Pharmacy benefit managers, also known as PBMs, are in the crosshairs of President-elect Donald Trump and more than 30 states, including Oklahoma.
“We’re going to knock out the middleman,” Trump said recently – and it couldn’t happen soon enough for one pharmacist who is a former state legislator.
PBMs are the companies situated between medical insurers and customers, acting as middlemen between pharmacies and patients. PBMs have long aggravated local pharmacies nationwide.
The nation’s three largest PBMs are CVS Health’s Caremark, UnitedHealth’s Optum-RX, and Cigna’s Express Scripts.
The Federal Trade Commission released an interim report in July that said these conglomerates are eliminating competition and increasing drug prices at the expense of patients. The federal watchdog filed suit in September against the trio, claiming that health care conglomerates are driving out competition in the pharmacy sector, thereby contributing to higher prices.
PBMs “are even driving their own stores out of business, because they can make more money from their mail-order business,” said former state Sen. Rob Standridge (R-Norman), an owner of two pharmacies who termed out of the Legislature in 2024 after 12 years.
PBMs “entered the pharmacy world 30+ years ago,” Standridge recalled. “At first they served a purpose – but that purpose was not to rip off both the insured, through insurance companies by driving up costs, and their contract pharmacies,” he told Southwest Ledger.
“An absence of meaningful regulation and a lack of transparency in the PBM market has allowed large PBMs with market dominance to deviate from their original purpose of acting as honest brokers to lower medical costs,” the National Association of Specialty Pharmacy wrote in a brief submitted in June 2024 to the U.S. Supreme Court in support of a 2019 Oklahoma statute, the Patient’s Right to Pharmacy Choice Act.
A bipartisan group of federal lawmakers has introduced legislation to break up PBMs and insurers. Sens. Elizabeth Warren (D-Massachusetts) and Josh Hawley (R-Missouri) filed a bill which would force companies that own health insurers or pharmacy-benefit managers to sell off their pharmacy business.
“PBMs have manipulated the market to enrich themselves – hiking up drug costs, cheating employers, and driving small pharmacies out of business,” Warren said. The proposed federal measure “will untangle these conflicts of interest by reining in these middlemen.”
State measures to regulate pharmacy benefit managers have been implemented in Oklahoma, in neighboring Arkansas, and in Kentucky, among others, Standridge noted.
The Patient’s Right to Pharmacy Choice Act, House Bill 2632, created prohibitions against restrictions of an Oklahoman’s right to choose a pharmacy provider. The Act also prohibits PBMs from:
• Charging certain fees.
• Reimbursing a pharmacy an amount less than the amount that the PBM reimburses a pharmacy owned by the PBM for providing the same covered services.
• Failing to make any payment due to a pharmacy for covered services properly rendered in the event a PBM terminates a provider from a pharmacy benefits manager network.
• Utilizing “spread pricing” in reimbursements to pharmacists or pharmacies. PBMs profit from the “spread” between the amount they charge health plans for a drug and the amount they reimburse pharmacies.
Standridge was a co-author of HB 2632, and Governor Stitt signed it into law in 2019.
A 2014 measure, House Bill 2100 sponsored in the Senate by Standridge, created oversight, licensing and regulation of Pharmacy Benefit Managers. The bill stipulated what must be contained within a contract between a pharmacy benefit manager and a provider. HB 2100 cleared the Legislature and was signed into law.
In 2018 Standridge filed Senate Bill 1573 to prohibit pharmacy benefit managers from requiring covered individuals to obtain prescription drugs from any mail-order pharmacy “or through the mail or other common carrier.” However, that bill died in the Senate Judiciary Committee.
Arkansas, Kentucky also focusing on PBMs Arkansas claims that pharmacy benefit managers are violating state laws. A release from Gov. Sarah Huckabee Sanders’ office said she was joining Arkansas’ Insurance Department Commissioner in imposing penalties and hearings against four PBMs in the state.
The release said the state is focusing on four major PBMs: Caremark, Magellan, Express Scripts, and MedImpact. The four are alleged to have violated a June 28 bulletin from the insurance department advising PBMs to stop paying pharmacies below the national average drug acquisition cost (NADAC), with a $5,000 fine for each violation.
Officials contend Caremark committed approximately 217 violations of payment below the NADAC; Magellan, 50 alleged violations; Express Scripts, 19 alleged violations; and MedImpact is charged with a single violation.
The $1.47 million in possible fines is the largest pharmaceutical enforcement action in Arkansas history.
A Pharmacy Benefit Manager licensure act the Arkansas Legislature passed in October decrees, for example, that no PBM will be allowed to pay its own pharmacy or pharmacist more than it pays an Arkansas pharmacy or pharmacist for providing the same pharmacist service.
Kentucky, too, enacted legislation to regulate pharmacy benefit managers; their bill was signed into law by the governor of Kentucky on April 5, 2024. Senate Bill 188 applies to PBM contracts issued, renewed, extended, or amended on or after Jan. 1, 2025.
SB 188 will affect employers offering prescription drug benefits to Kentucky residents, and is intended to level the playing field between commercial PBMs and independent
pharmacists.
A PBM “should be like a credit card,” Standridge said. “They should be regulated and should not be allowed to run roughshod over the industry.”
There are “antitrust and price manipulation issues” at the center of the PBM debate, he told the Ledger. PBMs “are not operating in the best interest for citizens and patients.”
Utah sues 2 PBMs over opioid sales Utah’s attorney general and the Utah Division of Consumer Protection filed suit Dec. 23 against two of the nation’s largest companies that manage prescription drug benefits, because of their opioid sales.
The suit alleges that UnitedHealth Group and Express Scripts and their subsidiaries “played a significant role” in the opioid epidemic via their positions as “intermediaries between manufacturers, pharmacies, insurance companies, payers, and patients,” the Utah AG’s office announced.
The lawsuit claims the two pharmacy benefit managers have “substantially contributed to … a tripling of the number of Utahns who died from prescription opioid overdose.”
In 2014, “the volume of opioids sold in Utah would provide every state resident with roughly 34 pills,” the lawsuit reports.
Related stories, pages 6-8