The Hidden Power of PBMs: A System Under Scrutiny

Pharmacy Benefit Managers (PBMs) have long operated in the shadows of the U.S. healthcare system, wielding significant influence over drug pricing and access. Recent developments — including federal investigations, state lawsuits, and bipartisan legislative efforts — have intensified scrutiny on these intermediaries, highlighting the urgent need for reform.

For years, PBMs have claimed to reduce costs by negotiating drug prices on behalf of insurers, but evidence suggests they often do the opposite. A 2018 IVN investigation revealed how PBMs control 80% of the prescription drug market through a small handful of companies, generating billions in revenue while squeezing independent pharmacies and inflating prices for consumers.

Grassley Asks RFK About Support for PBM Accountability

Senator Chuck Grassley questioned Robert F. Kennedy Jr. on his stance regarding accountability for PBMs during Wednesday's Senate Finance Committee hearing. Kennedy, whose position on the issue was unclear, responded positively, stating that he supports reforming the PBM industry.

Kennedy is President Donald Trump's pick for Health and Human Services Secretary.

FTC Lawsuit Targets PBMs' Role in Drug Price Inflation

In a landmark move, the Federal Trade Commission (FTC) launched a legal challenge against the three largest PBMs — OptumRx, Caremark Rx, and Express Scripts — alleging they drove up insulin prices while blocking cheaper alternatives. According to the lawsuit, these PBMs manipulated rebate structures to favor high-cost drugs, leaving patients and taxpayers footing the bill.

This follows years of bipartisan concerns that PBMs create a perverse incentive system, where manufacturers must raise list prices to remain competitive in rebate negotiations. As a result, Americans pay far more for essential medications than patients in other countries.

State Attorneys General Take Action

It's not just the federal government taking aim at PBMs. States are stepping in as well.

In Oklahoma, Attorney General Gentner Drummond is pursuing CVS Caremark in a groundbreaking case alleging that the PBM underpaid independent pharmacies to the point of near collapse. The case is being heard in the state's new Pharmacy Benefit Manager Court, a first-of-its-kind initiative aimed at holding PBMs accountable for reimbursement practices that threaten local businesses and patient access to medications.

Other states, including Ohio, New York, and California, are launching similar lawsuits and policy reviews. The momentum suggests that the days of PBMs operating with little oversight may be numbered.

Congress Inches Closer to Reform

In Washington DC, lawmakers from both sides of the aisle have intensified efforts to rein in PBMs. Last year, the Senate Finance Committee, led by Senators Ron Wyden (D-OR) and Mike Crapo (R-ID), pushed forward bipartisan legislation that would:

✔ Prohibit spread pricing – a practice where PBMs pocket the difference between what insurers pay and what pharmacies receive.
✔ Require transparency – forcing PBMs to disclose how much of their revenue comes from rebates rather than true cost savings.
✔ Ensure savings reach consumers – instead of being captured by middlemen, rebates would be passed directly to patients.

Pharmacy Benefit Manager Transparency Act Holds PBM’s Accountable

Senator Maria Cantwell’s (D-Wash) Pharmacy Benefit Manager Transparency Act, introduced with Sen. Chuck Grassley (R-Iowa), sought to ban deceptive pricing schemes, prohibit arbitrary clawbacks, and increase PBM transparency. The bill has bipartisan support and is endorsed by over 200 organizations, including the AARP.

Cantwell has voiced her strong concerns over PBMs following the release of the FTC interim report on July 9, 2024. The report found that PBMs are profiting at the expense of patients, inflating drug costs, and imposing unfair contracts on independent pharmacies.

Senator Chuck Grassley (R-Iowa) has emphasized the importance of the Pharmacy Benefit Manager Transparency Act, stating, "This bipartisan bill would not only put a stop to deceptive and opaque pricing schemes that burden consumers with higher prices, it also saves taxpayers $740 million. It's a win-win, and warrants swift approval in Congress."

“We should all be very concerned about the activities of PBM middlemen,” Cantwell said on the Senate Floor. “These are the people who are supposedly getting discounts for us on drug prices but then actually pocket those discounts.”

She highlighted the impact on independent pharmacies, stating, “PBMs are engaging in self-preferencing, meaning that they are steering rebates back to themselves, and it's affecting pharmacies, and it's affecting pharmacies in my state, where now in downtown Seattle you don’t have any 24-hour pharmacies anymore, and pharmacy deserts are starting to happen.”

In calling for bipartisan support, she concluded, “I urge our colleagues here to take action on these PBM middlemen. This is a bipartisan effort.”

While previous reform attempts stalled due to heavy industry lobbying, the latest revelations — including the FTC report showing that the top three PBMs reaped $73 billion from markups — have injected new urgency into the debate.

PBMs, Big Pharma, and the "Revolving Door" Problem

The PBM issue is not new. In 2018, IVN reported on how both Republican and Democratic administrations have enabled the pharmaceutical-industrial complex by allowing former industry executives to cycle in and out of top government positions.

This "revolving door" has made real reform difficult. The pharmaceutical industry, including PBMs, spent over $300 million on lobbying in 2023 alone, ensuring that every attempt to increase transparency or break their monopoly is met with fierce resistance.

However, as pressure mounts from both political parties, state attorneys general, and consumer advocacy groups, the question is no longer whether reform will happen — but when.

What Happens Next?

With multiple lawsuits, bipartisan bills, and an ongoing FTC investigation, PBMs are facing more scrutiny than ever before. The potential outcomes include:

1. Tougher regulations forcing PBMs to disclose pricing structures and pass rebates to consumers.

2. Stronger state enforcement, as seen in Oklahoma and Ohio, setting new precedents for how PBMs operate.

3. Breakup of PBM monopolies, either through legislation or court action, to restore competition and fair pricing in the drug market.

For now, PBMs remain a powerful but embattled force in healthcare. Their ability to control costs or inflate prices has made them a top target for reform —and patients, policymakers, and independent pharmacies are all watching closely.

Related IVN Coverage:

📌 Don't Like Big Pharma? Meet PBMs
📌 Trump and the Pharmaceutical-Industrial Complex

More Recent News:

🔗 FTC Sues Top PBMs Over Insulin Price Inflation
🔗 Oklahoma Sues CVS Caremark Over PBM Practices
🔗 Congress Moves to Reform PBM

Tag: pharmacy benefit managers