States seek to lower drug prices by targeting the companies that manage them for health plans

States Target PBMs to Cut Drug Costs

States seek to lower drug prices - As medication expenses climb, state governments are actively pursuing strategies to reduce drug prices by focusing on the organizations that control prescription coverage for health insurance. These entities, known as pharmacy benefit managers (PBMs), have become central figures in the fight against rising healthcare costs. By targeting PBMs, states aim to address inefficiencies in the drug supply chain and ensure more equitable pricing for patients. The momentum behind these efforts has intensified ahead of this year’s midterm elections, as lawmakers across the U.S. seek to reshape the industry’s influence on drug affordability.

The PBM Influence on Healthcare Costs

Pharmacy benefit managers act as intermediaries between healthcare insurers and drug manufacturers, negotiating drug prices and determining which medications are covered under health plans. While they are credited with helping lower costs through bulk purchasing and discounts, critics argue that PBMs have increasingly prioritized profit over patient needs. For example, CVS Health, one of the largest PBMs, has spent millions lobbying to maintain its role in the system. This has sparked debates over whether PBMs are truly reducing drug prices or simply preserving their own financial advantages.

Recent studies reveal that 60% of U.S. adults are worried about affording their medications, with 40% skipping doses or choosing cheaper alternatives due to cost. These findings underscore the need for legislative reforms, as more than a dozen states have introduced measures to limit PBM compensation, require minimum payments to pharmacists, and enhance transparency in drug pricing. The goal is to ensure that PBMs work in the best interests of patients rather than perpetuating high costs.

Legal Battles and State-Level Reforms

Tennessee’s new law, set to take effect in July 2028, bans PBMs from operating retail pharmacies. This move has drawn immediate legal challenges, with CVS Health Corp. filing a federal lawsuit to block its implementation. The company claims the law favors independent pharmacies, potentially disadvantaging its own retail operations. In Knoxville, this could mean pharmacists like Seth White face job losses if the law stands, while customers rely on CVS for their prescriptions.

Meanwhile, Kansas is navigating a different approach. The state’s legislation mandates that PBMs pay a $10.50 dispensing fee per prescription, which pharmacy owners like Lisa Gales of Main Street Pharmacy call a "great win." However, Gales notes that the fees still fail to cover the losses incurred on 86% of prescriptions last year. "It’s still way under what it’s costing us," she said, highlighting the ongoing struggle to balance cost control with fair compensation for pharmacies.

Arkansas, which passed a similar law last year, faced a federal court challenge that temporarily stalled its implementation. The case illustrates the broader hurdles states encounter when reforming the PBM landscape. Critics argue that these fees add an extra "pill tax" to consumers, but supporters insist they are necessary to ensure PBMs fairly compensate pharmacists and health plans. With over 120 bills addressing PBMs introduced in 26 states this year, the push for reform continues to gain steam.

Political and Financial Impact of PBM Reforms

Political campaigns have also capitalized on the PBM issue, framing it as a key policy topic. This has led to significant financial investments by PBMs and their allies, with at least $24 million spent on advertising since 2025 to influence public opinion. In Tennessee, CVS allocated $4 million specifically to counter the state’s new law, while also settling three lawsuits in Louisiana for $45 million after being accused of unfair lobbying practices. These efforts highlight the industry’s determination to protect its interests, even as states push for greater oversight.

Despite the opposition, the trend of holding PBMs accountable is growing. Louisiana, for instance, has enacted a law requiring PBMs to act in the best interest of health plan clients, while another state has imposed a $11.81 dispensing fee per prescription. These measures reflect a broader movement to align PBM practices with patient needs. As states continue to target PBMs, the question remains whether these reforms will lead to substantial changes in drug pricing or merely shift the burden of costs onto other stakeholders in the healthcare system.