Pharmacy benefit managers (PBMs) were first developed in 1958 as a prepayment plan for prescriptions. Today, PBMs function as middlemen between pharmacies, plan sponsors, drug manufacturers, and wholesalers.1
With the increasing complexity of PBM services and horizontal and vertical integration within the drug supply chain, concerns have grown about PBMs’ business practices, such as the transparency of drug pricing and reimbursements to pharmacies. At the end of 2023, the Centers for Medicare & Medicaid Services (CMS) issued a letter expressing unease over “certain practices by some plans and PBMs that threaten the sustainability of many pharmacies, impede access to care, and put increased burden on health care providers.”
Individual states began to tackle PBM practices in 2017 through legislation. To date, all 50 states have enacted legislation regulating PBMs, with 156 laws in total. The most common provisions include prohibiting gag clauses on pharmacies, which prevent them from disclosing cost and pricing information to a patient; limiting patient cost-sharing; and requiring PBMs to obtain licensure or registration.
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