The Break Up Big Medicine Act: Structural Separation as Healthcare Policy

Warren-Hawley bipartisan legislation targets vertical integration as consolidation reaches unprecedented scale

By Elena Pak, Credentialing Department, WCH

In a political climate defined by partisan gridlock, the introduction of the Break Up Big Medicine Act by Senators Elizabeth Warren (D-Mass.) and Josh Hawley (R-Mo.) represents a rare moment of ideological convergence on healthcare reform. This legislation, which builds upon provisions from their earlier Patients Before Monopolies Act, proposes the most significant structural challenge to vertically integrated healthcare conglomerates in decades. For providers navigating an increasingly consolidated marketplace, this bill represents both a potential recalibration of competitive dynamics and a test of whether bipartisan cooperation can overcome formidable industry opposition.

The Consolidation Landscape: Market Structure and Concentration Data

The scale of vertical integration in American healthcare has reached levels that fundamentally alter market dynamics. Three pharmacy benefit managers—CVS Caremark, Express Scripts (Cigna), and OptumRx (UnitedHealth)—control approximately 80% of prescription drug claims for roughly 270 million Americans. In pharmaceutical wholesaling, three companies—McKesson, Cencora (formerly AmerisourceBergen), and Cardinal Health—command over 90% of the U.S. drug distribution market according to industry analyses, with some sources citing market shares approaching 95-98% depending on measurement methodology.

This consolidation has enabled unprecedented vertical integration. UnitedHealth Group’s 2024 financial results illustrate the revenue scale of these integrated operations. The company reported total consolidated revenues of $400.3 billion, with Optum (its health services division) generating $253 billion and UnitedHealthcare (its insurance arm) producing $298.2 billion. Within Optum, OptumRx revenues reached $133.2 billion in 2024, growing 15% year-over-year. Corporate eliminations—representing internal transactions between segments that must be removed to avoid double-counting—have grown substantially, which may indicate increasing internal transaction volume within the vertically integrated ecosystem.

CVS Health operates a similar structural model, combining its CVS Caremark PBM, CVS Pharmacy retail operations, and Aetna insurance business under unified corporate control. While specific intercompany transaction figures require verification from detailed SEC segment reporting, the basic structure creates identical conflicts of interest: the insurance plan determines coverage, the PBM processes claims and sets reimbursement rates, and the pharmacy dispenses medications—all owned by the same parent company with unified profit incentives.

The Human Impact: Pharmacy Closures and Access Disparities

The consequences of consolidation extend beyond corporate balance sheets into healthcare access patterns. According to data compiled by the American Economic Liberties Project, at least 326 pharmacies closed between December 19, 2024—when Congress abandoned PBM reform provisions in a spending package—and the end of February 2025. Of these closures, 237 (73%) were independent pharmacies. Since January 2024, advocacy organizations report that at least 3,179 pharmacies—more than 5% of all U.S. pharmacies—have permanently closed.

Research published in Health Affairs documents that nearly one-third of all retail pharmacies operating between 2010 and 2020 had closed by 2021. The geographic and demographic distribution of these closures reveals significant healthcare access disparities. Pharmacy closure rates reached 37.5% in predominantly Black neighborhoods and 35.6% in Latino communities, compared to 27.7% in predominantly White areas. Independent pharmacies, which close at more than twice the rate of chain operations, were disproportionately located in minority communities, low-income neighborhoods, and areas with high concentrations of Medicare and Medicaid beneficiaries.

The aggregate effect: nearly 16 million Americans now live in “pharmacy deserts,” and one-third of all U.S. counties have experienced net declines in pharmacy access, affecting 91.6 million people. For physicians, consolidation trends show similar patterns, with approximately 80% of physicians now working for corporate entities rather than maintaining independent practices—representing a fundamental shift in how medical care is organized and delivered in the United States.

Structural Conflicts and Competitive Effects: FTC Findings

Federal Trade Commission investigations have documented the mechanisms through which vertical integration affects independent providers. The FTC’s July 2024 interim staff report on pharmacy benefit managers found that PBM-affiliated pharmacies were reimbursed at higher rates than unaffiliated pharmacies, with disparities especially pronounced in commercial insurance plans. Specialty generic drugs with the most significant price markups were primarily dispensed through PBM-affiliated pharmacies, allowing vertically integrated companies to capture both the reimbursement spread and the dispensing profit margin.

