Yesterday, we reviewed the major themes covered in the Senate Finance Committee's "interview" of seven pharma executives on Tuesday. The implications of administration policy to eliminate rebates has obvious implications for PBMs but the read through to managed care is significant. While Bernie Sander’s Medicare For All bill is no more than headline risk, be ready for these headlines from 20+ Democratic candidates for President to play on a loop until November 2020. For UNH and it’s eroding premium valuation should be of great concern.
That is one reason we put UNH on our Hedgeye Health Care short bench two weeks ago. The reverse in sentiment on UNH has been violent over the last few days as consensus comes to grips with changes that Emily Evans has been warning about for almost a year.
Thesis Points
- Medicare Advantage is well past peak growth and while penetration will continue to advance, growth in covered lives is likely to decelerate to the low single digits
- Commercial Insurance enrollment will remain bound by a working age population that is not growing with peak insurance
- OptumRx margins are at risk from changes in rebate policy at the Federal level
- Optum Health has become increasingly levered to provider revenue through an aggressive acquisition strategy
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Thomas Tobin
Managing Director
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Emily Evans
Managing Director – Health Policy
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