A bipartisan bill filed in the U.S. Senate last week seeks to lower health costs by eliminating incentives huge conglomerates have to raise them. It would do so by prohibiting companies from being both the provider of health services and the entity that determines how much consumers ultimately have to pay for them.
Introduced by Sens. Josh Hawly, R-Mo., and Elizabeth Warren, D-Mass., the Break Up Big Medicine Act would be the biggest antitrust measure undertaken in decades.
American per-capita health spending is by far the highest in the world, yet it produces greatly inferior outcomes. So it’s hard not to suspect that somebody’s skimming exploding amounts of money without adding much in the way of value.
Three conglomerates — UnitedHealth Group, CVS Health and Cigna-Express Scripts — are among the 13 largest companies by revenue in the United States.
And they’re dominant players in many parts of the health sector. They own huge insurers and pharmacy middlemen as well as thousands of pharmacies and doctors’ offices.
In a written statement, Warren said that such “vertical integration” gave the companies an incentive to raise prices. That might be seen as especially true because regardless of whether care is financed by employers, the government or individuals, the ultimate payer is the public.
“There’s no question that massive health care companies have created layers of complexity to jack up the price of everything from prescription drugs to a visit to the doctor,” Warren said. “The only way to make health care more affordable is to break up these health care conglomerates. Our bill would be a monumental step towards ending the stranglehold that corporate giants have on our broken health care system.”
The bill would prohibit companies from owning medical providers such as doctors’ offices and pharmacies while simultaneously owning insurers and their representatives such as middlemen known as pharmacy benefit managers, or PBMs. It would empower the Justice Department, the Federal Trade Commission, the Department of Health and Human Services, state attorneys general and private parties to sue claiming violations.
To illustrate how owning so many sides of a medical transaction might drive up prices, consider drug middlemen.
The PBMs owned by the three big conglomerates control nearly 80% of the insured prescription transactions in the United States. They work on behalf of big insurers. Importantly, each of the big PBMs is a sister company to one of the eight biggest insurers by market share.
PBMs decide which drugs are covered and that gives them massive leverage to negotiate non-transparent rebates from manufacturers who want insured patients to buy their products.
Research has shown that increasing rebates gives drugmakers a strong incentive to raise list prices. Delinking rebates and list prices would reduce annual drug spending by nearly $100 billion, the University of Southern California’s Schaeffer Center reported last summer.
In addition, all three conglomerates own mail-order pharmacies and CVS also owns the nation’s largest retail chain. Their PBMs decide how much to reimburse their own pharmacies as well as those of their competitors.
Many see this as an inherent conflict. For the past decade, independent and small-chain pharmacies have accused the big PBMs of discriminating against them and driving them out of business in droves.
Last year, those suspicions led the Federal Trade Commission to accuse the PBMs of wild price hikes and discriminatory practices meant to drive customers away from competitors and into their own pharmacies.
Asked for comment on the Hawley-Warren bill, UnitedHealth Group and Cigna-Express Scripts didn’t immediately respond. CVS Health referred to a statement made by CEO Dave Joyner on a Tuesday earnings call. A spokesman said the statement was unrelated to the bill.
“Our commitment to reimagining the health care experience has never been stronger,” said Joyner, who made $18 million in 2024. “We are taking the lead to address some of the biggest challenges in the U.S. health care system — its cost, its complexity, and the fragmentation that exists today.”
Rather than raising health costs, Joyner said CVS Health’s size and its many roles allow it to bring them down.
“By combining our unique set of capabilities, we can provide a connected solution for consumers that delivers better experiences and improves health outcomes at lower cost,” he said, arguing that it was actually better for consumers if CVS acts on patients’ behalf as both buyer and seller.
CVS’s health insurer Aetna’s “members who consistently use CVS Pharmacy have higher medication adherence and lower (emergency room) utilization,” Joyner said.
Hawley, the Republican cosponsor of the bill that would break up CVS, doesn’t seem to buy that argument.
“Americans are paying more and more for health care while the quality of care gets worse and worse.” he said in a written statement. “In their quest to put profits over people, Big Pharma and the insurance companies continue to gobble up every independent health care provider and pharmacy they can find. Working Americans deserve better. This bipartisan legislation is a massive step towards making health care affordable for every American.”
Antonio Ciaccia is a Columbus-based drug-pricing expert who consults with employers and government agencies on how to bring down their costs. He said the Warren-Hawley bill would eliminate the conflict at the center of most prescription transactions.
“If you hire a PBM to manage pharmacy spending and network design when they have their own pharmacy that can benefit from the decisions they make, it’s an obvious conflict,” he said in a text message. “This legislation aims to restore PBMs to their originally intended role as an unconflicted fighter of high drug prices.”
In another illustration of how a health conglomerate can control every aspect of a health transaction, consider UnitedHealth Group, now the third-largest corporation in the United States.
With 42% market share, it has the largest health insurer. A patient insured by UnitedHealth could easily go to a doctors’ office owned by United’s Optum, now the nation’s largest employer of physicians.
If the Optum doctor writes that patient a prescription, UnitedHealth’s OptumRx will handle it because that is the PBM exclusively used by the insurer. The patient could then be forced to avoid the neighborhood pharmacy and fill that prescription through UnitedHealth’s mail order pharmacy.
In other words, insurers and PBMs have long claimed to bring down costs by using their size to negotiate discounts from providers. But if they own the providers, the parent companies are, in essence, negotiating with themselves.
There has been heavy consolidation in the health sector over the past decade, and the results were predictable, said Emma Freer, senior policy analyst for healthcare at the American Economic Liberties Project. Her group started the drumbeat to “break up big medicine” more than a year ago.
“For decades, policymakers in both parties have incentivized vertical consolidation in health care, resulting in Big Medicine behemoths that exploit conflicts of interest to drive costs up, quality down, and independent providers out of business,” Freer said in an email. “This is why we launched the Break Up Big Medicine initiative last year, and we are proud to support the Break Up Big Medicine Act, which will eliminate these conflicts while restoring power over our healthcare system to patients and the providers who care for them.”
Freer added that bipartisan support for the bill is growing.
U.S. Reps. Jake Auchincloss, D-Mass., Diana Harshbarger, R-Tenn., Val Hoyle, D-Ore., Pramila Jayapal, D-Wash., and Pat Ryan, D-N.Y., have co-sponsored similar legislation in the House. And Greg Murphy, R-N.C., and Alexandria Ocasio-Cortez, D-N.Y., have endorsed the concept, Freer said.