PBM Reform: The Tipping Point for Lowering Drug Prices? 

By Tony Schueth, CEO, Point-of-Care Partners	Mary Griskewicz, Regulatory Resource Center Lead

Few parts of the healthcare system have come under more scrutiny in recent years than pharmacy benefit managers (PBMs). Originally tasked with negotiating discounts, managing formularies, and controlling prescription drug costs for health plans and employers, PBMs now face growing questions: Are the savings they secure actually reaching patients or getting lost elsewhere in the system?

While high drug prices remain a major concern, the broader issue driving bipartisan reform efforts is the perceived lack of transparency. Complex rebate arrangements, spread pricing, and vertical integration have made it difficult to understand how PBMs impact prices, pharmacy networks, and patient costs.

In response, federal agencies and Congress are advancing transparency rules and investigations while states continue to pass laws to shed light on PBM operations. Meanwhile, technology offers new ways to improve visibility and accountability.

This article explores the original purpose of PBMs, how their role has evolved, what’s driving today’s reform efforts, and how key stakeholders—including PBMs themselves—may need to adapt. While there’s no one-size-fits-all fix, the moment calls for reexamination of how pharmacy benefits are managed and who ultimately benefits.

PBMs, a Brief History

PBMs emerged in the 1960s and 1970s to help health plans manage the growing complexity of the prescription drug benefit. They streamlined claims processing, negotiated bulk pricing, and created formularies to promote cost-effective prescribing—all in the name of efficiency.

Over time, their role expanded. As drug prices and rebate structures grew more complex, PBMs became powerful intermediaries with significant control over the pharmaceutical supply chain. Vertical integration and opaque pricing practices raised concerns about whether they still served their original purpose. While they continue to secure discounts, critics argue those savings aren’t consistently passed on to patients or plan sponsors—prompting renewed calls for transparency and reform.

What’s Driving the Push for PBM Reform?

Despite differing political philosophies and policy approaches, lawmakers across party lines, and at both the federal and state levels, are finding rare common ground when it comes to their stated reasons for reforming PBM practices. While the specifics of proposed legislation may vary, there is broad agreement on the underlying concerns: a lack of transparency, the potential for misaligned financial incentives, and uncertainty about whether negotiated savings are truly reaching patients. These shared drivers have created a bipartisan foundation for reform efforts aimed at rebalancing the system and restoring trust in how the prescription drug benefit is managed. Here are the key drivers:

Lack of Transparency and Misaligned Incentives

A central concern driving PBM reform is the perceived lack of transparency. Critics point to complex rebate structures, spread pricing, and proprietary reimbursement formulae that make it difficult for payers, pharmacies, and regulators to assess whether PBMs are prioritizing patient needs or protecting their own margins.

Practices like spread pricing, in which PBMs charge payers more than they reimburse pharmacies, and the retention of manufacturer rebates have drawn scrutiny for potentially inflating drug prices and increasing patient out-of-pocket costs.

These dynamics, critics argue, misalign incentives and can undercut efforts to improve drug affordability even when discounts exist behind the scenes.

Market Consolidation and Vertical Integration

The PBM industry is also concentrated among a few dominant players: CVS Caremark, Express Scripts, and OptumRx collectively manage nearly 80% of prescription drug claims in the United States. This level of consolidation gives them enormous negotiating power and control over pharmacy networks and formularies.

Adding to the concern is vertical integration, as these PBMs also own specialty and mail-order pharmacies. This has raised red flags regarding conflicts of interest, especially when patients are steered toward PBM-affiliated pharmacies through financial incentives or administrative barriers. Independent pharmacies have pointed to stark disparities in reimbursement rates, and a growing number of state and federal leaders are questioning whether these practices violate principles of fair market competition.

State-Led Investigations and Federal Pressure

While federal efforts have recently increased through executive orders, rulemaking, and Federal Trade Commission investigations, states have led the charge on PBM reform. Many have passed or proposed laws targeting spread pricing, gag clauses, and opaque audit practices.

State audits and lawsuits have exposed how some PBM practices may inflate Medicaid costs and contribute to pharmacy closures. These actions often spark public attention and put added pressure on federal policymakers.

State reforms frequently serve as models for national policy. Today, the push for PBM reform is broad-based, with lawmakers, regulators, employers, advocates, and even some PBMs acknowledging the need for greater transparency, accountability, and affordability.

Stakeholder Perspectives and Strategic Shifts

While PBMs are at the center of reform discussions, consequences will be felt across the healthcare landscape. Policymakers are increasingly aligned, regardless of political affiliation, on the need for greater transparency, accountability, and patient-focused value in prescription drug management. Each stakeholder group has its own perspective on PBM reform and will need to consider how to adjust accordingly.

Pharmacies

Independent and community pharmacies have been among the most vocal critics of current PBM practices, particularly concerning low reimbursement rates, retroactive fees, and opaque appeals processes. Many see reform as a lifeline to stabilize margins and restore fairness.

