock Market Today: Investors Look on the Bright SideA generally good week closes on another positive note, as investors, traders and speculators look for fresh catalysts.
-
Stock Market Today: Stocks Climb More Walls of WorryVolatility is back in a normal range, and the trend for the main equity indexes remains positive despite specific and general headwinds.
-
Stock Market Today: UnitedHealth Drags on Dow After CEO SplitsUNH created headwinds for the price-weighted Dow on news that its embattled CEO, Andrew Witty, is stepping down.
-
Stock Market Today: Dow Drops 971 Points as Powell Pressure Ramps UpPresident Trump is increasing his attacks against Jerome Powell, insisting the Fed chair cut interest rates.
-
Stock Market Today: No 'Powell Put'? No ProblemInvestors, traders and speculators look beyond both another Trump post and more signs of slowing economic activity.
-
Which Stocks Stayed Green as the Market Plummeted?Only a handful of S&P 500 stocks managed to generate gains during the market's historic four-day plunge.
-
Stock Market Today: Tariff Talks Drive Another Up-and-Down DayTrade war negotiations are happening, but the "fear gauge" is gyrating, and investors, traders and speculators are still searching for signs of a bottom.
-
M&A Is Why UnitedHealth Group Stock Is in of the 100,000% Return ClubUnitedHealth has given a master class in mergers and acquisitions over the years.
