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Medical Care

Healthcare Stocks Plunge as Lawmakers, Patients Seek Model Changes

2024-12-11

On Wednesday, the shares of major healthcare companies witnessed a significant decline of nearly 5%. This downturn was triggered by concerns related to potential alterations in their intricate business models. Among the affected companies are UnitedHealth Group, Cigna, and CVS Health. These entities operate as three of the nation's largest private health insurers and also serve as drug supply chain middlemen known as pharmacy benefit managers (PBMs). They possess pharmacy businesses as well. The stock reaction on that day seemed to be a response to the newly introduced bipartisan legislation aimed at breaking up PBMs.

Impact on UnitedHealth Group and Its Significance

UnitedHealth Group's signage was prominently displayed on a monitor on the floor of the New York Stock Exchange. Michael Nagle | Bloomberg | Getty Images. The shares of major healthcare companies fell as much as 5% on Wednesday, causing concern among investors. UnitedHealth Group, along with Cigna and CVS Health, saw their stocks decline. These companies operate three of the nation's largest private health insurers and PBMs. They also own pharmacy businesses. In early afternoon trading, all three companies' shares were down by at least 4.8%. The stock reaction on Wednesday appeared to be in response to the new bipartisan legislation that aims to break up PBMs, as first reported by the Wall Street Journal. PBMs have faced years of scrutiny from Congress and the Federal Trade Commission due to allegations of inflating drug costs to boost their profits.The share moves also came at a time when insurance companies and their practices faced heightened public criticism following the fatal shooting of Brian Thompson, the CEO of UnitedHealth Group's insurance arm, last week. Health stocks had already been on a downward trend in the days after Thompson's killing. A Senate bill, sponsored by Sens. Elizabeth Warren, D-Mass., and Josh Hawley, R-Mo., would force the companies that own health insurers or PBMs to divest their pharmacy businesses within three years, according to the Journal. The lawmakers informed the Journal that a companion bill is scheduled to be introduced in the House on Wednesday. "PBMs have manipulated the market to enrich themselves—hiking up drug costs, cheating employers, and driving small pharmacies out of business," Warren said in a release. The release added that healthcare companies that own both PBMs and pharmacies have a "gross conflict of interest that enables these companies to enrich themselves at the expense of patients and independent pharmacies."The largest PBMs – UnitedHealth Group's Optum Rx, CVS Health's Caremark, and Cigna's Express Scripts – are all owned by or connected to health insurers. According to the FTC, they collectively administer about 80% of the nation's prescriptions. PBMs play a crucial role in the drug supply chain in the U.S. They negotiate rebates with drug manufacturers on behalf of insurers, large employers, and federal health plans. They also create formularies that determine which medications are covered by insurance and reimburse pharmacies for prescriptions. The FTC has been conducting an investigation into PBMs since 2022.— CNBC’s Bertha Coombs contributed to this report

Congress is taking a significant step with new legislation that aims to reshape the health care landscape. This move could have far-reaching implications for major players like UnitedHealth Group, CVS Health, and Cigna.

Legislation Forces Big Health Care Players to Sell Pharmacies

Background and Context

Members of Congress are pushing for legislation that could break up some of the nation's largest health care conglomerates. The federal legislation, introduced on Wednesday by a group of prominent Republican and Democratic lawmakers, prohibits companies owning drug middlemen or health insurers from also owning pharmacy businesses. This is the most aggressive legislative effort in recent years to target pharmacy benefit managers (P.B.M.s), which control a significant portion of prescriptions in the US. 1: The three largest P.B.M.s - CVS Health's Caremark, Cigna's Express Scripts, and UnitedHealth's Optum Rx - collectively hold 80 percent of prescriptions. This dominance has raised concerns about market manipulation and increased drug costs. The new legislation signals a renewed effort by lawmakers to address these issues. 2: While there has been a bipartisan push to rein in the largest P.B.M.s with legislation requiring more transparency and modest changes to pricing practices, those bills have stalled in Congress. The powerful health care lobbies have put up significant resistance, but the new legislation shows that lawmakers on both sides of the aisle are determined to take on the issue.