Independent pharmacies report that insurers and PBMs routinely reimburse them below acquisition cost for at least three out of every ten prescriptions they fill, creating economically unsustainable operating conditions for providers lacking vertical integration advantages. When a UnitedHealthcare member visits an Optum Health physician and fills prescriptions at an OptumRx-affiliated pharmacy, UnitedHealth Group captures profit margins at every transaction point that would otherwise flow to independent providers operating at arm’s length.

The vertically integrated companies can steer patients toward affiliated providers through network design, reimburse their own pharmacies at preferential rates compared to independent competitors, and exclude non-affiliated providers from preferred networks—all while maintaining the appearance of competitive market processes. This creates what economists characterize as “structural conflicts of interest”: situations where the economic incentives to favor corporate affiliates systematically override any commitment to competitive neutrality in reimbursement and network access decisions.

Legislative Framework: Structural Separation Modeled on Glass-Steagall

The Break Up Big Medicine Act employs a structural separation approach explicitly modeled on the Glass-Steagall Act, which separated commercial and investment banking following the 1929 stock market crash. Just as Glass-Steagall prohibited banks from engaging in both deposit-taking and securities underwriting—activities that created inherent conflicts of interest—the Break Up Big Medicine Act prohibits common ownership across healthcare sectors where analogous conflicts exist.

The bill’s core provisions establish categorical prohibitions. Parent companies cannot own both a medical provider or management services organization and a pharmacy benefit manager or insurer. Similarly, parent companies of prescription drug or medical device wholesalers cannot own medical providers or management services organizations. Companies in violation would have one year to achieve compliance through divestiture of conflicting business units.

Enforcement authority is distributed across multiple government entities: the Federal Trade Commission, Department of Health and Human Services, Department of Justice, and state attorneys general. Private parties would additionally gain standing to bring lawsuits against violators, creating multiple enforcement channels. Penalties for non-compliance include automatic disgorgement of profits derived from prohibited transactions and forced asset sales. The FTC and DOJ would gain prospective authority to review and block future transactions that would recreate the prohibited conflicts of interest.

This regulatory approach differs fundamentally from traditional antitrust enforcement focused on market share thresholds and competitive effects analysis in defined relevant markets. Rather than evaluating whether a specific merger substantially lessens competition through economic modeling of price effects and market concentration, structural separation prohibits certain business combinations categorically based on the conflicts of interest they create—regardless of market share or demonstrable price effects in specific transactions.

The Efficiency Debate: Theoretical Benefits Versus Empirical Evidence

Proponents of vertical integration consistently argue that combining insurance, pharmacy benefits, and provider services creates opportunities for genuine operational efficiencies and care quality improvements. The theoretical framework is compelling: integrated data systems enable better care coordination across settings, unified ownership eliminates duplicative administrative functions, aligned financial incentives facilitate chronic disease management across the care continuum, and comprehensive patient profiles enable more effective population health interventions when a single entity manages insurance coverage, pharmacy benefits, and clinical care delivery.

UnitedHealth Group emphasizes its value-based care arrangements and integrated care management platforms. CVS Health has integrated Aetna’s insurance data with its pharmacy and retail operations to create comprehensive patient profiles for targeted clinical interventions. Both companies argue that vertical integration enables sophisticated care management programs—particularly for complex chronic conditions requiring coordination across multiple care settings and provider types—that would be operationally infeasible in fragmented delivery systems with multiple unaffiliated entities operating independently.

The empirical evidence for cost savings flowing to consumers, employers, or government payers remains limited and contested. Healthcare spending reached $4.3 trillion in 2021—approximately $13,000 per person and nearly 20% of GDP—continuing its upward trajectory despite decades of progressive consolidation. The Purchaser Business Group on Health, representing the nation’s largest employers who collectively purchase healthcare coverage for millions of employees, concludes that consolidation has not improved quality or lowered costs. Their analysis suggests that consolidation—whether horizontal or vertical—has worked to the detriment of employers and patients.

