Investing.com — The shares of UnitedHealth Group (NYSE: UNH), CVS Health (NYSE: CVS) and Cigna Corp . (NYSE: NYSE:) rose in today’s trading session, posting increases of 3%, 5.5% and 5% respectively. The move higher comes as investors reevaluate the impact of new health care provisions included in a continuing resolution agreed to by congressional leaders. Mizuho analyst Ann Hynes pointed out that the provisions, which target pharmacy benefit managers (PBMs), are less stringent than feared and will not take effect until 2028, providing ample time for the industry to adjust.
The legislation focuses on eliminating Medicaid spread pricing, mandating full reimbursement pass-through, and adding reporting transparency requirements. While the language may affect PBM contracts in the commercial market, it is considered manageable. Notably, the legislation does not require the total elimination of refunds.
Since Dec. 8, when concerns about President-elect Trump’s focus on the PBM industry caused a sell-off, managed care companies have seen significant declines in their stock prices relative to broader market indexes. However, shares are now trading at an average of 10.8 times estimated 2025 adjusted EPS, down from 12.8 times before initial industry comments.
The provisions are intended to increase transparency and accountability within the PBM industry, with measures such as banning spread pricing in Medicaid and granting new audit rights to Part D plan sponsors. These changes are expected to introduce more duties administrative rather than significantly alter PBMs’ current business models.
“We believe the sell-off in managed care companies since Dec. 8, when it became clear that President-elect Trump would target the PBM industry, appears excessive,” Hynes said. This sentiment has likely contributed to the rebound in stock prices as the market digests the legislation’s potential long-term effects.
The reevaluation of the initial reaction to the legislative news has provided a boost to shares of UnitedHealth, CVS Health and Cigna Corp., as investors recognize that the impact of the provisions may not be as damaging to the companies’ future as previously thought. With time to renegotiate and restructure contracts, these managed care organizations appear to be on firmer ground than their recent stock performance suggests.
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