After years of unbridled expansion in nearly every corner of the health care system, the largest insurance conglomerates are facing new efforts to break up their businesses.
Arguing that the companies have become too dominant, Arkansas and Tennessee passed laws aimed at preventing companies from administering prescription benefits and running retail and mail-order pharmacies. Lawmakers in other states and Washington have proposed similar restrictions.
In response, all three companies (UnitedHealth Group, CVS Health and Cigna) are fighting back fiercely. They and their allies have filed lawsuits, deployed lobbyists, pestered customers with text messages and blanketed the airwaves with ads.
Hours after Gov. Bill Lee of Tennessee, a Republican, signed the new law in May, CVS sued in federal court to block it. Within weeks, UnitedHealth, Cigna's Express Scripts and a trade association of the companies filed additional lawsuits challenging the legislation.
The companies said patients would lose access to their pharmacies.
“We owe it to our patients to do everything in our power to prevent these misguided laws from going into effect,” said Susan Peppers, an executive who oversees Express Scripts.
At a time when affordability has become a key concern, companies say the laws would make prescription drugs more expensive. Supporters of the laws say breaking up the conglomerates would have the opposite effect on prices, eliminating business practices that inflate costs.
Federal and state lawmakers who are pharmacists, doctors and nurses have been pushing many of the legislative proposals, arguing that large conglomerates have harmed patient care and forced small pharmacies to close.
Lawmakers' efforts reflect growing public concern that the three conglomerates have become too large and plagued by conflict. Increasingly, Americans are relying on one of the three titans for nearly every aspect of their health care. The same company that insures them also employs their provider and dispenses their medications.
UnitedHealth, for example, now includes a major insurer; a pharmacy benefits manager or PBM; a wide network of doctors and clinicians; a chain of surgical centers; a clearinghouse that processes insurance claims; a mail order pharmacy; and a bank.
Today, with hundreds of billions of dollars in annual revenue, the three conglomerates are among the 15 largest public companies in the United States by sales. None of the three were in that category in 2011, according to FactSet, a financial data provider.
Critics say conglomerates have exploited conflicts to profit from their wide range of businesses, driving up medical costs and weakening competition. For example, a PBM often directs patients to its parent company's pharmacies. The PBM is responsible for compensating pharmacies for a patient's medications, but often pays other pharmacies less than its affiliated pharmacies.
Those conflicts recently prompted Florida to investigate CVS Health, whose expanding business encompasses an insurer, a PBM, clinics and the nation's largest retail pharmacy chain.
“Here we have a situation where it appears that a company has grown so large that it is controlling market power in a way that could manipulate prices at the expense of consumers,” Florida Attorney General James Uthmeier said at a news conference last month.
CVS said it would work with Uthmeier to address any concerns.
In Washington, companies face three different federal legislative proposals, including two that echo laws in Arkansas and Tennessee. A third bill would ban ownership of both health insurers and doctor offices, which could have far-reaching consequences for UnitedHealth and some hospital systems that operate a health plan and a broad range of medical services.
These proposals, with names like the Break Up Big Medicine Act, have not gained much traction and are intended to spread bold ideas. But they pose a much greater threat to businesses than state actions.
The idea that PBMs should be removed from pharmacies has garnered support from 39 state attorneys general; 25 policy and advocacy groups; and Mark Cuban, the billionaire businessman who runs an online pharmacy and has been an outspoken critic of large conglomerates.
Also backing the breakup legislation are Democrats like Sen. Elizabeth Warren of Massachusetts and Rep. Alexandria Ocasio-Cortez of New York, and prominent Republicans like Sen. Josh Hawley of Missouri and President Donald Trump Jr.'s son.
“The only way to make health care more affordable is to dismantle these health care conglomerates,” Warren said in a press release in February.
Despite high-profile backing, there are huge obstacles to dismantling the companies. Even after passing legislation this year regulating some of the companies' practices, most lawmakers in Washington appear to have little interest in drastic reform. Companies have enormous lobbying power. And a federal judge has already raised serious objections to the legality of the Arkansas legislation.
