The role and influence of Pharmacy Benefit Managers (PBMs) in the US healthcare system came under intense scrutiny in 2024, with Congress and regulatory bodies like the FTC and HHS investigating their business practices and profitability. Originally designed in the 1960s to streamline drug claims processing and encourage generic drug adoption, PBMs evolved to negotiate rebates with drug manufacturers and implement tiered formularies, leveraging their growing market power to supposedly lower drug prices. Over the past two decades, PBMs have expanded their services, encompassing drug utilization reviews, disease management, and specialty pharmacy services. However, this expansion, coupled with significant consolidation through mergers and acquisitions, has raised concerns about potential anti-competitive practices and their impact on patient access and affordability.
The healthcare landscape has been dramatically reshaped by the vertical integration of PBMs with health insurers, healthcare providers, and specialty pharmacies. Major insurers like CVS Health and Cigna acquired PBMs (Aetna and Express Scripts, respectively), while UnitedHealthcare expanded its own PBM, OptumRx. This consolidation has concentrated immense negotiating power within a handful of entities, the six largest being CVS Caremark, Express Scripts, OptumRx, Humana Pharmacy Solutions, MedImpact, and Prime Therapeutics. While this market dominance ostensibly provides leverage to negotiate lower drug prices, it also raises serious concerns about reduced competition, preferential treatment for affiliated organizations, and barriers to entry for smaller, independent pharmacies.
These concerns translate into real-world consequences for patients. Reduced competition can limit patient choice and access to medications. Preferential formulary placement for drugs produced by affiliated companies, coupled with opaque pricing models, obscures true costs and restricts patient access to potentially more affordable alternatives. The FTC’s interim report highlighted the substantial price discrepancies between PBM-affiliated pharmacies and independent pharmacies, further demonstrating the potential for anti-competitive practices that ultimately harm patients. Independent pharmacies often struggle to compete with the preferential pricing given to PBM-affiliated pharmacies, restricting patient choice and potentially impacting access in underserved communities.
The vertical integration of PBMs extends beyond the pharmacy and payer relationship. CVS Health’s creation of Cordavis, a wholly-owned subsidiary focused on biosimilar development, exemplifies this further integration into the pharmaceutical supply chain. While CVS Health presents this move as a strategy to increase biosimilar availability and lower costs, critics argue that it creates a conflict of interest. As both a PBM and a biosimilar manufacturer, CVS Health faces accusations of potentially prioritizing its own products on formularies, stifling competition, and ultimately increasing costs for patients. This integrated model raises concerns about market manipulation and prioritization of profits over patient welfare.
The case of Humira illustrates the complexities of the biosimilar market and the potential for PBM influence to manipulate pricing and access. Despite the availability of numerous biosimilar competitors, Humira’s list price remained high in 2023. This suggests that existing rebate models, which often favor high-list-price drugs, may have disincentivized the adoption of more affordable biosimilars. CVS Health’s entry into biosimilar manufacturing through Cordavis raises further concerns that PBMs may prioritize their own products, potentially limiting market access for other manufacturers and hindering true price competition, which would benefit patients.
This concentration of power within vertically integrated PBM conglomerates calls for legislative and regulatory action. The Patients Before Monopolies Act, introduced in late 2024, proposes to prohibit PBMs and insurers from owning pharmacy businesses, directly addressing the conflict of interest inherent in these integrated structures. While the future of this legislation remains uncertain, the incoming Congress has a critical opportunity to address the anti-competitive practices of PBMs and ensure a more transparent and patient-centered pharmaceutical market. The focus should be on enhancing oversight and promoting true competition to guarantee patients access to affordable medications. Rather than dismantling these large organizations, targeted regulations that address anti-competitive practices and prioritize patient needs offer a more effective path toward a more equitable and affordable healthcare system. The ultimate goal should be to ensure that PBMs, their partners, and regulatory agencies prioritize patient access and affordability above all else.
