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Policy Ideas 

We’re working to identify policy solutions to the PBM problem so that Americans pay no more than is absolutely necessary for their medicines. There are several PBM policy reform efforts happening across the U.S., including:


PBMs have created a perverse drug pricing incentive structure in which consumers are pushed to purchase higher-priced drugs instead of the medicines they can more readily afford. PBM profits stem from the rebates they demand from drug manufacturers, so the higher a drug’s list price, the larger the rebate and more revenue for the middlemen. And because PBMs and their affiliated insurance companies control drug formularies, they can limit patient access to lower-priced generics and biosimilars. 

We believe it is essential to delink PBM revenues from drug prices and eliminate the incentives for PBMs to push patients toward pharmaceuticals that are best for corporate profits. PBMs should be paid a fair, market-based flat fee for the services they provide and not be rewarded for elevating consumer out-of-pocket costs.


State governments and employers who work with PBMs to administer prescription drug benefits have been kept in the dark for too long. One study shows that three in five employers think their contracts with PBMs are problematic, complicated, and often benefit the PBM at the expense of the employer. 63% of employers said PBMs are not transparent about how they make money.

We believe businesses and state government payers would benefit greatly from a less complicated contract with the PBMs they do business with and more transparency into the PBM practices and sources of revenue. This means PBMs should be:

  • Required to report to businesses and state governments the PBM acquisition cost of medicines and the sources and amounts of all revenues PBMs receive; 

  • Paid only a transparent, competitive fee for the value of their services and do not profit from playing games with the cost of prescription medicines;

  • Prohibited from requiring consumers to use mail-in or PBM-owned pharmacies (known as “steering”); and,

  • Required to identify certain affiliates that ultimately reduce competition in the marketplace.

Several policymakers at the state and federal level have worked to increase PBM transparency and ensure they perform services in the best interests of patients, employers and the health plan or provider they are meant to serve.

Success in the States: 

New York passed legislation to regulate PBMs and close loopholes used by PBMs that allowed them to force patients to use mail-order pharmacies or PBM-owned pharmacies over local independent businesses.

Michigan passed a bill to prohibit gag clauses, require PBM transparency reports, and ban spread pricing practices. 

Texas enacted legislation that protects community pharmacies and ensures patient choice by prohibiting PBMs from steering patients to pharmacies they own and ensuring pharmacies are protected from PBM overreach.

Oklahoma passed a bill protecting both patients and pharmacies from PBM abuses by granting the insurance commissioner greater enforcement authority over PBMs, prohibiting the practice of spread pricing, and banning pharmacy network participation fees. 


Legislation should require that insurers and PBMs pass negotiated discounts and rebates directly to consumers. This will assure that no patient pays any more than the minimum cost necessary for the prescription medicines they need.

Success in the States: 

West Virginia became the first state to "carve out" PBMs from its Medicaid managed-care program and began running the program as a fee-for-service program - eliminating spread pricing and reducing administrative fees. This bipartisan solution is expected to save the state $30 million a year.

Arkansas Governor Sarah Huckabee Sanders signed similar legislation that will ensure manufacturer rebates are passed on to Arkansas residents at the pharmacy counter.


State policymakers are examining innovative approaches to lower the out-of-pocket costs of prescription medications. One of the most promising and successful of these solutions is the
PBM Reverse Auction,” which helps transform the opaque and uncompetitive process for setting prescription drug prices into a transparent, dynamically competitive marketplace where PBMs would compete with one another for any given state’s business.

Success in the States: 

Colorado is expected to save between

$6M - $10M



Minnesota is projected to save more than

in drug costs in 2023 and 2024

New Hampshire is expected to save as much as



New Jersey saved an unprecedented


over five years


Ohio, Louisiana, and Maryland have also passed legislation to create this PBM reverse auction.

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