American Consumer Institute white paper finds that Pharmacy Benefit Manager’s market power, lack of transparency, and business practices lead to higher prescription drug prices for consumers.

ARLINGTON, VIRGINIA – A white paper released today by the American Consumer Institute (ACI) sheds new light on the prescription drug affordability crisis. Specifically, the paper proposes that Pharmacy Benefit Managers (PBMs) – third-party administrators tasked with negotiating drug prices and managing benefit plans on behalf of health insurers, employers, and others – are to blame for escalating drug prices. These industry middlemen increasingly leverage their market power to extract exorbitant profits for themselves at the expense of everyone else. This abuse of the prescription drug market is most visible in the wide variety of predatory business practices that PBMs engage in.

The whitepaper describes these practices in detail and the negative impact they have on the prescription drug market, specifically for consumers. Examples include formulary design, where PBMs exclude lower-cost generic medications from drug menus just because manufacturers provide more lucrative rebates on brand-name drugs, and arbitrary clawbacks, where PBMs prohibit pharmacies from disclosing to patients that the price of a drug is lower than their plan’s deductible, leading patients to overpay for drugs. Also discussed is the inexplicable failure of PBMs to pass through cost savings generated from manufacturing rebates and copayment assistance programs to patients. Increased pricing transparency is key to reducing high and rising drug prices.  

The paper also describes strong public dissatisfaction with the status quo and ongoing efforts by Congress and regulatory agencies to crack down on PBMs. These include recent legislative proposals and moves by some regulatory agencies to withdraw support from PBMs formally.

Considering all these factors, ACI suggests that now is the time to implement real, meaningful reform. This can be done by taking the following actions:

  • PBMs should be required to pass through 100% of manufacturer rebates and discounts to patients; 
  • Patients paying coinsurance and deductibles should pay the negotiated price and not the full list price of drugs;  
  • PBMs should be prohibited from using clawbacks and spread pricing; 
  • PBMs should be prohibited from using copay accumulator adjustments to deny patients copay assistance as was initially intended by manufacturers and 
  • The Department of Health and Human Services, or another federal agency, should be given more excellent supervision over PBMs’ pricing practices, including auditing power to track wholesale and retail prices between the entire supply chain, if necessary.  

The whitepaper’s findings add to the growing body of research that suggests that the key to containing escalating prescription drug prices is to rein in some PBM business practices. This will require lawmakers and regulators to implement each of the reforms just described.

To learn more about the link between PBMs and high prescription drug prices, read the white paper here.

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The American Consumer Institute is a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on Twitter (X) @ConsumerPal.