Impact on UnitedHealth Group, CVS Health, and Cigna

1: Under the new legislation, UnitedHealth Group, CVS Health, and Cigna would be forced to sell their pharmacies within three years. This is a major blow to these companies, which have built significant pharmacy businesses over the years. It will require them to restructure their operations and potentially find new ways to generate revenue. 2: For UnitedHealth Group, which has Optum Rx as its pharmacy business, this could mean a significant change in its business model. The company will need to focus on its core health insurance business and find alternative ways to provide pharmacy services to its members. For CVS Health, which has Caremark, the sale of its pharmacy could have a major impact on its retail operations and its ability to provide one-stop health care services.

Resistance and Future Outlook

1: It's not clear whether the legislation will gain traction. The powerful health care lobbies have shown that they are willing to fight to protect their interests. However, the fact that lawmakers on both sides of the aisle are supporting the legislation gives it some momentum. 2: If the legislation does pass, it will have a significant impact on the health care industry. It could lead to increased competition in the pharmacy market, which could ultimately benefit consumers by lowering drug costs. But it will also require these companies to adapt and find new ways to operate in a changing regulatory environment.

Carta Healthcare, a pioneer in AI technology for data abstraction, has made a significant move by acquiring Realyze Intelligence. This portfolio company of UPMC Enterprises brings with it a wealth of capabilities and a shared vision to revolutionize healthcare through the power of AI.

Uniting AI for Faster Healthcare Insights

Expanding Combined AI Platforms

The acquisition aims to combine the strengths of both companies. Realyze Intelligence's platform utilizes AI to match patients to clinical trials, expediting research and reducing costs. It examines structured and unstructured data in EHRs to identify ideal patients, while its clinician-trained AI can assemble suitable cohorts in seconds. Carta Healthcare's platform, on the other hand, applies AI to structured and unstructured data to reduce the time and price for data abstraction. Together, they anticipate that their combined technologies' "powerful" automation will offer faster insights and significantly reduce labor demands for various healthcare programs.

For example, in oncology, cardiovascular health, and other specialty areas, the combined platforms have the potential to expand the feasibility of trials and research while increasing data abstraction with expert clinician oversight. This is a major step forward in leveraging AI to improve healthcare outcomes.

CEO Perspectives on the Importance of Data

Brent Dover, CEO of Carta Healthcare, emphasizes the significance of data in healthcare. He believes that data is the single most important ingredient for improving care practices and patient outcomes. From clinical trials to clinical registries, clinicians face vast amounts of data filled with valuable information. Realyze Intelligence's ability to use clinician-trained AI and a human-in-the-loop approach aligns with Carta Healthcare's mission to maximize insights from clinical data.

This shared vision is driving the collaboration and innovation between the two companies. By combining their expertise, they are poised to make a significant impact on the healthcare industry.

Addressing Challenges in Clinical Trials

Aaron Brauser, founder and CEO of Realyze Intelligence, highlights the challenges faced by health systems and pharmaceutical companies in identifying and enrolling patients for clinical trials. The process is costly, labor-intensive, and time-consuming. However, with high-quality, timely data from EHRs and other systems, Realyze Intelligence aims to revolutionize clinical trial matching and reuse the data to enhance research, optimize care pathways, and improve patient outcomes.

For instance, by leveraging AI, they can quickly identify eligible patients and assemble suitable cohorts, saving valuable time and resources. This not only benefits the patients but also accelerates the progress of medical research.

Recent Developments and Funding

In 2023, Carta Healthcare closed a $25 million series B financing round, with additional investments from Memorial Hermann Health System and UnityPoint Health. This follows a $20 million Series B financing round in 2022, which included investors like Paramark Ventures, Frist Cressey Ventures, American College of Cardiology, Asset Management Ventures, CU Healthcare Innovation Fund, Mass General Brigham, Maverick Ventures Investment Fund, and Storm Ventures.

In 2022, Carta Healthcare also became a certified software vendor for the Society of Thoracic Surgeons/American College of Cardiology Transcatheter Valve Therapy Registry. This further showcases their commitment to advancing healthcare through technology.

Moreover, in April, researchers at Memorial Sloan Kettering Cancer Center applied machine learning and large language models to augment the manual curation of cancer data elements using the Realyze Intelligence platform. In February, Realyze Intelligence earned a position among the inaugural class of start-up companies selected for the CancerX Startup Accelerator, part of the Biden administration's Cancer Moonshot program.

These recent achievements demonstrate the growing impact and potential of AI in healthcare and the importance of collaborations like the one between Carta Healthcare and Realyze Intelligence.