CVS and other drug-plan providers surge after the Trump administration scraps a key part of its push to lower prices
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Reuters
President Donald Trump speaks about lowering drug prices with Health and Human Services Secretary Alex Azar.
CVS, Cigna, and other major players in the pharmacy benefits management space rose in surged on Thursday after the Trump administration said it will abandon its effort to eliminate rebates from government drug plans.
The now-scrapped proposal would have banned PBMs - or intermediaries who negotiate between drug manufacturers and insurance plans - from collecting portions of drug rebates for themselves as profit. PBMs would pass rebates to patients covered by Medicare and Medicaid and find a different way to increase revenue.List prices for pharmaceutical have been increasing over the past decade. But many drug companies have said that net prices - which factor in discounts and rebates negotiated by pharmacy benefit managers on behalf of employers and insurers - have increased far less, or even declined. They say consumers are paying high out-of-pocket costs for their drugs because of policies set by insurers and pharmacy benefit managers.
As such, the healthcare industry was divided on the proposal. PBMs and insurers said the proposal would weaken their ability to negotiate lower costs for patients, while big pharma said it would benefit patients.Drugmakers currently pay out more than $100 billion in rebates annually. Rebates are a big business for PBMs such as Cigna-owned Express Scripts, CVS Health's Caremark business, and UnitedHealth Group-owned OptumRx.
Markets Insider is looking for a panel of millennial investors. If you're active in the markets, CLICK HERE to sign up.Health and Human Services Secretary Alex Azar sparred with the Trump administration over the effectiveness of the strategy, according to Politico. Azar argued addressing rebates was necessary to decrease drug prices, but domestic policy chief Joe Grogan deemed the plan too expensive, costing about $180 billion over a decade."Based on careful analysis and thorough consideration, the President has decided to withdraw the rebate rule," White House spokesman Judd Deere told Business Insider in a statement Thursday. "The Trump administration is encouraged by continuing bipartisan conversations about legislation to reduce outrageous drug costs imposed on the American people, and President Trump will consider using any and all tools to ensure that prescription drug costs will continue to decline."
Other PBMs and companies involved in the pharmaceutical supply chain climbed following the news. Here's a roundup of the biggest movers, all of which were among the biggest gainers in the benchmark S&P 500:
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