What is a pharmacy benefit manager (PBM) and how do they affect drug prices?
The Arguments
WHAT THE INDUSTRY ARGUES
Supporters of PBMs argue they serve as intermediaries between insurers, pharmacies, and drug manufacturers, negotiating discounts and managing formularies to reduce prescription drug costs for health plans and consumers. They contend that PBMs leverage their large purchasing power to secure rebates from drug manufacturers, which can lower overall spending on medications. Recent bipartisan reforms requiring PBM transparency and delinking practices suggest policymakers recognize PBMs can play a constructive role when properly regulated.
WHAT CRITICS ARGUE
Critics argue that PBMs, particularly when vertically integrated with pharmacy chains and insurance companies, create conflicts of interest that can drive up drug prices rather than reduce them. As referenced in the Tennessee proposal that would force CVS Health to separate its pharmacy stores from its PBM operations, opponents contend that vertical integration allows companies to steer patients to their own pharmacies and retain rebate profits rather than passing savings to consumers. Bipartisan proposals like the Break Up Big Medicine Act aim to address these concerns by dismantling vertically integrated healthcare companies.
The Data
WHAT THE DATA SHOWS
No CMS data was available on this topic. However, source material indicates that Congress has enacted bipartisan PBM transparency and delinking reforms after years of debate, and multiple legislative efforts at both federal and state levels — including the Break Up Big Medicine Act and a Tennessee proposal targeting CVS Health — are attempting to address vertical integration between PBMs, pharmacies, and insurers.
The Bottom Line
BOTTOM LINE
PBMs are intermediaries that negotiate drug prices on behalf of health plans, and the debate centers on whether their growing vertical integration with pharmacies and insurers ultimately lowers or raises prescription costs for consumers.
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