Series: The Truth About the Top Three PBMs

(CVS Caremark, owned by CVS Health) 

It’s been well reported that the top three PBMs control nearly 80% of all U.S. prescription drug claims. They were originally established to negotiate prescription drug savings for patients, employers and taxpayers – and yet, Americans continue to face higher out-of-pocket costs for the medicines they need.  

So, who are these PBMs and how can we separate fact from fiction?  

Let’s take a closer look at the Big Three corporate middlemen in the drug supply chain, and how their business practices shape what patients pay at the pharmacy. This overview breaks down who owns the PBMs, how they operate and how their business decisions influence drug pricing throughout the drug supply chain. Most importantly, these dynamics underscore the need for PBM reform and more transparency around vertical integration. 

At the start of the week, we took a deep dive into Express Scripts, owned by Cigna. Next, we turn our attention to CVS Caremark, owned by CVS Health

CVS Caremark’s Growth and Market Power 

Caremark was first founded in 1979 as the product of a merger between Home Health Care of America and Baxter International’s infusion services. The company bought AdvancePCS for $5.6 billion in 2003, and four years later CVS (the largest pharmacy chain in the U.S.) acquired Caremark in a $21 billion transaction, creating the highly vertically integrated giant in the PBM industry known today as CVS Health.

By 2023 CVS Caremark held the largest market share in commercial insurance, Medicare Part D, and Medicaid managed care. In Medicaid managed care alone, CVS Caremark controls almost 40% of the market. By leveraging substantial market power across retail pharmacy (CVS Pharmacies), insurance (Aetna) and its PBM (CVS Caremark), CVS Health’s vertical integration consolidates drug pricing, benefit design, dispensing and patient care management all under one entity, with widespread implications for millions of patients nationwide.

Vertical Integration and Patient Impact 

The vertically integrated structure of CVS Health allows the company to steer patients toward its own pharmacies, favor its preferred products on formularies, mark up drug prices to secure higher rebates, and retain significant revenue. In fact, CVS Health raked in $357.8 billion in 2023 alone.

The company’s practices have come into the spotlight in recent years. A 2025 FTC investigation found that CVS Caremark, along with the other major PBMs, inflated the prices of certain specialty drugs by hundreds to thousands of percent, generating $7.3 billion in extra revenue between 2017 and 2022. While these companies gain additional profits, out-of-pocket costs for patients skyrocket.

Consequences for Pharmacies, Employers and Taxpayers  

CVS Caremark’s outsized influence also allows this middleman to consistently underpay independent pharmacies and rip off health plans. A recent settlement with the state of Oklahoma requires CVS Caremark to pay more than $5 million to independent and contract pharmacies for previously underpaying them on almost 70,000 prescriptions.

In a major settlement earlier this year, CVS Caremark was charged with keeping money that belonged to Oklahoma’s state employee health plan. Around the same time, CVS Caremark was also hit with a $289 million federal judgement for overcharging the Medicare Part D program for drugs.

Not only is CVS Caremark overcharging for drugs, but the company is also failing to pass savings on to employers. CVS Caremark reached a $45 million settlement with the state of Illinois for retaining rebates owed under its contract.  

Reform is Needed 

Even before being acquired by CVS, Caremark was a major player in the PBM industry. Today, CVS Caremark plays an even bigger role while continuing to boost profits at the expense of employers, taxpayers, patients and independent pharmacies.

As policymakers, employers and consumers continue to scrutinize PBM practices, understanding how these powerful entities operate is essential to evaluating where reforms are needed and how the system can better serve the people who rely on it for their medications. Learn more about policy solutions here.