Issue Brief

Executive Summary | Pharmacy Benefits Manager Reforms: Can Congress Fix the Market Without Breaking It?

< 1 min
April 17, 2024
Congressional proposals aim to regulate Pharmacy Benefit Managers (PBMs) to enhance market transparency, foster competition, and ensure fair drug pricing, without compromising their negotiating capabilities.

By Anna Kaltenboeck, Jennifer Chen, and Timothy Lash

Pharmacy Benefit Managers (PBMs) are crucial in managing prescription drug prices in the United States, earning revenue by negotiating price concessions from pharmaceutical companies and pharmacies. However, their role has become controversial due to perceived conflicts of interest and market power abuses that may disadvantage unaffiliated stakeholders. Amidst this scrutiny, several bipartisan Congressional proposals aim to regulate PBM revenue structures to align their incentives more closely with the needs of health plans and beneficiaries, without dampening their ability to effectively negotiate drug costs.

The current legislative efforts explore enhancing competition among PBMs, increasing their accountability, and rigorously examining the impacts of vertical integration. These reforms are designed to mitigate potential negative effects from revenue regulation, such as reduced negotiation efficacy and the risk of tacit collusion. By standardizing terms for PBM bids and potentially allowing federal oversight of audit rights, the proposals strive to foster a more competitive and transparent PBM marketplace, which could lead to more favorable drug pricing for plan sponsors and ultimately, consumers. These adjustments aim not only to rectify current market dysfunctions but also to provide a framework for sustainable PBM practices that support the broader goals of healthcare affordability and access.

PBM Summary 04.10.24[32] thumbnail
ATI Advisory Logo
Timothy Lash
President, Gary and Mary West Foundation
President, West Health Institute
President & Chair, West Health Policy Center