By Staff at Shortreport.fyi — 07 Jan 2026

“Bullshit” The New Way Health Giants Hide Billions – Laura Wadsten

Executive Summary

Hunter Brook Capital's investigative report uncovers how CVS Health, UnitedHealth Group, and Cigna Group engineered secretive PBM group purchasing organization (GPO) subsidiaries; Zinc, Emisar, and Ascent; to divert billions in drug rebates away from health plans and patients. Despite claims of "100% rebate pass-through," these shell entities retain 15-20% of rebate flows as hidden fees, operating from ghost offices with skeleton crews yet generating an implausible $50 million revenue per employe, dwarfing Apple and Nvidia. The opacity has real consequences: a 22-year-old asthma patient died after formulary changes driven by PBM negotiations caused his inhaler copay to jump from $66 to $539. With mounting federal (FTC, House Oversight, OIG) and state investigations, plus lawsuits resulting in multi-million dollar settlements, regulators are targeting these rebate aggregators as the epicenter of PBM malfeasance. The report presents extensive evidence, including on-site investigations of empty offices, whistleblower testimony, internal contracts, and audit data, demonstrating systemic financial engineering designed to obscure true costs and inflate parent company earnings at the expense of patient safety and plan sponsors.

Ticker Symbols:
- CVS Health: NYSE: CVS
- UnitedHealth Group: NYSE: UNH
- Cigna Group: NYSE: CI

Author Position Disclosure:
Hunter Brook Capital discloses that they hold short positions in the featured companies.

Report Author:
Hunter Brook Capital

Source Material:
Original Report

Thesis

Core Arguments:

Hidden Fee Diversion: The Big Three PBMs created captive GPO subsidiaries (Zinc, Emisar, Ascent) that reclassify drug rebates as "manufacturer administrative fees," retaining 15-20% of rebate flows despite contractual promises of 100% pass-through to health plans
Ghost Operations, Real Revenue: These entities operate from empty or near-empty offices with fewer than 150 total employees yet generate approximately $50 million revenue per employee; 20x higher than Apple and 14x higher than Nvidia, indicating artificial financial engineering rather than legitimate operations
Contractual Opacity: Health plan contracts with parent PBMs contain zero references to affiliated GPOs, enabling billions in fees to be extracted invisibly; internal documents and settlements (e.g., Illinois $45-50 million CVS settlement) confirm undisclosed fee retention
Regulatory Convergence: Federal agencies (FTC, OIG, House Oversight) and multiple state AGs are investigating price-fixing, anti-kickback violations, and rebate misallocation; California's 2025 PBM reform and other state legislation target pass-through mechanics and GPO governance
Fatal Real-World Impact: A 22-year-old patient died after PBM-driven formulary changes increased his asthma inhaler copay 8-fold ($66→$539); research shows even modest cost-sharing increases correlate with measurable mortality increases, underscoring human cost of rebate opacity
Cross-Border Structure for Evasion: Emisar (Ireland) and Ascent (Switzerland) operate offshore with minimal physical presence, enabling regulatory arbitrage while maintaining tight integration with U.S. parent PBM operations
Intercompany Control Points: Despite being labeled "independent GPOs," these entities function as rebate aggregators fully controlled by parent companies, serving as mechanisms to cannibalize rebates before they reach plan sponsors
Market Concentration Persists: Big Three maintain 80-90% market share despite some employer defections (Johns Hopkins→Capital Rx, Tyson→Rightway); opacity and enforcement momentum may temper but not eliminate consolidation
Broker/Consultant Conflicts: Compensation models for benefits consultants may reward higher rebates/fees rather than lower net costs, with growing advocacy for ERISA fiduciary standards to constrain current rebate/GPO dynamics
Escalating Reform Momentum: California's comprehensive 2025 PBM reform package, Wisconsin's "Cole's Act," and federal inquiries signal systemic push toward mandatory rebate pass-through, expanded rebate definitions, and stricter governance that could fundamentally reshape PBM economics

Standout Facts & Intriguing Details

Key Insights:

