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.
Vertical Integration: More Competition, Not Less
Entry by a competitor operating at multiple levels of the supply chain usually benefits consumers. It tends to intensify competition by creating more effective players in both upstream and downstream markets. That pattern shows up clearly in the empirical literature. A recent meta-analysis by Daniel Kulick, Gregory Price, and Justin Pierce (October 2025) finds many instances of procompetitive effects and some neutral ones, but only a handful of anticompetitive outcomes. Studies using the most reliable methodologies overwhelmingly identify procompetitive effects and no net anticompetitive harm.
Vertical integration can also cut costs by improving efficiency. Firms avoid the time and expense of repeatedly negotiating contracts at each stage of production and distribution. They can also eliminate “double marginalization” —the need to layer profit margins at multiple stages. Those efficiencies reduce business costs and can translate into lower prices for consumers. Like horizontal integration, vertical integration can generate complementary synergies that improve value. But unlike horizontal mergers, vertical integration does not reduce the number of competitors at any level of the supply chain. That distinction explains why antitrust enforcers have historically treated vertical mergers as posing less risk to competition and consumers than horizontal ones.
Consider Amazon. The company operates an e-commerce marketplace while also competing on that platform with its Amazon Basics house brand. That dual role lets Amazon leverage scale economies, tap into detailed knowledge of consumer demand, and apply expertise across a wide range of products. The result: new offerings, lower shipping costs through bulk orders, and lower production costs through large-scale manufacturing.
When Amazon introduces its own version of a product, competitors face pressure to cut costs, improve quality, offer better deals, or differentiate. Amazon can—and often does—use its control of the marketplace to promote its own products. But that strategy has limits. Steering consumers toward inferior products would erode Amazon’s value proposition. In some cases, steering may also reduce shipping overhead by increasing order volumes.
Research suggests that a marketplace promotes its house-brand products when it expects greater returns from direct sales than from commissions on third-party sellers. That dynamic may explain why Amazon competes directly in only about 8% of products sold on its U.S. marketplace. A 2023 study found that removing Amazon’s house brands would reduce consumer surplus by nearly 4%.
Other examples point in the same direction. Google’s 2015 entry into the photography app market with Google Photos on Android increased user attention in ways that benefited independent developers. Instagram also became more valuable to users after its its integration with Facebook.
Regulation Built This Mess—Integration Helps Survive It
In targeting rising concentration and vertical integration in health care, Sens. Warren and Hawley take aim at a symptom, not the disease. Health care ranks among the most heavily regulated sectors in the economy. The rulebook keeps growing: strict privacy and data-protection standards, extensive administrative and recordkeeping requirements, professional-licensure regimes, and much more. Some of these rules serve essential purposes, given the stakes. Others address real concerns but sweep too broadly, imposing costs that exceed their benefits. Still others do little more than entrench incumbents with the resources and lobbying power to shape the regulatory landscape.
Consider “certificate of need ” (CON) laws. Incumbent hospital systems often lobby for these rules, which require providers to obtain state approval before building new facilities or purchasing equipment. The effect is predictable: they shield well-connected incumbents from competition, while driving up costs and limiting access to care. Independent pharmacists’ support for laws that would block insurers from operating pharmacy chains reflects the same dynamic.
Some regulators go further and actively restrict competition. State dental boards offer a telling example. These boards—typically staffed by practicing dentists—control licensure and often act to exclude would-be competitors. The result is higher prices for patients. The Cato Institute reports that, between 2003 and 2015, the North Carolina State Board of Dental Examiners sent more than 45 cease-and-desist letters to entrepreneurs offering routine teeth-whitening services. It even pressed shopping-mall operators to evict them. The U.S. Supreme Court ultimately found that the board acted under a clear conflict of interest and engaged in illegal, anticompetitive conduct. Yet states did not respond by curbing regulatory capture. Michigan, Georgia, and North Dakota have since increased the number of board seats held by conflicted members. Eight states go further, requiring governors to select board members from lists supplied by dental associations. That is not competition policy—it is cartelization under color of law. And unlike private firms, such boards often enjoy immunity from antitrust liability. If policymakers want to dismantle monopolies that harm patients, this is an obvious place to start.
Layer onto that a fragmented regulatory landscape. States—and sometimes localities—impose their own rules on everything from CON laws to insurance-coverage mandates. The result is a patchwork that drives up compliance costs and makes interstate competition exceedingly difficult. It is hard to square that outcome with any coherent vision of a national market.
