Healthcare managers across the board were rising Thursday after the Trump administration dropped a plan to tighten the rule on annual rebates that are worth billions of dollars to the industry.
The plan, which would have eliminated pharmaceutical rebates paid to Medicare Part D and Medicaid plan sponsors, was part of President Trump's plan to lower the prices of consumer prescription drugs.
The decision reportedly was the result of months of infighting between the White House and the Department of Health and Human Services and spurred backlash from the pharmacy benefit managers that administer prescription drug programs.
CVS Health (CVS) - Get CVS Health Corporation Report was up 6.8% to $59.16 in trading, Cigna (CI) - Get Cigna Corporation Report was rising 13.66% to $182.43, and Humana (HUM) - Get Humana Inc. (HUM) Report climbed 13.5% to $281.39. In addition, Anthem (ANTM) - Get Anthem, Inc. Report shares rose 3.23% to $297.22 and Centene (CNC) - Get Centene Corporation Report shares gained 3.2% to $52.85. UnitedHealth Group UNH shares are rising 5.48% to $261.
Analysts at Cantor Fitzgerald now believe that the rebates in this market segment will be in place for the foreseeable future.
"Policy experts estimated the rule would have cost the government $180 billion over ten years, and many were not certain it would be the impetus needed to lower pharmaceutical drug prices. Although most PBMs only retain 0-5% of drug rebates, we believe this news will remove an overhang for stocks with captive PBMs or Part D exposure," Cantor analyst Steven Halper wrote.
CVS and UnitedHealth are holdings in Jim Cramer's Action Alerts PLUS charitable trust.