Uncertain future of PBMs creating cloud over MCO group, says Morgan Stanley

Morgan Stanley analyst Zack Sopcak noted that managed care stocks he covers are down an average of 10% since February 22 and “theories abound” as to why. In talks with investors, he has heard Medicare for All, drug pricing hearings and cuts to insulin prices all mentioned as potential reasons for the pressure, though “none have really stuck,” Sopcak stated. However, he does believe a lack of understanding or agreement on the future of PBMs and contributions to earnings in light of HHS’ proposals have “created a cloud” over the MCO group, Sopcak said. The analyst, who calls out the magnitude of the move in UnitedHealth (UNH) in particular as unwarranted, points to three potential upcoming catalysts that can “break the group’s malaise” prior to earnings: Anthem’s (ANTM) investor day on March 7, Humana’s (HUM) investor day on March 19 and the Medicare Advantage final rate setting announcement on April 1. Other MCOs include Cigna (CI), Centene (CNC), Molina Healthcare (MOH) and WellCare (WCG).
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