A bipartisan bill introduced in Congress aims to force conglomerates like CVS to divest their pharmacy businesses. Senators Warren and Hawley are sponsoring the bill that would prevent companies from owning pharmacy benefit managers and health insurers in addition to pharmacies. The legislation seeks to address concerns about monopolistic practices in the healthcare sector, particularly in the realm of prescription drug prices.
Critics argue that large PBMs, such as CVS Health’s Caremark and others, wield too much power in negotiating drug prices and steer patients towards their own pharmacies, which can drive up costs and force independent pharmacies out of business. The bill aims to increase transparency, pass rebate savings to patients, and prevent spread pricing practices that disadvantage smaller pharmacies.
Senator Warren has been a vocal opponent of industry consolidation, including in the healthcare sector. She has joined forces with like-minded legislators to challenge mergers and acquisitions that lead to market dominance. The bill sponsored by Warren and Hawley is part of a broader effort to regulate the healthcare industry and promote fair competition.
The role of the federal government, particularly the FTC and SEC, in enforcing antitrust laws is crucial in ensuring a level playing field for businesses. Cases like the breakup of AT&T in the 1980s demonstrate the government’s ability to take action against monopolies. The recent appointment of Andrew Ferguson as the new Chair of the FTC may impact future antitrust enforcement efforts, potentially creating a more business-friendly environment for mergers and acquisitions in the healthcare sector. The Commission asserted that the acquisition of Medco by Merck could lead to decreased competition in the pharmaceutical manufacturing and sales sector, as well as in the provision of pharmacy benefit management (PBM) services, resulting in higher prices and lower quality. The settlement required Medco to take measures to mitigate any favoritism towards Merck’s products over competitors’ products in relation to the PBM services provided by Medco.
Following years of legal battles, the corporate split between Merck and Medco officially occurred in 2003, leading to the establishment of an independent PBM called Medco Health Solutions. Over time, Medco acquired the specialty pharmacy Accredo, which later became a subsidiary of the PBM. Subsequently, Express Scripts, another major PBM, acquired Medco. Eventually, the health insurer Cigna merged with Express Scripts in 2018 and rebranded its health services division as Evernorth in 2020, encompassing Express Scripts, Accredo, and eviCore.
The evolution of PBMs like Medco and Express Scripts highlights the shift from controlling the drug supply chain through partnerships with pharmaceutical companies to a different form of problematic consolidation. Senators Warren and Hawley aim to sever ties specifically related to the pharmacy business, although history demonstrates the challenges associated with achieving this goal.