UnitedHealth Group’s medical care ratio provides an illustrative case study. The company reported an MCR of 85.5% in 2024 compared to 83.2% in 2023, indicating that a higher percentage of premium revenue was paid out in medical claims. Company executives attributed this increase to CMS Medicare funding reductions, member mix changes, and the timing of Medicaid redeterminations following the pandemic-era continuous enrollment provisions. However, this trend does not clearly demonstrate the cost efficiencies often promised by vertical integration proponents. The MCR is influenced by numerous factors including CMS benchmark methodologies, member acuity patterns, risk adjustment transfers, Medicare Advantage coding intensity practices, and commercial market pricing cycles—making it difficult to isolate the specific effects of vertical integration on underlying medical cost trends versus premium revenue dynamics.

Political Dynamics and Legislative Prospects

The timing of the Break Up Big Medicine Act reflects strategic political considerations by both sponsors. Healthcare costs remain a salient voter concern across demographic and geographic segments, and both parties seek credible policy responses ahead of midterm elections where economic issues could prove decisive. Recent regulatory and legislative activity has created momentum for PBM reform specifically, with new regulations included in appropriations packages and President Trump issuing executive orders directing federal agencies to “reevaluate the role of middlemen” in prescription drug pricing—language that aligns closely with the Warren-Hawley bill’s structural separation objectives.

The Warren-Hawley collaboration merits particular attention given their positions at opposite ends of the ideological spectrum. Warren represents the progressive wing of the Democratic Party, with a career-long focus on corporate accountability, financial regulation, and consumer protection. Hawley has positioned himself as a populist conservative critic of concentrated corporate power and cultural elites. Their partnership on healthcare reform—extending beyond this bill to include the earlier Patients Before Monopolies Act focused specifically on PBM-pharmacy separation—indicates that healthcare consolidation represents one of the few policy areas capable of generating genuine cross-partisan cooperation rather than merely tactical coalition-building on narrow issues.

However, the path to passage confronts formidable obstacles. If the bill fails to advance through committee consideration and floor votes before midterm elections fundamentally alter the congressional calendar, it will likely lose momentum as the political focus shifts toward 2026 presidential positioning. The affected industries represent some of the largest and most politically connected corporations in America. UnitedHealth Group generates annual revenues exceeding $400 billion and employs nearly 400,000 people across its operations. CVS Health commands similar scale. These companies maintain extensive government affairs operations and possess the resources to sustain multi-year lobbying campaigns against legislation threatening their fundamental business models.

Industry trade associations will predictably argue that forced divestiture would disrupt care delivery for millions of Americans currently served through integrated platforms, eliminate efficiency gains from integrated care coordination and data sharing, create market uncertainty that ultimately harms patients through reduced investment and service disruption, and represent punitive retroactive regulation of business models that developed under decades of permissive regulatory oversight. Legal challenges invoking constitutional protections for property rights, due process, and commercial relationships are virtually certain if the legislation advances toward enactment.

State-Level Precedents: Arkansas and the Attorneys General Coalition

The federal legislative effort occurs against a backdrop of state-level action that provides both precedent and political momentum. Arkansas Governor Sarah Huckabee Sanders signed HB 1150 into law in April 2025, making Arkansas the first state to prohibit pharmacy benefit managers from owning pharmacies. The Arkansas legislation mirrors key structural separation provisions of the federal Patients Before Monopolies Act and demonstrates that this policy approach commands bipartisan support at the state level, where legislators often face less industry pressure than their federal counterparts and maintain closer connections to independent providers experiencing competitive harm.

A bipartisan coalition of 39 state and territory attorneys general sent a letter to congressional leaders urging passage of federal legislation prohibiting PBM ownership of pharmacies, explicitly citing the structural conflicts of interest inherent in common ownership. This unprecedented breadth of attorney general support—spanning red states, blue states, and purple states—provides crucial political cover for federal legislators who might otherwise fear industry retaliation through campaign contributions and independent expenditure campaigns. The attorneys general coalition also establishes a foundation for coordinated state-level enforcement even if federal legislation stalls, creating potential for a patchwork of state requirements that may ultimately pressure federal harmonization.

The state-level movement creates complex regulatory dynamics. If multiple states enact structural separation requirements with different provisions, effective dates, and enforcement mechanisms, companies face the operational challenge of navigating fifty different state regulatory regimes—some prohibiting certain combinations, others permitting them, and still others imposing intermediate restrictions. This patchwork has historically created industry pressure for uniform federal standards that preempt inconsistent state requirements, a dynamic that has played out in contexts ranging from data privacy regulation to environmental standards to consumer protection rules.

