Managed-care stocks continue to tumble amid uncertainty in health care

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Health insurance stocks followed up a bad day on Thursday with even more losses Friday morning, as investors fled the sector plagued by increasing political risks from Washington, D.C.

The S&P 500 Managed Care Index fell as much as 4.8 percent Thursday, to its lowest level since Jan. 8, paced by declines in Anthem Inc., UnitedHealth Group Inc. and Centene Corp.

Shares of Indianapolis-based Anthem fell $11.75 each, or 4.1%, on Thursday, and were down another 7.3 percent, or $20.29 each, at midday Friday, to $255.95 per share,

Health and Human Services Secretary Alex Azar on Thursday renewed his call for large employers to ensure their workers get prescription drug rebates at the pharmacy counter. The agency has proposed the requirement for Medicare’s Part D drug program.

“It’s increasingly clear that both the Trump administration and Congress are eager to shine more light on health care pricing and change the system so that more of the rebates flow directly to the patient (or back-end rebates are eliminated in favor of front-end discounts),” Bloomberg Intelligence analyst Brian Rye said in an email.

Health insurance companies have shed tens of billions in market value over the past two months amid proposals in Washington that threaten to create a long period of uncertainty for payers. Following Medicare for All proposals and the lawsuit challenging the constitutionality of the Affordable Care Act, many generalist investors have lost conviction in managed care, Jefferies health-care strategist Jared Holz said.

“The constant barrage of policy speak from both parties, while unlikely very impactful near term is not what the sector needs as far as an inspiration source,” Holz wrote in a note.

Bulls are hoping for a respite next week when UnitedHealth kicks off earnings season for the sector on Tuesday.

“Uncertainties around drug rebates and Medicare for All have put a damper on otherwise strong performance and guidance” since the fourth-quarter results, Morgan Stanley managed-care analyst Zack Sopcak said in a note to clients.

He expects UnitedHealth’s earnings to set the tone for the group, as usual, but he said that commentary on the Medicare Part D proposed rule and progress on point-of-sale rebate initiatives may be more important for broader health-care sentiment.

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