This regulatory thicket helps explain consolidation and integration. Compliance carries high fixed costs. Larger firms can spread those costs across greater output, giving them a structural advantage over smaller rivals. Firms also have strong incentives to enter new markets by acquiring upstream or downstream entities. Vertical integration, in turn, can ease compliance by pooling resources, expertise, and institutional knowledge. In heavily regulated markets, it can intensify—rather than dampen—competitive pressure.
The benefits extend beyond compliance. Vertical integration can harmonize governance, align incentives, and facilitate technology upgrades and data sharing. Payer-provider integration, for example, combines claims data with clinical data. That improves predictive modeling, allowing earlier identification of high-risk patients and more proactive care in risk-based or capitated arrangements. Consolidating data flows can also strengthen data security by reducing the number of transfer points—and thus the number of potential targets for hackers.
Integration also supports more effective use of AI-enabled tools. When systems across providers, insurers, PBMs, and pharmacies can communicate seamlessly, firms can allocate resources more efficiently based on patient need. Larger, integrated entities can also diffuse technological and organizational innovations more quickly across the supply chain, extending those gains to more patients.
The BMBA would put a chill on these dynamics. By constraining integration, it risks raising costs, slowing innovation, and ultimately reducing access to care—the very outcomes its sponsors say they want to avoid.
Use Antitrust as a Scalpel, Not a Sledgehammer
None of this suggests that vertical integration or mergers are always benign. They are not. Firms with market power at any level of the supply chain can use integration to raise rivals’ costs, misuse commercially sensitive information, or foreclose competitors. Those strategies can reduce output, limit innovation and choice, and push prices higher.
Contracting practices can cut both ways, too. Steering arrangements, “most favored nation” (MFN) clauses, and similar tools can produce procompetitive or anticompetitive effects, depending on how firms use them. Take steering. When health plans steer patients to affiliated PBMs or pharmacy chains, they may lower costs by aggregating demand. But the same arrangements can also exclude independent pharmacies, weaken competition, and keep prices elevated.
This is precisely why antitrust law exists. The Sherman Act prohibits unreasonable restraints of trade and exclusionary conduct that creates or entrenches monopoly power. Courts apply the “rule of reason” to weigh procompetitive benefits against anticompetitive harms before condemning a practice. That framework matters. It allows enforcers to police abuse without outlawing integration outright. And it works on the front end, too: Section 7 of the Clayton Act already empowers agencies to block mergers likely to harm competition, including in health care markets.
Targeted enforcement preserves what works. When agencies stop firms from abusing market power, they leave intact the efficiencies that benefit consumers. That approach reflects a long-standing principle of U.S. antitrust law: tailor remedies to the harm, rather than punishing firms simply for achieving scale through innovation, business acumen, or even luck.
Blanket bans take the opposite approach. They eliminate entire categories of business arrangements—such as common ownership of insurers and providers—without regard to their actual effects. In trying to prevent potential harms, they also wipe out real efficiencies. The result is likely higher costs, reduced access, and worse outcomes.
Herbert Hovenkamp, one of the country’s leading antitrust scholars, has criticized structural breakups on these grounds. Courts have a mixed record with such remedies, and often a poor one. Even when violations occur, Hovenkamp argues, structural separation should remain a last resort—used only when narrower remedies, like injunctions, cannot address the competitive harm.
Targeted relief may demand more from enforcers. Monitoring compliance is not costless. But it avoids unnecessary collateral damage. In health care, for example, a court could enjoin a steering arrangement that lacks procompetitive justification, while preserving integration that lowers costs. Likewise, if a vertically integrated wholesaler raises rivals’ costs by restricting access to a critical drug, a court can require it to supply competitors on reasonable commercial terms.
Structural breakups, like those mandated by the BMBA, offer no such precision. They discard the benefits along with the risks—leaving consumers worse off in the process.
A Cure Worse Than the Disease
Bills like the BMBA trade on populist appeal. They offer a simple “solution” that treats efficiency-generating arrangements as nails to be hammered. But bans on cross-supply-chain ownership punish firms for responding to administrative complexity, fragmented contracting, and duplicative overhead.
They also sidestep the hard questions. Does the firm even have market power? Is it using that power to harm competition? Do the efficiencies outweigh the risks? Is a breakup necessary—or would it fail to solve the problem, or even make things worse? These are not bureaucratic hurdles. They are the core of sound antitrust analysis. Ignore them, and enforcement risks undermining its own goals.
Policymakers who want lower costs and less consolidation in health care should start elsewhere. Remove the regulatory barriers that entrench incumbents and discourage entry. Clear the path for competition, and much of the pressure to integrate will dissipate on its own.
