From Investigation to Legislation: The Growing Momentum for PBM Reform

As the 119th Congress settles in alongside the incoming Trump administration, pharmacy benefit managers (PBMs) face unprecedented scrutiny from multiple directions. While broad health care reform may not be at the top of the legislative agenda (that honor is reserved for the economy), the mounting pressure to address prescription drug costs keeps PBMs firmly within regulators’ crosshairs.

The 118th Congress produced 2 significant bipartisan attempts at PBM reform that ultimately remained stagnant in the Senate—the Pharmacy Benefit Manager Reform Act and the DRUG Act. The bills emphasized transparency and oversight into the practices of what is arguably the opaquest stakeholder in the industry. Acting as intermediaries between pharmaceutical manufacturers, health plans, and pharmacies, PBMs were initially established in the 1960s as claims processing support. Fast forward 60 years later, and their role has become deeply complex as they negotiate drug discounts, establish formularies, implement utilization management programs, and manage the prescription drug benefits for millions of Americans.^1,2 

Congressional Dynamics

The DRUG Act (S1542), introduced by Senator Roger Marshall (R-KS) with co-sponsors including Senator Jon Tester (D-MT), aimed to fundamentally restructure how PBMs operate and generate revenue. At its core, the legislation would have ended spread pricing—the practice where PBMs charge health plans more for drugs than what they pay pharmacies—while mandating transparent, flat-fee structures instead of percentage-based compensation.¹

The timing is particularly relevant given Medicare's new drug price negotiation powers under the Inflation Reduction Act (IRA). While pharmaceutical manufacturers must now justify their pricing to the Centers for Medicare and Medicaid Services (CMS), PBMs have largely escaped similar scrutiny despite their significant influence on what patients actually pay at the pharmacy counter.

The more comprehensive Pharmacy Benefit Manager Reform Act (S1339), introduced by Senator Bernie Sanders (I-VT) with support from Senators Bill Cassidy (R-LA) and Patty Murray (D-WA), aimed to pull back the curtain on PBM operations through extensive reporting requirements. The legislation would have mandated detailed annual disclosures of drug-specific costs, rebates, and utilization data, while requiring PBMs to document how they steer patients toward affiliated pharmacies through benefit design.²

Transparency provisions were particularly robust for PBM-owned pharmacies, requiring comparative pricing analysis across pharmacy networks and detailed reporting on acquisition costs and markups. In essence, PBMs would have to spill the tea on their own pharmacies, showing how their prices compare to independent pharmacies. This focus on vertical integration reflects growing concern about market concentration, as the 3 largest PBMs—all owned by major health insurers or pharmacy chains—control roughly 80% of prescription claims.³

The bill also tackled the contentious rebate issue, requiring full pass-through of manufacturer payments to plan sponsors and granting them audit rights. This provision isn’t too shocking—right now, about 90% of rebates are passed through to their customers.⁴ However, this provision aimed to address long-standing questions about whether PBMs' rebate negotiations actually lower costs for patients or simply increase their own profits.
Both pieces of legislation garnered notable bipartisan support, reflecting growing consensus that the current PBM model needs reform. However, despite this momentum, both bills ultimately fell victim to year-end political maneuvering when PBM provisions were stripped from December's government funding package.

The silver lining? These legislative efforts created detailed blueprints for future reform, identifying key pressure points in the PBM business model and establishing potential regulatory frameworks. With a new Congress taking office and mounting pressure for drug pricing reform, these proposals likely represent opening salvos rather than missed opportunities.

The FTC Has Receipts

The Federal Trade Commission (FTC) has been at the forefront recently with the July 2024 interim staff report—an absolutely scathing review of PBM practices. They doubled down in January with a second interim report that found the “Big 3” PBMs—CVS Caremark, Express Scripts, and OptumRx—marked up specialty generic drugs by “hundreds and thousands of percent,” generating over $7.3 billion in revenue from drug dispensing between 2017 and 2022.³

Particularly concerning to regulators was evidence that PBM-affiliated pharmacies received disproportionate shares of the most profitable prescriptions. The report documented that PBMs reimbursed their affiliated pharmacies at higher rates than independent pharmacies for nearly every specialty generic drug examined.³

This investigation culminated in the FTC's September 2024 lawsuit against the Big 3 PBMs over alleged artificial inflation of insulin prices. The companies quickly countersued, arguing the FTC was attempting a "sweeping attempt to reshape an entire industry." With new FTC leadership under Andrew Ferguson, the agency's aggressive stance may shift, though Ferguson notably supported the latest PBM report despite raising methodological concerns.⁵

Here's where things get interesting: Vice President JD Vance has spoken positively about former FTC Chair Lina Khan's aggressive approach to market concentration. That's a pretty good sign that the new administration will keep the pressure on PBMs, especially with Ferguson taking over at the FTC.⁶ 

The Bottom Line

The cherry on top of the PBM reform sundae comes in the form of President Donald Trump, who has declared he’s going to “knock out the middleman.” So, we have a Republican administration that wants to “knock out” PBMs, bipartisan support in Congress who agree these companies need oversight, and an FTC paper trail of receipts. It should be fairly straightforward to enact legislation, right?⁶

Of course not, because we have a divisive Congress with razor-thin margins, a packed legislative agenda, PBMs with significant resources, and the ever-present challenge of turning good ideas into good laws. 

Could 2025 be the year that PBM reform finally happens? We’re poised to make it happen, but past performance doesn’t guarantee future results. Reform efforts will need to navigate technical details, political hurdles, and industry pushback. Still, with health care costs hitting our wallets hard, PBM reform might be an idea whose time has finally come. 

1. Delinking Revenue from Unfair Gouging Act, S1542, 118th Cong (2023). Accessed February 20, 2025. https://www.congress.gov/bill/118th-congress/senate-bill/1542/text 
2. Pharmacy Benefit Manager Reform Act, S1339, 118th Cong (2023). Accessed February 20, 2025. https://www.congress.gov/bill/118th-congress/senate-bill/1339 
3. Federal Trade Commission. Pharmacy benefit managers: the powerful middlemen inflating drug costs and squeezing main street pharmacies. Interim staff report. Published July 2024. Accessed February 21, 2025. https://www.ftc.gov/system/files/ftc_gov/pdf/pharmacy-benefit-managers-staff-report.pdf 
4. Fein AJ. The 2024 economic report on U.S. pharmacies and pharmacy benefit managers. Drug Channels Institute. Published March 2024. 
5. FTC sues prescription drug middlemen for artificially inflating insulin drug prices. News release. Federal Trade Commission. Published September 20, 2024. Accessed February 24, 2025. https://www.ftc.gov/news-events/news/press-releases/2024/09/ftc-sues-prescription-drug-middlemen-artificially-inflating-insulin-drug-prices 
6. Baxter A. PBMs have evaded lawmakers’ reform attempts so far. Could 2025 turn the tide? PharmaVoice. Published January 6, 2025. Accessed February 24, 2025. https://www.pharmavoice.com/news/pbm-reform-attempts-2025-congress-pharma/736473/