Prescription Profits: Examining the Role of PBMs in Drug Pricing

Why are the entities most responsible for shaping drug prices the ones patients hear about the least?

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Published December 16th, 2025

Written by Alexa Lavine

Pharmacy Benefit Managers are a popular topic of discussion and legislation in Congress, but outside of Congress, most people do not know the vast impact PBMs have on prescription drug pricing. PBMs are the intermediary negotiators between insurance companies, prescription drug manufacturers and pharmacies, according to the Center for American Progress. The CAP explains that PBMs work with insurance companies to create formulary lists of preferred drugs, which influence the price beneficiaries pay out of pocket for certain prescription drugs. PBMs also negotiate rebates and benefits with drug manufacturers to determine the reimbursement pharmacies receive and the prices insurers pay, reports CAP. Additionally, CAP notes that PBMs have recently taken on the role of directly reimbursing pharmacies. Together, these practices can drastically impact the prices patients pay for prescription drugs.

Recently, PBMs have vertically integrated to control multiple layers of the prescription drug supply chain. Likely, the insurer, pharmacy and PBM involved in a given prescription are all owned by the same health care company, according to PhRMA. This means the benefits and rebates negotiated actually return to the health care company rather than the insurance company, pharmacy, or patients. The PBM is effectively negotiating with itself for higher profits. PhRMA reports that PBMs receive enough rebates and benefits to lower prescription drug prices by 50%, but still force patients to pay the full price, keeping the rebates for themselves.

Since many PBMs operate or are affiliated with pharmacies, they use a practice called steering to direct patients to those pharmacies and away from independent or unaffiliated ones, according to the Federal Trade Commission. Furthermore, the FTC has found that PBMs reimburse independent and unaffiliated pharmacies less per prescription drug than they do for their own pharmacies. This can lead to closures of pharmacies, pushing patients to PBM-owned pharmacies or even creating pharmacy deserts in rural areas where there are no alternatives. The prices at PBM-owned pharmacies are often higher — the FTC determined that prices are marked up by 1,000% — especially for specialty drugs treating cancer or heart disease. PBMs prioritize profit and take advantage of reimbursement and rebates whenever possible. PBM pricing and steering tactics might be less successful if there were market competition, but, to make matters worse, only three big PBMs control over 80% of the market, according to the House Oversight Committee. The CAP highlights that the consolidation and market control PBMs hold just incentivize them to charge more for prescription drugs.

There have been many attempts at PBM reform over the past couple of years, but most recently, Rep. Buddy Carter, R-GA, introduced the PBM Reform Act, and Sen. Chuck Grassley, R-IA, introduced the PBM Transparency Act, as detailed in legislation accounts by Congress.gov. Both of these proposals aim to reform PBMs by increasing accountability and transparency in pricing, limiting deceptive practices. Though PBM and drug pricing reform have bipartisan support, neither of these bills has been passed due to congressional gridlock and political polarization, similar to many of the other past PBM legislation proposals.

PBMs hold a central yet often overlooked role in the U.S. pharmaceutical supply chain. As an intermediary between pharmaceutical manufacturers, insurers and pharmacies, PBMs have immense power over what drugs are covered by insurance, drug pricing and pharmacy reimbursement. Recent consolidation efforts have allowed PBMs to control multiple steps in the prescription drug pricing and distribution process, allowing them to maximize profit while increasing drug costs for patients. As Congress considers policy efforts to reform PBM practices, a deeper understanding of the impact they have on consumers and pharmacies, in addition to awareness of their role, is essential in creating effective solutions and engaging in advocacy.

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