On-Site Verification: Zinc's Bloomington, MN headquarters a virtually empty office; Emisar's Dublin, Ireland location as non-functional ghost space; Ascent in Switzerland maintains light staffing but still generates extraordinary per-employee revenue
Revenue Per Employee Anomaly: At ~$50 million per employee, these GPOs' efficiency metrics defy economic logic, Apple generates $2.4M/employee, Nvidia $3.6M/employee, suggesting artificial internal pricing rather than genuine productivity
Fee Escalation Timeline: Aggregator fees started at 1-2.5% of rebate amounts in early implementations but have grown to 15-20%, with no corresponding increase in disclosed services or operational scope
Settlement as Smoking Gun: Illinois AG forced CVS Caremark/Zinc to pay $45-50 million for hidden fees, providing quantitative confirmation of undisclosed retention practices
Cole Schmidtknecht Case: The 22-year-old's death following formulary-driven copay increase ($66→$539 for Flovent inhaler) became a focal point for advocacy, inspiring Wisconsin's "Cole's Act" and amplifying reform momentum nationwide
Contract Omission Strategy: Health plan contracts systematically exclude any mention of affiliated GPOs, creating a documentary void that enables fee diversion to occur entirely off client visibility
FEHB Audit Findings: Federal employee health benefit audits identified pass-through gaps and misallocation, with Ascent explicitly shown retaining portions of rebates while plans receive remainder
Minimal Digital Footprint: Emisar and Zinc lack functional websites or measurable online presence despite supposedly managing billions in pharmaceutical transactions
Job Posting Evidence: Internal hiring documents show minimal operational roles (data analytics, contract administration) inconsistent with the scale of revenue generation or claimed GPO purchasing functions
Industry Expert Corroboration: Former PBM executives and whistleblowers interviewed for the report uniformly describe these entities as "captive rebate aggregators" performing no genuine purchasing work
Offshore Coordination: Regulatory documents tie Express Scripts and Prime Therapeutics to Ascent's Swiss operations, with Michigan AG price-fixing allegations highlighting cross-border governance concerns
Mortality Correlation: Academic studies cited show statistically significant increases in patient mortality correlated with even modest increases in prescription cost-sharing, providing evidence base for harm claims

Frequently Asked Questions (FAQ)

What are PBM GPOs and why are they controversial?

PBM group purchasing organizations (GPOs) are newly created subsidiaries of the Big Three pharmacy benefit managers; Zinc (CVS Health), Emisar (UnitedHealth), and Ascent (Cigna), identified as "rebate aggregators" designed to capture additional fees from drug manufacturers. These entities as controversial because they retain 15-20% of rebate flows as hidden "manufacturer administrative fees" despite parent PBM promises of 100% rebate pass-through to health plans, effectively diverting billions of dollars that should reduce patient and employer drug costs.

How do these GPO subsidiaries generate such high revenue per employee?

These three GPO entities employ fewer than 150 people combined yet generate approximately $50 million in revenue per employee, vastly exceeding technology giants like Apple ($2.4M) and Nvidia ($3.6M). This extraordinary figure not to operational efficiency but to financial engineering: the GPOs function as pass-through entities that reclassify and capture rebate flows through internal pricing mechanisms rather than performing genuine purchasing or administrative work, making the revenue-per-employee metric an indicator of artificial profit extraction rather than legitimate business productivity.

What evidence supports claims that these are "ghost offices"?

Zinc's Bloomington, MN headquarters appeared virtually empty with minimal staff presence, Emisar's Dublin, Ireland location was found to be non-functional with no meaningful operational activity, and while Ascent in Switzerland maintains some staffing, all three entities lack the physical infrastructure, digital presence (no functional websites for Zinc/Emisar), and operational scope consistent with managing billions in pharmaceutical transactions. This physical evidence alongside job posting analysis showing minimal hiring for operational roles, supporting the characterization of these entities as shell structures designed for fee capture rather than substantive business operations.

How do health plans remain unaware of these fee diversions?

Analysis of contractual documents reveals that health plan contracts with parent PBMs (CVS Caremark, OptumRx, Express Scripts) contain zero references to affiliated GPO subsidiaries, creating what the report describes as systematic documentary omission. This contractual opacity enables fees labeled as "manufacturer administrative fees" or "aggregator fees" to be retained by GPO entities entirely outside client visibility, with the report noting that even when plans receive what is contractually labeled "100% pass-through," substantial portions (8-9% to 15-20%) of the total rebate pool never reach plan accounts because they are reclassified and diverted at the GPO level before being counted as "rebates" subject to pass-through obligations.

What regulatory actions have been taken against these practices?

Multiple enforcement actions including: Illinois AG securing a $45-50 million settlement from CVS Caremark/Zinc for hidden fees; Michigan AG filing price-fixing allegations; ongoing investigations by the Federal Trade Commission, Office of Inspector General, and House Oversight Committee examining rebate aggregators and cross-border GPO arrangements; state-level probes in Louisiana, Ohio, and other jurisdictions; and California's comprehensive 2025 PBM reform package mandating broader rebate definitions, pass-through requirements, and enhanced governance disclosures. This regulatory convergence represents a systemic push to expose and reform the rebate aggregation model that has enabled fee diversion.

What is the connection between PBM practices and patient deaths?

The case of Cole Schmidtknecht, a 22-year-old asthma patient who died after his insurer's PBM-negotiated formulary change caused his Flovent inhaler copay to jump from approximately $66 to over $539, leading him to ration medication. This connects individual tragedy to systemic issues by citing academic studies demonstrating statistically significant increases in patient mortality correlated with even modest increases in prescription cost-sharing. The opacity of rebate flows and fee diversions documented throughout the research directly contributes to inflated patient out-of-pocket costs, with the Cole case serving as a catalyst for reform efforts including Wisconsin's "Cole's Act" and broader advocacy for formulary transparency and rebate pass-through requirements.

