State Lawmakers Turn Attention to Pharmacy Benefit Managers

A recent analysis by the website GoodRx found that the cost of prescription drugs in the United States has risen 37 percent over the past decade, outstripping inflation.

Drug companies, insurers and the government often take the blame for these skyrocketing prices. But a recent New York Times investigation points to another culprit: pharmacy benefit managers, intermediaries between drug companies and insurers, which the newspaper found drive up the cost of prescriptions.

Pharmacy benefit managers, otherwise known as PBMs, contract with health insurers and employers to manage the prescription drug benefits of millions of Americans.

They handle a variety of tasks, from maintaining formularies to processing claims—and they’ve been a target of state legislators for years. According to the National Academy for State Health Policy, by late 2023, all 50 states had passed at least some legislation to regulate PBMs.

But that seems to be just the beginning. Since the start of 2024, more than 100 bills dealing substantively with PBMs have been introduced in 20 states, according to the LexisNexis® State Net® legislative tracking system. A number of those bills have failed, but 13 were signed into law, and others are pending.

PBMs might “often escape attention” as the New York Times put it, but they’re squarely in the sights of state legislators.

Recently Enacted Bills Regulating Basic PBM Practices

The bills that have been enacted generally regulate the behavior of PBMs. They include:

• Louisiana SB 444 and West Virginia SB 453, both of which govern reimbursements by PBMs, and Oregon HB 4113, which mandates that PBMs count payments made by or on behalf of an enrollee for prescription drugs when determining the enrollee’s contribution to out-of-pocket deductibles and maximums.

• Idaho HB 596, which limits charges for PBMs, and Iowa HB 2099, which requires PBMs to operate in good faith and prohibits them from retailing against pharmacies.

• New Hampshire SB 557, which prohibits discrimination by PBMs, and Kentucky SB 188, which ensures that PBMS establish reasonably accessible pharmacy networks.

While these bills may seem to be basic in nature, they reflect the still-emerging landscape of PBM regulation. As the U.S. Government Accountability Office noted in a March 2024 study, “researchers and stakeholders have questioned certain PBM practices,” leading to a recent deluge of legislation.

GAO researchers found that some state-level regulators “stressed the need for robust enforcement of PBM laws and effective penalties to enforce them,” suggesting that there are still wide swaths of this burgeoning policy area that need oversight.

As an example of just how much regulation still remains to be enacted around this issue, the New York Legislature recently passed SB 9040, which would bar PBMs from penalizing pharmacies for giving customers information about the costs of prescription medications—perhaps one of the most basic services a pharmacy provides, but one that is still imperiled under current practices. 

SB 9040 awaits action by New York Gov. Kathy Hocul (D).

State Legislatures Focusing on PBMs

At least 26 states have considered bills dealing substantively with pharmacy benefit managers in the current legislative biennium, according to the LexisNexis State Net legislative tracking system. Half of those states have enacted such measures. 

PBMs Could Continue to Draw Lawmakers’ Attention

According to State Net® data, a little more than 60 bills focusing on PBMs remain pending in eight states: California, Illinois, Massachusetts, New Hampshire, New York, Ohio, Pennsylvania and Rhode Island.

Like the bills mentioned above, these pending proposals would regulate a litany of PBM practices and behaviors, covering such issues as rebates, supply chain transparency and in-network drug costs.

In addition to solving practical problems, these bills also seem to be politically popular.

“Pennsylvanians are getting screwed by the high cost of prescription drugs and too many rural pharmacies have been forced to close their doors, while the few PBMs that dominate the market are raking in billions,” Pennsylvania Gov. Josh Shapiro (D) said in a press release after signing HB 1993 to address pharmacy benefit transparency. “My Administration is doing everything in our power to cut costs and put money back in their pockets so they can receive the medication they need to live healthy lives while supporting our communities.”

More legislation is likely on the horizon for 2025 and beyond, as PBMs are growing in influence and power. As the New York Times reported, due to recent mergers, the three largest PBMs, CVS Health’s Caremark, UnitedHealth’s Optum Rx and Cigna’s Express Scripts, “are becoming more dominant, collectively processing roughly 80 percent of prescriptions in the United States. In 2012, the figure was less than 50 percent.”

The Times noted that all three PBMs are owned by health care conglomerates, but if they were standalone companies, they “would each rank among the top 40 U.S. companies by revenue. The largest, Caremark, generates more revenue than Ford or Home Depot.”

According to the National Academy for State Health Policy, states only started regulating PBMs in 2017—just seven years ago. With the added attention from the Times and other media outlets, this could be a policy priority for lawmakers for years to come.

—By SNCJ Correspondent BRIAN JOSEPH

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