REUTERS: UnitedHealth Group Inc will stick with its decision to pass on drug maker discounts to patients to help them beat rising medicine prices despite the U.S. government having withdrawn a similar proposed policy in its health programs, its top executive said on Thursday.
"You can expect us not to change our stance on rebates," Chief Executive Officer David Wichmann said on a conference call with analysts to discuss the earnings.
UnitedHealth shares were down US$5.65, or 2per cent, at US$260.94 in morning trading, after earlier rising about 1per cent in premarket trading on news the company beat estimates for quarterly profit and boosted its forecast for 2019 earnings.
The share decline came after the conference call, in which the company said 2019 revenue would not hit the company's original target.
"We think UnitedHealth is underperforming the peers today likely because on the call, they guided 2019 revenues to now be 'at or slightly below' the prior revenue guidance range of US$243-245 billion," Scott Fidel an analyst at Stephens said.
Two analysts and one investor said the decision to stick with its point-of-sale rebates did not seem to be linked to the share price fall.
UnitedHealth said in March its pharmacy-benefit management unit OptumRx would only sell new health plans that give the after-market discounts it negotiates with drugmakers directly to patients. About 9 million of its customers are in such plans this year.The company is the first U.S. health insurer to report quarterly results after the Trump administration last week shelved its proposal to pass billions of dollars in rebates to Medicare patients.
Pharmacy benefits managers receive after-market discounts from drug companies and allow their clients, such as large employers, to incorporate them into overall premium pricing or share them with patients.
Wichmann said the government's decision showed that the Trump administration values pharmacy benefit managers as a "counterbalance" to drug prices.
UnitedHealth and other insurers still face other potential health policy changes and pressure as rising healthcare costs take the center stage in debates ahead of the 2020 U.S. presidential elections.
Some Democratic candidates have proposed a complete ban on private health insurance in favor of a government-run Medicare-for-all plan.
REVENUE OUTLOOK LOWERED
UnitedHealth Chief Financial Officer John Rex said he expects 2019 revenue to be "at or just slightly below" its previously given range of US$243 billion to US$245 billion in 2019.
UnitedHealth raised its full-year adjusted earnings forecast to between US$14.70 and US$14.90 per share, from an earlier forecast of between US$14.50 and US$14.75 per share.
The company's medical care ratio, or the percentage of premiums paid out for medical services, worsened to 83.1per cent, from 81.9per cent a year earlier. Analysts had expected 83per cent.
Net earnings attributable to shareholders rose 12.7per cent to US$3.29 billion, or US$3.42 per share, in the three months ended June 30.
Excluding items, UnitedHealth earned US$3.60 per share, beating the average analyst estimate of US$3.45, according to IBES data from Refinitiv.
(Reporting by Caroline Humer in New York and Tamara Mathias and Manojna Maddipatla in Bengaluru; Editing by Sriraj Kalluvila and Bernadette Baum)