Why are these entities located in Ireland and Switzerland?

The offshore locations of Emisar (Dublin, Ireland) and Ascent (Zurich, Switzerland) serve multiple strategic purposes: regulatory arbitrage that places entities outside direct U.S. state-level oversight; tax optimization through favorable international jurisdictions; and additional opacity layers that complicate investigation and enforcement. Despite these international locations, the entities maintain tight operational integration with U.S. parent PBM systems, with regulatory documents tying Express Scripts and Prime Therapeutics to Ascent's Swiss operations. The cross-border structure as designed to maximize financial engineering flexibility while minimizing transparency and accountability to U.S. regulators and plan sponsors

What is the "circular fee arrangement" described in the report?

A circular fee structure wherein PBM parent companies control both the traditional PBM entity and its affiliated GPO subsidiary, enabling them to charge drug manufacturers for substantially similar services through two separate channels. This with contract analysis showing that a manufacturer's payment flows to the GPO entity, which retains a portion (15-20%) as "aggregator fees" before passing the remainder to the parent PBM, which then passes that reduced amount to health plans as "100% of rebates", with the GPO portion never classified as a rebate subject to pass-through obligations. This circular arrangement effectively allows the Big Three to extract fees from the rebate stream while maintaining technical compliance with pass-through language, constituting as financial engineering designed to obscure true cost structures.

How does this compare to historical PBM practices?

The current GPO fee structures mirror previous schemes where PBMs re-categorized discount flows to protect profit margins as transparency pressure increased. The aggregator fees started at 1-2.5% of rebate amounts in early implementations but escalated to 15-20% over time without corresponding operational justification. The GPO subsidiary model positioned as an evolution of rebate opacity tactics: as regulators and plan sponsors demanded "100% pass-through" commitments, PBMs responded not by genuinely passing through all manufacturer payments but by restructuring what counts as a "rebate" versus a "fee," thereby maintaining revenue extraction through definitional arbitrage rather than substantive reform.

What reforms are being proposed to address these issues?

Multiple reform initiatives including: California's 2025 PBM reform package mandating expanded rebate definitions, pass-through requirements, and governance disclosures; Wisconsin's "Cole's Act" inspired by the patient death case; federal proposals to classify PBMs as ERISA fiduciaries with heightened duties to plan sponsors; state-level legislation requiring transparent reporting of all manufacturer payments regardless of label; and proposals to prohibit common ownership of PBMs and GPO entities. These reforms target the core mechanisms enabling fee diversion, definitional ambiguity around "rebates," contractual opacity regarding affiliated entities, and lack of fiduciary obligations, with the regulatory momentum suggesting fundamental restructuring of PBM economics may be forthcoming.

What alternatives are employers exploring?

While the Big Three maintain 80-90% market share, some large employers are defecting to alternative models: Johns Hopkins University switched to Capital Rx; Tyson Foods moved to Rightway; and growing numbers of self-insured employers are experimenting with pass-through PBM contracts, transparent pricing models, and pharmacy benefits carved out from integrated payer arrangements. However, these alternatives remain limited in scale, with the opacity of rebate mechanics and the market power of integrated payer-PBM-GPO structures creating significant switching costs and barriers to widespread adoption of transparent alternatives.

What is the report's assessment of company transparency claims?

This directly contradicts executive statements claiming "100% rebate pass-through" and "unparalleled transparency." The evidence including: contractual documents omitting any reference to affiliated GPOs despite their retention of 15-20% of manufacturer payments; on-site investigations documenting ghost offices inconsistent with claimed operational capabilities; revenue-per-employee figures ($50M) that the report characterizes as implausible for legitimate business operations; and settlements/audits confirming undisclosed fee retention (e.g., Illinois $45-50M settlement, FEHB audit findings). The systematic gap between public transparency claims and documented operational reality, including the lack of functional websites, minimal staff, and contractual omissions, indicates that asserted commitments to disclosure and pass-through are unreliable when measured against verifiable evidence and industry standards.

Important Disclaimers

This is Not Primary Research: This summary is a condensed overview of a detailed equity research report authored by Hunter Brook Capital. It is intended to highlight key findings and should not be considered original analysis. Readers seeking comprehensive evidence, methodology, and detailed argumentation should consult the full report.

Author Position Disclosure: Hunter Brook Capital has disclosed that they hold short positions in CVS Health (NYSE: CVS), UnitedHealth Group (NYSE: UNH), and Cigna Group (NYSE: CI), meaning they stand to profit if these stocks decline in value. This position should be considered when evaluating the report's conclusions.

Original Research Credit: All findings, investigations, analysis, and conclusions summarized here are the work of Hunter Brook Capital. Full attribution belongs to the original authors.

Verification: For complete sourcing, evidence, and detailed analysis, please review the original report at: Original Report

Not Investment Advice: This summary is for informational purposes only and does not constitute investment advice, a recommendation to buy or sell securities, or financial guidance. Readers should conduct their own due diligence and consult qualified financial professionals before making investment decisions.

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