Bad Medicine: Why Breaking Up Big Health Care Could Make It Worse
Washington has found its latest villain: “Big Medicine.” The proposed fix? Break it up and hope the pieces behave better than the whole.
Americans have real reasons to be frustrated about high health care costs, and large conglomerates rank somewhere between unpopular and reviled—roughly where Microsoft’s “Clippy” sat in the 1990s. So it’s no surprise that Sens. Elizabeth Warren (D-Mass.) and Josh Hawley (R-Mo.) have teamed up to introduce S. 3822, the Break Up Big Medicine Act (BMBA). The bipartisan bill targets vertical integration—firms operating at multiple levels of the supply chain—in health care.
If enacted, the BMBA would bar parent companies of prescription-drug or medical-device wholesalers from owning or controlling health care providers or management services organizations (MSOs). It would also prohibit parent companies from owning or controlling both insurers or pharmacy benefit managers (PBMs) and care providers.
The bill defines “providers” broadly. It sweeps in physician practices and hospitals, along with pharmacies, urgent- and emergency-care providers, and ambulatory-surgery centers. MSOs include entities that support providers with “payroll, human resources, employment screening, payer contracting, billing and collection, coding, information technology … patient scheduling, property or equipment leasing, and administrative or business services,” as well as other nonclinical functions.
The BMBA never defines “control.” That omission matters. It could extend the prohibition beyond full ownership to cover negative controls, minority equity stakes with governance rights, or other governance arrangements.
The compliance timeline is tight. Covered entities would have just one year to divest prohibited assets. That is a tall order. Untangling conglomerates, splitting data systems, reallocating contracts, and rebuilding independent management structures carry significant operational risk. The bill also opens the door to enforcement by the Federal Trade Commission (FTC), U.S. Justice Department (DOJ), and Department of Health and Human Services (HHS), as well as state attorneys general and private plaintiffs. It authorizes the FTC and DOJ to challenge future mergers and acquisitions, and it imposes penalties that include forced divestiture and profit disgorgement.
States have already experimented with similar “break up” efforts. Arkansas, for example, is locked in a constitutional fight over a law that bars PBMs from owning or controlling pharmacy chains. Even supporters of stricter PBM regulation have criticized the measure for risking pharmacy closures, creating “pharmacy deserts,” and limiting access to medicines in rural areas. Other states—including Massachusetts, California, and Oregon—have taken a different tack, imposing structural limits on health care ownership primarily through expanded merger review.
Supporters of the BMBA argue that separating ownership will boost competition. In their view, integration creates conflicts of interest that allow firms to leverage supply chains, exclude rivals, limit patient choice, and raise prices. But the economic evidence offers a more complicated picture. Vertical integration can create harmful conflicts in some cases. In others, it can align incentives, reduce costs, and improve how firms meet patient needs. Blanket bans risk missing that distinction—and may produce the opposite of their intended effect.