Implications for Providers and the Healthcare System

For independent pharmacies, physician practices, and other healthcare providers operating outside vertically integrated conglomerates, the Break Up Big Medicine Act represents potentially transformative regulatory change. Structural separation would eliminate the most egregious forms of affiliated self-preferencing and discriminatory reimbursement that currently advantage corporate affiliates over arm’s-length competitors. Independent pharmacies would compete based on service quality, convenience, medication therapy management, and clinical outcomes rather than facing systematic exclusion from preferred networks controlled by vertically integrated competitors operating their own pharmacy chains with inherent economic incentives to steer volume internally.

Physicians in independent practice would no longer face structural pressure to sell their practices to hospital systems or corporate management services organizations simply to maintain adequate patient access through insurance network participation. Medical device wholesalers could not leverage ownership of provider organizations to favor their own distribution networks over competing wholesalers offering potentially better pricing or service. The competitive playing field would be substantially leveled, though certainly not perfected—advantages from operational scale, brand recognition, technological capabilities, and capital access would continue to matter significantly, but the structural advantages from vertical integration that systematically favor affiliated entities would be eliminated.

The legislation also addresses the existential threat confronting independent providers under current market trajectories. With independent pharmacy closures proceeding at more than twice the rate of chain pharmacy closures, and 80% of physicians now employed by corporate entities rather than maintaining independent practices, observable trends point toward a healthcare system dominated entirely by a small number of vertically integrated conglomerates within ten to fifteen years absent regulatory intervention. Structural separation could arrest this consolidation trajectory and preserve market space for diverse organizational models of care delivery, including physician-owned practices, community-based independent pharmacies serving local populations, and specialized providers focused on particular patient populations or clinical conditions.

For patients, potential benefits include restored substantive choice in provider selection rather than nominal choice constrained by network steering, reduced systematic steering toward corporate affiliates that may not represent optimal clinical matches, and renewed price competition that could pressure both retail prices and insurance premium trends downward. The theoretical risk frequently cited by integration proponents—disruption of integrated care coordination platforms—depends critically on whether the claimed clinical benefits of vertical integration have been realized in actual practice or represent primarily aspirational projections. If integration has served primarily to concentrate profit margins and market power rather than improve care coordination and health outcomes, structural separation may impose minimal clinical costs while delivering substantial benefits through restored competitive dynamics.

A Fundamental Policy Choice

The Break Up Big Medicine Act forces a fundamental choice about how American healthcare should be structurally organized. The current model of vertical integration has produced corporate entities of unprecedented scale controlling vast portions of the healthcare supply chain from insurance coverage through pharmacy benefits to drug wholesaling and clinical care delivery. Whether this consolidation has delivered promised efficiencies and care quality improvements, or primarily concentrated profits and market power while raising costs and reducing competitive options, remains intensely contested among economists, policymakers, industry participants, and academic researchers.

What cannot be reasonably contested based on available empirical evidence is the epidemic of pharmacy closures disproportionately affecting minority and low-income communities, the near-complete disappearance of independent physician practices in many specialties and geographic markets, healthcare costs approaching 20% of GDP despite decades of consolidation theoretically aimed at efficiency gains, and growing perception among patients, independent providers, and employer purchasers that the system increasingly serves the financial interests of corporate shareholders more effectively than the health needs of patients and communities.

As Emma Freer of the American Economic Liberties Project observes, policymakers in both parties have incentivized healthcare consolidation for decades, resulting in massive conglomerates that exploit structural conflicts of interest to drive costs upward, quality and access downward, and independent providers systematically out of business through discriminatory reimbursement and network exclusion. The Break Up Big Medicine Act offers an alternative regulatory path—one that prioritizes genuinely competitive markets, provider independence, and patient welfare over corporate integration strategies that have demonstrably failed to control costs or measurably improve population health outcomes despite theoretical efficiency rationales.

For American healthcare providers navigating these crosscurrents—independent pharmacists who have witnessed one-third of their professional colleagues forced to close, physicians increasingly employed by corporate entities treating medicine as a profit center, and patients struggling with healthcare access in expanding pharmacy deserts and underserved communities—the coming months will determine whether this rare bipartisan moment translates into enacted legislation or dissipates into familiar gridlock as industry lobbying intensifies and political attention shifts toward approaching elections.

