On Wednesday, the shares of major healthcare companies witnessed a significant decline of nearly 5%. This downturn was triggered by concerns related to potential alterations in their intricate business models. Among the affected companies are UnitedHealth Group, Cigna, and CVS Health. These entities operate as three of the nation's largest private health insurers and also serve as drug supply chain middlemen known as pharmacy benefit managers (PBMs). They possess pharmacy businesses as well. The stock reaction on that day seemed to be a response to the newly introduced bipartisan legislation aimed at breaking up PBMs.

Impact on UnitedHealth Group and Its Significance

UnitedHealth Group's signage was prominently displayed on a monitor on the floor of the New York Stock Exchange. Michael Nagle | Bloomberg | Getty Images. The shares of major healthcare companies fell as much as 5% on Wednesday, causing concern among investors. UnitedHealth Group, along with Cigna and CVS Health, saw their stocks decline. These companies operate three of the nation's largest private health insurers and PBMs. They also own pharmacy businesses. In early afternoon trading, all three companies' shares were down by at least 4.8%. The stock reaction on Wednesday appeared to be in response to the new bipartisan legislation that aims to break up PBMs, as first reported by the Wall Street Journal. PBMs have faced years of scrutiny from Congress and the Federal Trade Commission due to allegations of inflating drug costs to boost their profits.The share moves also came at a time when insurance companies and their practices faced heightened public criticism following the fatal shooting of Brian Thompson, the CEO of UnitedHealth Group's insurance arm, last week. Health stocks had already been on a downward trend in the days after Thompson's killing. A Senate bill, sponsored by Sens. Elizabeth Warren, D-Mass., and Josh Hawley, R-Mo., would force the companies that own health insurers or PBMs to divest their pharmacy businesses within three years, according to the Journal. The lawmakers informed the Journal that a companion bill is scheduled to be introduced in the House on Wednesday. "PBMs have manipulated the market to enrich themselves—hiking up drug costs, cheating employers, and driving small pharmacies out of business," Warren said in a release. The release added that healthcare companies that own both PBMs and pharmacies have a "gross conflict of interest that enables these companies to enrich themselves at the expense of patients and independent pharmacies."The largest PBMs – UnitedHealth Group's Optum Rx, CVS Health's Caremark, and Cigna's Express Scripts – are all owned by or connected to health insurers. According to the FTC, they collectively administer about 80% of the nation's prescriptions. PBMs play a crucial role in the drug supply chain in the U.S. They negotiate rebates with drug manufacturers on behalf of insurers, large employers, and federal health plans. They also create formularies that determine which medications are covered by insurance and reimburse pharmacies for prescriptions. The FTC has been conducting an investigation into PBMs since 2022.— CNBC’s Bertha Coombs contributed to this report