Opinion:

By Marion Mass

Since 2022, there have been no less than five Congressional hearings and a critical executive order from President Trump targeting the drug industry middlemen that rip off American patients – Pharmacy Benefit Managers (PBMs).

These middlemen deserve the scrutiny. Between overcharging patients and steering patients away from independent pharmacies, they have created an anti-competitive environment responsible for higher prices and reduced access.

The three biggest PBMs, CVS Caremark, Optum Rx, and Express Scripts, control an astounding 80% of the prescriptions Americans take. Beyond this horizontal integration, each of those PBMs is integrated with a big insurer that can prescribe, Aetna, United, and Cigna, respectively. Each PBM also operates a lucrative pharmacy. With this level of control over every stage of a healthcare plan, it’s no surprise these companies can pull many levers that harm patients clinically and financially, while lining their own pockets behind the scenes.

While 20 states passed PBM reform in 2024 to keep these companies in check, few have hit as hard at PBM anti-competitive practices as a pair of Republican governors.

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In Arkansas, Governor Sarah Huckabee Sanders signed a first of its kind law preventing PBM from owning pharmacies. Policymakers haven’t done this level of trust-busting since the days of Ma Bell. PBMs have embraced lawfare to protect their monopolistic scheme. They found a federal district court judge to play ball and temporarily block reform, but Huckabee Sanders is thankfully appealing the decision.

Governor Jeff Landry pushed hard for the same PBM measure in Louisiana’s state legislature. Undeterred by his failure to get the measure through, he and his Attorney General have slapped PBM giant CVS Caremark and its subsidiaries with three lawsuits. One of the suits involves text messages sent by CVS to its customers that effectively lobbied against the trust-busting measure – where the State of Louisiana alleges that CVS “allegedly misused health-related information of Louisiana citizens… for improper commercial or political gain.”

These red-state governors are following President Trump’s lead on PBMs because they know how deeply involved these organizations are in setting drug prices for their constituents. When a drug company sells their product, PBMs are responsible for negotiating “discounts” for medicines before sending them to pharmacies. These so-called “rebates” can be massive. But rarely do those rebates make their way to patients.

PBMs often reimburse independent pharmacies at a much lower price than what pharmacies charge patients in a practice called “spread pricing.” An FTC report found that top PBMs CVS Health and Express Scripts recorded $1.4 billion in revenue thanks to this tactic alone.

These middlemen also steer patients away from lower-cost alternatives. Medications for simple conditions like allergies can have hundred-dollar price variations from name-brand to generic. But PBMs nearly always opt for the high-cost option. Even more, most pharmacy benefit managers direct patients to pharmacies owned and operated by the PBMs themselves – leaving independent pharmacies behind.

Once the mom-and-pop pharmacy has been squeezed dry, PBMs like CVS even have arms to acquire formerly independent businesses, effectively diverting money from the community and into corporate coffers.

All of these tactics – in addition to PBMs materially marking up the price of over 50 different specialty drugs – allowed companies like CVS to post record profits over the past five years. It seems that it’s lucrative to shortchange patients without accountability from Washington or elsewhere.

But it’s clear that with these new state policies, the governors of Arkansas and Louisiana have the PBM industry on the defensive. The Pharmaceutical Care Management Association, the lobbying group representing PBMs, are suing the Arkansas state government for their law, and the Louisiana lawsuits from Governor Landry are still ongoing.

Protecting the free market from disruptive industries like PBMs is a cornerstone of the Republican platform, and it’s great to see leaders following through on that promise.

Yet this fight against drug middlemen has room to grow. Governor Landry encouraged lawmakers to take further steps to crack down on abusive PBM practices. Future measures ought to limit spread pricing and ensure drug discounts are passed on to the patients who need the drugs, not the middlemen that peddle them.

What has transpired in Arkansas and Louisiana should be a rallying cry to other state leaders and the constituents they swore to serve. Fighting against anti-competitive practices is the path to fiscal solvency in drug pricing.

Marion Mass, M.D. is a Bucks County pediatrician and the co-founder of the Practicing Physicians of America.