UNH, CVS, CI: Potential FTC lawsuit in sight

The Federal Trade Commission (FTC) is preparing to file a lawsuit against the three largest pharmacy benefit management (PBM) companies in the United States, “Wall Street Journal” reported. UnitedHealth is on the list (NYSE:UNH) OptumRx, Cigna (NYSE:CI) Express Scripts and CVS Health (NYSE:CVS) Caremark. This potential lawsuit follows a two-year investigation into whether the companies used unfair methods to inflate drug prices, particularly insulin.

FTC Chairwoman Lina Khan said the investigation is aimed at ensuring a more cost-effective healthcare system. The regulator also intends to investigate potential drug price manipulation and increase transparency by reviewing PBM practices.

Before we go any further, it’s important to understand what PBMs are. PBMs act as middlemen between insurers and drug manufacturers. They negotiate discounts on prescription drugs, which directly impacts how much patients pay. Interestingly, the three PBMs in question control about 80% of prescriptions in the US.

Potential charges

It’s important to note that on Tuesday, the FTC released an interim report on PBM practices. The report focuses on PBMs’ relationships with pharmacies and raises concerns about potential cost increases for customers and patients.

The report found that PBMs agreed to remove some drugs from their lists in exchange for higher rebates from manufacturers. That could limit patients’ access to cheaper drugs.

Which healthcare stocks are worth buying?

Of the three healthcare stocks mentioned above, both CI and UNH have a Strong Buy consensus rating, while CVS has a Moderate Buy rating. Furthermore, analysts predict the highest upside potential of around 20% for Cigna.