The stakes extend well beyond this specific legislative vehicle. If vertical integration continues along current trajectories unchecked by structural regulation, the logical endpoint within ten to fifteen years is a healthcare system dominated by perhaps three to five massive conglomerates controlling insurance, pharmacy benefits, drug wholesaling, physician practices, hospitals, and retail pharmacies. Competition would exist primarily at the margins, with most Americans’ complete healthcare journeys occurring entirely within vertically integrated corporate silos. The alternative vision embodied in structural separation legislation envisions a marketplace where providers succeed based on clinical quality and service excellence rather than corporate affiliation and structural advantages, where patients exercise meaningful choice rather than being steered through network design and reimbursement incentives, and where innovation emerges from organizationally diverse sources rather than the strategic planning departments of a handful of dominant conglomerates.

The question is whether structural separation comes through democratic legislative processes while such intervention remains feasible, or whether reform must await a system crisis when consolidation has proceeded to the point where reversal becomes economically and politically impractical. The Break Up Big Medicine Act represents a test of whether American political institutions retain the capacity to regulate concentrated corporate power proactively in the public interest, or whether such regulation must always follow crisis rather than preventing it.

Sources

1. Senator Elizabeth Warren – Official Press Release: “Warren, Hawley Introduce Bipartisan Bill to Break Up Big Medicine” (February 10, 2026) – Available at: warren.senate.gov
2. Senator Josh Hawley – Official Statement: “Hawley, Warren Introduce Bill to Break Up Big Medicine” (February 2026) – Available at: hawley.senate.gov
3. American Economic Liberties Project – “326 Pharmacies Have Closed Since Elon Musk Tanked PBM Reform” (March 10, 2025) – Available at: economicliberties.us
4. American Economic Liberties Project – “Economic Liberties Commends 39 State Attorneys General Call for Congress to Break Up Big Medicine” (April 15, 2025) – Available at: economicliberties.us
5. UnitedHealth Group – Form 10-K Annual Report for fiscal year ended December 31, 2024 (Filed February 27, 2025 with SEC) – Available at: sec.gov/edgar, Accession Number: 0000731766-25-000063
6. UnitedHealth Group – “UnitedHealth Group Reports 2024 Results” – Earnings Release and Exhibit 99.1 (Filed January 16, 2025) – Available at: sec.gov and unitedhealthgroup.com/investors
7. Managed Healthcare Executive – “UnitedHealth Group’s 2024 Revenue Grows to Reach $400.3 Billion” (January 2025) – Analysis of UNH financial results and medical care ratio trends
8. Health Affairs – “More US Pharmacies Closed Than Opened In 2018–21; Independent Pharmacies, Those In Black, Latinx Communities Most At Risk” (2024) – Peer-reviewed research on pharmacy closure patterns and demographic disparities
9. UC Berkeley School of Public Health – “Nearly 1 in 3 retail pharmacies have closed since 2010” (December 2024) – Research analysis of pharmacy access trends
10. Federal Trade Commission – “Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies” – Interim Staff Report (July 2024) – Available at: ftc.gov
11. Drug Channels Institute – “The 2025-26 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors” (October 2025) – Comprehensive industry analysis with revenue data and market concentration metrics
12. IntuitionLabs – “US Drug Wholesalers: How McKesson, Cencora & Cardinal Control 90%+ of Distribution” (November 2025) – Industry analysis report on pharmaceutical wholesaling concentration
13. Senator Elizabeth Warren – Letter to FTC Chair Lina Khan: “Warren Urges FTC to Protect Cancer Patients, Closely Scrutinize Acquisitions of Oncology Practices for Anticompetitive Effects” (2024) – Available at: warren.senate.gov
14. CBS News – “Elizabeth Warren and Josh Hawley, bipartisan Senate duo, aim to break up ‘Big Medicine'” (February 2026)
15. The Hill – “Warren, Hawley introducing legislation to break up ‘Big Medicine'” (February 2026)
16. American Journal of Managed Care – “Bipartisan Break Up Big Medicine Act Targets Vertical Integration in Health Care” (February 2026)
17. Purchaser Business Group on Health – Statements and analysis on healthcare consolidation effects (2024-2025) – Representing large employer perspectives
18. Medicare Market Insights – “UnitedHealth Group 2024 Calendar Year Results” (April 2025) – Detailed financial analysis of vertical integration revenue flows and segment performance