To remain competitive and relevant, pharmacies may need to:

• Expand their clinical offerings, such as chronic care management, immunizations, or point-of-care testing, to demonstrate their broader value to the healthcare system.
• Invest in interoperability and digital health tools to connect more seamlessly with providers and payers. The Point-of-Care Partners (POCP) pharmacy interoperability white paper outlines key strategies to support this shift.
• Adapt to emerging reimbursement models that reward outcomes—not volume—and engage directly in value-based care arrangements.
• Use technology to deepen patient relationships, improve medication adherence, and differentiate services from mail-order or vertically integrated PBM-owned pharmacies.

Life Sciences Manufacturers

Manufacturers often view PBMs as opaque intermediaries whose influence over formularies and pricing creates barriers to access. The current rebate model incentivizes higher list prices to fund larger rebates, which manufacturers argue distorts market dynamics and undermines innovation.

With rebate practices under pressure, manufacturers may need to:

• Explore alternative pricing arrangements such as direct-to-payer or outcomes-based contracts that reduce reliance on traditional rebate structures.
• Strengthen value-based narratives and clinical data to secure favorable formulary placement in a more transparent and competitive environment.
• Reconsider investments in research and development and pipeline strategy in response to pricing pressures that could reduce profit margins, especially for smaller or emerging biopharma companies.

Health Plans and Employer Groups

Health plans have traditionally relied on PBMs to manage the drug benefit, but increasing attention to hidden fees, spread pricing, and pass-through practices is prompting many to take a closer look at the value they receive.

As reform advances, payers may need to:

• Renegotiate contracts to ensure greater pricing transparency, clearer rebate pass-through terms, and enforceable audit rights.
• Evaluate alternative models such as transparent PBMs or carve-out arrangements that offer more control over pharmacy benefit design.
• Enhance internal capabilities to manage pharmacy data, understand cost drivers, and integrate with evolving technical standards like real-time benefit tools and formulary application programming interfaces (APIs).
• Align formulary strategies with the shift toward lowest net cost drugs rather than high-rebate options.

Patients

Patients often feel the downstream effects of PBM practices, whether it is limited pharmacy choice, high out-of-pocket costs, or confusion over drug coverage. While many of the behind-the-scenes reforms will take time to trickle down, the hope is that greater transparency and accountability will eventually lead to more affordable, predictable, and patient-centered drug pricing.

To maximize the potential benefits of reform:

• Patients will need access to clear, real-time information about drug costs and alternatives.
• Consumer-facing tools, such as real-time benefit check at the point of prescribing, must be designed with usability in mind and integrated into existing workflows.
  • Regulations continue to push the industry in this direction. The Centers for Medicare and Medicaid Services now requires Medicare Part D plans to implement real-time benefit tools (RTBTs) that provide patient-specific drug cost and coverage information, support formulary alternatives, flag prior authorization requirements, and integrate with at least one electronic health record or electronic prescribing system. The latest update, finalized in 2024, sets a compliance deadline of January 1, 2027, and specifies that RTBTs must conform to the National Council for Prescription Drug Programs RTPB Standard Version 13.
• As reforms are implemented, advocacy groups and policymakers should monitor for unintended consequences and ensure that cost savings are passed on meaningfully to patients.

Pharmacy Benefit Managers

PBMs acknowledge their role in negotiating discounts and managing drug costs but push back on reform efforts that target them alone. The Pharmaceutical Care Management Association (PCMA), a trade association for PBMs, argues that drug manufacturers, not PBMs, are responsible for setting high prices and has launched campaigns like “Lower the List Price” to shift the narrative. The campaign's goal is to hold drug companies accountable for setting and raising drug prices.

Despite these defenses, PBMs continue to face increased scrutiny of their rebate-based models, spread pricing practices, and vertical integration. In response, PBMs may need to:

• Reassess business models to rely less on retained rebates and more on transparent service fees or value-based contracts.
• Develop patient-focused offerings such as copay smoothing or adherence tools that demonstrate added value beyond price negotiation.
• Upgrade technical infrastructure to support real-time data exchange and compliance with transparency mandates.
• Reevaluate existing contracts and pricing strategies to withstand increased legal and regulatory oversight.

PCMA also launched a new PBM innovations project and white paper highlighting innovations.

While PBMs may be the most directly affected, the ripple effects of reform will be felt across the entire healthcare system. From pricing strategies and care delivery models to technology infrastructure and patient engagement, every stakeholder will need to reassess how they operate and collaborate. The path forward will require not just compliance but thoughtful adaptation.

Final Thoughts

PBM reform is no longer a fringe issue or single-party crusade. It has become a bipartisan priority with support from patient advocates, provider groups, and even segments of the business community. Like all complex policy efforts, the path forward will require balancing transparency with functionality and oversight with innovation.

Whether your organization is a payer, provider, pharmacy, manufacturer, or tech vendor, now is the time to assess how your business intersects with PBM operations and how potential changes might impact your strategy.

POCP can help. We specialize in strategy. Whether you need analysis of how policies impact your current strategy, assessment of your organization’s readiness to embark upon major reform, or simply support for your response to the recent requests for information, we’re here to guide you. Get in touch to learn more.