As legislative season begins, lawmakers should be careful about PBM 'reform'

As state lawmakers begin to return to office this week, a number of issues will be clamoring for their attention. One of the most important — but perhaps overlooked due to its technical and less attention-grabbing nature — is pharmacy benefit manager reform.

Reform-minded leaders should work with PBMs, leveraging their market power to achieve lower costs for consumers.

Last year, Arkansas became the first state in the nation to ban PBMs, and other states heavily regulated the industry. These efforts are expected to continue in 2026, even as courts raise constitutional questions about the Arkansas law and regulations in Iowa.

I’m a health care broker, so I know PBMs pretty well. They’re easy targets because of the complex process by which they work, as well as the pharmaceutical industry’s years-long campaign to put blame for drug pricing on the industry.

At its core, PBMs’ basic function is straightforward. Because they represent hundreds of thousands or even millions of patients who cannot negotiate with drugmakers on their own, PBMs are able to use their size as leverage to push for lower prices. When the big players reject a high price, a manufacturer has to decide whether it wants to lose access to those patients.

That negotiating leverage also keeps drugmakers from unilaterally dictating the cost of medications, from commonly used drugs like insulin to newer medications like Zepbound and Wegovy. For example, companies gave consumers a New Year’s present of increasing prices for 350 products — but the final costs to patients won’t be known until PBMs have their say.

U.S. health care pricing can be confusing, with even seasoned observers getting lost amid the jargon of rebates, formularies, and spread pricing. Critics often accuse PBMs of adding unnecessary layers of administrative cost or of exaggerating savings. Some of these concerns are legitimate, and the industry’s lack of transparency makes it easy for critics to portray PBMs as the villains keeping patients from being able to afford the medications they need.

But this criticism is better leveled at the drugmakers. They often insist they cannot lower prices because of research costs or regulatory burdens. Yet when Eli Lilly, the first trillion-dollar drug company, found itself boxed out of the CVS network, it suddenly found a way to make its products available more cheaply.

On December 1, drugmaker Eli Lilly cut the consumer cost of its popular weight-loss injection Zepbound, bringing its prices in line with competitor Novo Nordisk’s popular and recently reduced drug Wegovy.

Lilly’s move should be instructive for state and federal lawmakers because it came after Novo Nordisk agreed to lower prices of Wegovy under pressure from pharmacy giant CVS. CVS — through its PBM division, CVS Caremark — had initially tried to negotiate with Lilly, but the drugmaker refused to budge on its pricing, leading CVS Caremark to stop offering Zepbound to clients. But once Novo Nordisk agreed to reduce the price of Wegovy, Eli Lilly suddenly changed its tune.

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Photo by Justin Sullivan/Getty Images

Lawmakers looking to reduce prescription drug prices should take note.

Like all industries, PBMs have their flaws, but this case showed CVS forcing a needed price correction. And it should be front of mind for lawmakers who, yes, should insist on greater PBM transparency, but also must be aware of both the constitutional limitations on so-called “reforms” and how overregulating PBMs will impact constituents’ drug prices.

As lawmakers look for solutions to Americans’ record-high health care costs, they should realize that any cost-reduction effort must include prescriptions — and that means working with PBMs. Reform-minded leaders should work with PBMs, leveraging their market power to achieve lower costs for consumers while insisting on price transparency and other reforms that reinforce how PBMs are using fundamental market principles to keep drug companies from causing even more harm to Americans’ finances.