PBM Reforms in House Funding Bill Come Years Too Late, Now Congress Must Finish the Job
Washington, D.C. —In response to the release of a House funding bill that includes pharmacy benefit manager (PBM) reforms, the American Economic Liberties Project released the following statement.
“The minibus legislation would revive most of the bipartisan, bicameral PBM reforms in Medicare Part D – including banning PBMs from pocketing rebates and other manufacturer kickbacks that drive up prescription drug costs, excluding independent pharmacies from their networks, and withholding certain pricing information from plan sponsors – that Elon Musk tanked in late 2024, resulting in the closure of hundreds of independent pharmacies across the United States,” said Emma Freer, Senior Policy Analyst for Healthcare at Economic Liberties. “This bill is a first step to rein in the largest PBMs, lower prescription drug costs for older Americans and the taxpayers who fund Medicare Part D, and slow the pharmacy closure epidemic. However, the key provisions won’t take effect until at least 2028, which is far too long a wait – and underscores the need for Congress to enact more substantial structural reforms.”
PBMs are middlemen who negotiate prescription drug benefits on behalf of health plans with drug manufacturers and pharmacies. The “Big Three” PBMs – CVS Caremark, Cigna Group’s Express Scripts, and UnitedHealth Group’s OptumRx – control nearly 80% of U.S. prescription drug claims. They leverage this market power to demand untenably low reimbursement rates from independent pharmacies in exchange for inclusion in their networks. Many pharmacies accept these rates for fear of losing access to a large share of their customer base. But these rates are accelerating the pharmacy closure epidemic. Economic Liberties research shows that at least 326 pharmacies closed between Dec. 19, 2024, after Musk intervened, and Feb. 28, 2024 alone. The vast majority of these closures – 237, or nearly 73% – were independent pharmacies; the remaining 89 were chain locations.
The Big Three PBMs also use their market power – combined with a manufacturer rebate-driven business model that biases PBMs toward higher list price drugs, as Economic Liberties detailed in a February 2023 policy brief – to mark up drug prices by as much as 7,736%, according to the Federal Trade Commission.
As Economic Liberties has outlined in previous letters to Congress, the strongest PBM reforms include requiring PBMs to reimburse pharmacies fairly while eliminating the conflicts of interest that incentivize them to gouge patients, pharmacies, health plan sponsors, and taxpayers. They include:
- The bipartisan Pharmacists Fight Back Act, reintroduced by Reps. Jake Auchincloss (D-MA-04) and Diana Harshbarger (R-TN-01) last month, which would bolster independent pharmacy revenue by setting baseline pharmacy reimbursement rates in federal healthcare programs. The legislation would also prohibit PBMs acting on behalf of federal healthcare programs from engaging in anticompetitive business practices, such as patient steering and spread pricing, in which a PBM charges a health plan far more for a prescription than it reimburses a pharmacy for dispensing it.
- The bipartisan Patients Before Monopolies Act (S.5503, H.R. 10362), introduced by Sens. Elizabeth Warren (D-MA) and Josh Hawley (R-MO) and Representatives Harshbarger and Auchincloss in December 2024, which would force health insurers and PBMs to divest their pharmacy businesses within three years.
- The bipartisan Lower Costs, More Transparency Act (H.R. 5378) by Rep. Cathy McMorris Rodgers (R-WA-05), which would similarly require all state Medicaid managed care programs and the PBMs with whom they contract to reimburse pharmacies according to their acquisition and dispensing costs. In doing so, the bill would establish parity in pharmacy reimbursements across Medicaid managed care and fee-for-service settings. It would also prohibit spread pricing.
Learn more about Economic Liberties’s Break Up Big Medicine initiative to address healthcare consolidation here.
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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; international trade arrangements that promote balanced trade and benefit workers, farmers and small businesses; and wealth is broadly distributed to support equitable political power.