If Arkansas and Tennessee laws prevailed, the companies would most likely not split their businesses. Instead, they would likely close or sell dozens of pharmacies, which are not crucial to their bottom line. PBM units are much more profitable.
An important step in Arkansas
In addition to the Arkansas and Tennessee laws, similar bills have been proposed in at least eight other states but have not advanced.
State officials have reached a higher “level of frustration” with conglomerates, said Erin Fuse Brown, a health policy professor at Brown University. “Now we're at the point where they've given up.”
A year ago, Arkansas took the first major step by passing a law prohibiting the owner of a PBM from holding a pharmacy license.
“I don't have a problem with big business,” said Jeremiah Moore, a Republican state representative who introduced the bill. “But I believe in competition, and when organizations, like some PBMs, don't fight fairly, I think there are times for the government to step in and ensure a level playing field.”
The conglomerates sued, arguing that the legislation was unconstitutional because it favored state companies over foreign ones. A federal judge temporarily blocked the law from taking effect, saying the conglomerates' argument would likely hold up. The case is pending.
An avalanche of ads and texts in Tennessee
The Arkansas legislation caught the attention of Bobby Harshbarger, a pharmacist and Republican state senator in Tennessee. He is the son of U.S. Rep. Diana Harshbarger, R-Tenn., who is also a pharmacist and among the sponsors of one of the federal bills.
Mr. Harshbarger runs Premier Pharmacy in Kingsport, Tennessee, which his family has been connected to for years. (The conglomerates claim that the Harshbarger family owns the pharmacy, but the Harshbargers denied this.)
Tennessee already prohibits companies from bringing patients to their pharmacies and defrauding small pharmacies.
Harshbarger said a more drastic solution was needed. “Why continue to push legislation that would simply be violated?” asked. “For me, it's gotten to the point where it has to be structural.”
He then introduced the Tennessee bill that became law. He called the companies' warnings “alarming” and said they would not have to close pharmacies to comply.
In their lawsuits, the companies said the disruption would be worse for older and more rural patients who rely on mail-order pharmacies and specialized services, such as nurses who make home visits. They claim the legislation is a thinly veiled attempt to prevent them from doing business in Tennessee.
The law's true purpose, CVS argued in its lawsuit, is to “protect local pharmacies against out-of-state competitors.”
Of the state's more than 1,000 retail pharmacies, CVS said it had 134 retail pharmacies that would have to close or be sold. In its lawsuit, the company said the law would prevent it from mailing treatments to state residents and cited the examples of Sunlenca, an HIV drug, and Balversa, a bladder cancer drug.
In its lawsuit, UnitedHealth said Tennessee law would force it to close or sell 20 pharmacies that specialize in serving people with serious mental health problems and chronic illnesses.
“These laws reduce access to affordable, reliable care and destabilize safety net services that improve patient health outcomes,” said Robert Josephson, a UnitedHealth spokesman.
Express Scripts said it would have to close and relocate a major pharmacy in Memphis that serves patients nationwide.
In the four months before the Tennessee bill passed, CVS spent at least $3 million on advertising to try to defeat it, according to AdImpact, an advertising tracking company.
One dark money group, Shaping Health Initiatives for Tomorrow, which does not disclose its funding sources, spent at least $1.5 million. The group ran ads attacking several Tennessee lawmakers for supporting the legislation, claiming they were “working against” President Trump's TrumpRx website and his “plan to lower drug costs.” The group and its attorney did not respond to requests for comment.
CVS took the fight directly to its customers. Using its text threads reminding people to pick up their prescriptions, CVS sent a mass message to Tennessee customers in early March. He warned them that their pharmacy was at risk of closing and linked them to a form to contact their elected officials.
Less than two weeks later, Tennessee Attorney General Jonathan Skrmetti told the company to stop trying to influence its customers through messages.
“My office has received reports from Tennessee consumers that CVS is abusing customers' trust – and violating state law – by misusing the pharmacy text system to send political advocacy messages,” he said in a letter.
David Whitrap, a CVS spokesman, said the company did not send any further text messages about the issue.
