Dispatch RELEASE
Pharmacy Benefit Managers: Power, Profits, and the Growing Controversy
Dispatch RELEASE — March 22nd, 2026 — S.S. Bee
Pharmacy Benefit Managers (PBMs) role in the U.S. healthcare system was originally designed to help insurers and employers manage prescription drug benefits and control costs, PBMs now wield enormous influence over which medications patients can access and how much they pay. While PBMs argue they reduce drug spending through negotiation and efficiency, critics increasingly contend that these intermediaries have become a major driver of high drug prices, reduced transparency, and restricted patient care.
Patient Access and Restrictions
PBMs apply significant control over which medications patients can access through formulary design and utilization management tools such as prior authorization and step therapy. While these tools are intended to ensure appropriate use, they can also delay treatment and create administrative burdens for healthcare providers.
Patients may be required to “fail” on cheaper medications before gaining access to those prescribed by their doctors, even when the initial choice is clinically justified. In some cases, patients are forced to switch medications for non-medical reasons, purely due to formulary changes.
Many patients have increasingly seen a rise in medications being rejected or requiring prior-authorizations that previously was not part of their plan. This can cause a dangerous delay in a patient’s medication or therapy treatment.
The Rise of PBMs and Their Expanding Role
PBMs emerged in the late 20th century as administrative service providers. Their primary functions included processing prescription claims, creating formularies (also known as covered drugs), and negotiating discounts with pharmaceutical manufacturers. Over time, the largest PBMs integrated with insurers and pharmacies, transforming into powerful conglomerates that control significant portions of the drug supply chain.
Today, just a handful of PBMs administer the majority of prescription drug benefits in the United States. This consolidation has raised serious concerns about market competition and the potential for monopolies.
Lack of Transparency
One of the most persistent criticisms of PBMs is their lack of transparency. The financial arrangements between PBMs, drug manufacturers, pharmacies, and insurers are often confidential. This lack of vagueness makes it nearly impossible for employers, policymakers, and patients to understand where money is flowing or whether cost savings are being passed along.
Rebates are a prime example. PBMs negotiate rebates from drug manufacturers in exchange for favorable placement on formularies. While PBMs claim these rebates lower costs, critics argue that the system incentivizes higher list prices, since larger rebates can be extracted from more expensive drugs. Patients, especially those with high-deductible plans or coinsurance, often pay based on the inflated list price rather than the discounted net price.
Incentives That May Drive Up Drug Prices
Rather than reducing costs, PBMs may actually contribute to rising drug prices. Because their revenue is frequently tied to a percentage of rebates or list prices, PBMs may favor higher-priced medications over cheaper alternatives. This creates an incentive structure where all parties—except the patient—benefit from higher prices.
Additionally, formulary decisions are not always based purely on clinical effectiveness. Drugs offering higher rebates can receive preferred status, even when equally effective, lower-cost options exist. This undermines the integrity of clinical decision-making and can lead to inadequate treatment choices.
Impact on Pharmacies
Independent pharmacies have been particularly vocal about PBM practices. Many PBMs engage in “spread pricing,” where they charge insurers more for a drug than they reimburse the pharmacy, pocketing the difference. Pharmacies often have no visibility into these transactions.
Reimbursement rates set by PBMs can be so low that pharmacies dispense medications at a loss. Combined with retroactive fees, known as Direct and Indirect Remuneration (DIR) fees, these practices have forced many independent pharmacies to close, reducing access to care in rural and underserved communities.
Conflicts of Interest and Vertical Integration
The largest PBMs are often owned by or affiliated with major health insurers and pharmacy chains. This vertical integration raises concerns about conflicts of interest. For example, a PBM may steer patients toward its own mail-order or specialty pharmacies, potentially sidelining independent competitors.
Such arrangements can limit patient choice and concentrate profits within a single corporate ecosystem. Critics argue that this consolidation distorts the market and prioritizes corporate gain over patient care.
Regulatory Scrutiny and Reform Efforts
Growing dissatisfaction with PBMs has prompted increased scrutiny from lawmakers and regulators. Several states have enacted laws to limit spread pricing, increase transparency, and regulate reimbursement practices. At the federal level, proposals have targeted rebate reform and greater oversight.
However, meaningful reform has proven difficult. PBMs maintain that they save billions of dollars annually and warn that excessive regulation could lead to higher premiums. The complexity of the drug pricing system further complicates efforts to assign blame or implement change.
Conclusion
Pharmacy Benefit Managers were supposed to simplify and reduce the cost of prescription drug coverage, but their evolution has introduced new layers of complexity and controversy. While they remain a powerful force in negotiating drug prices, their lack of transparency, questionable incentives, and impact on pharmacies and patients’ safety have drawn increased criticism.
As the debate continues, one thing is clear: the role of PBMs in the healthcare system demands closer examination. Whether through regulation, market reform, or structural change, addressing the negative consequences associated with PBMs will be essential to improving affordability and access in prescription drug care.
CITATIONS:
www.statnews.com/2024/08/12/some-inconvenient-truths-about-pharmacy-benefit-managers
www.commonwealthfund.org/publications/issue-briefs/2019/mar/pharmacy-benefit-managers-practices-controversies-what-lies-ahead
www.politico.com/news/2024/09/20/feds-sue-pharmacy-insulin-costs-
www.forbes.com/sites/joshuacohen/2019/04/15/pbm-executives-questioned-on-drug-pricing-practices-by-senate-finance-committee
www.marketwatch.com/story/ftc-takes-fresh-swipe-at-drug-middlemen-says-some-prices-marked-up-over
www.brookings.edu/articles/a-brief-look-at-current-debates-about-pharmacy-benefit-managers
www.barrons.com/articles/pbm-united-healthcare-cvs-cigna-drug-prices