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PBMs Are Feeling a Push From States to ‘Turn the Lights on’ to Their Business Practices

In the endless debate over how to lower the cost of prescription medicines, Congress and the Biden administration are largely focused on reining in the prices set by drugmakers. But states are turning their sights to another player in the supply chain: pharmacy benefit managers.

Pharmacy benefit managers, or PBMs, are intermediaries that negotiate with manufacturers for lower drug prices on behalf of insurers and facilitate payment to pharmacies for the medicines they dispense. They’ve traditionally been less visible to the public, but their influence has grown, with the three largest PBMs — UnitedHealth Group Inc.’s OptumRx, CVS Health Corp.’s CVS Caremark and Cigna Corp.’s Express Scripts — processing an estimated 77 percent of all prescription claims last year.

Now, pressure on the PBMs is mounting, with a growing number of states looking to shed light on the middlemen’s secretive business practices — and uncover just how much money they actually save patients.

“PBMs have come to play an important role in the pharmaceutical space, and the services that they provide are useful,” said Juliette Cubanski, deputy director of the Medicare policy program at the Kaiser Family Foundation. “There’s certainly a lack of transparency when it comes to the magnitude of the dollars changing hands.”

While the federal government has slow-walked some of its efforts to address PBMs this year, states have been more aggressive, with auditors and attorneys general launching investigations into their business practices and lawmakers introducing dozens of bills to increase oversight and transparency around their negotiations with drugmakers and pharmacies.

“The states are where all the activity is right now,” said Antonio Ciaccia, chief executive officer of the drug pricing research firm 46brooklyn, with a rising number of states “trying to address the collateral damage of the excessively inflated prices that the PBM-drugmaker market dynamic has created.”

States pushing hard on PBMs

The flurry of legislative activity was set off by a 2020 Supreme Court ruling that held Arkansas has the right to regulate PBMs within the state, which “really gave us the ability to assert a regulatory authority there on this one piece of the prescription drug supply chain,” said Troy Downing, Montana’s state auditor and commissioner of securities and insurance.

Montana is one of more than a dozen states where lawmakers have passed legislation this year to increase PBM oversight. Downing said one of the challenges in the state was that it was unclear how many PBMs were even doing business in Montana, and that regulators wanted to understand “how much money is in that middle tier of the drug supply chain.” Continue Reading


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