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PBM Reform is More Critical than Ever as Pharmacies Look to Congress for Relief

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Introduction

Pharmacy Benefit Managers Spent $17 Million to Block Reform—Here’s What That Means for Pharmacies

$17 million. That’s how much, according to the National Community Pharmacists Association(NCPA), the nation’s pharmacy benefit managers (PBMs) spent last year to defeat efforts to impose meaningful legislative reform. By comparison, NCPA says it spent “just five percent of what they did,” or $850,000.

Despite being grossly outspent, reform supporters came close to succeeding. Several PBM provisions were included within a “must pass” budget package considered by the U.S. Congress in the final days of the 2024 legislative session. But those provisions were stripped out in the 11th hour, essentially greenlighting PBMs to continue their modus operandi, and leaving the nation’s pharmacists to face another year of egregious, unfair PBM practices.

And make no mistake, PBMs have had a profoundly negative impact on the nation’s pharmacies. A 2024 expose by the New York Times, for example, found that PBMs, “which employers and government programs hire to oversee prescription drug benefits, have been systematically underpaying small pharmacies, helping to drive hundreds out of business.”

But gross underpayments are only a part of the story. PBMs also affect pharmacies by requiring patients to use pharmacies owned by their parent companies, by imposing excessive fees, and through their sheer size and power. According to the Times, three PBMs – CVS Caremark, Express Scripts and Optum Rx – account for an estimated 80% of all prescriptions processed each year in the United States. Caremark is owned by CVS, which operates the country’s largest chain of retail drug stores. And, explains the Times article, Express Scripts is part of Cigna, and Optum Rx is part of UnitedHealth Group, each of which owns an online pharmacy.

For its part, NCPA has vowed to continue the fight. In February 2025 the group was part of a coalition that sent letters to U.S. Congressional leadership and to President Donald Trump, urging them to prioritize PBM reform during the current congressional session. “It is time for Congress to take action,” the coalition members wrote. “By enacting these measures, you can deliver relief to patients and families at their local pharmacies, employers facing continued increases in healthcare costs, and taxpayers who are currently overpaying for government-provided benefit programs.”

Absent meaningful reform, pharmacists have no choice but to find a way forward. According to Pharmacy Times, many pharmacists have sought to increase revenue by adding clinical services to their pharmacy’s offerings, including immunizations, point-of-care testing and medication therapy management. Others have integrated compounding services, along with wellness consultations and chronic care management.

One certainty during this unsteady time, is the important role technology can have in helping pharmacies add efficiency, reduce operational costs, and gain visibility into the bottom line. This includes PrimeRx, which is the preferred technology choice for thousands of pharmacies throughout the United States and Puerto Rico. Pharmacies rely on PrimeRx for extensive functionality including automated workflows, seamless inventory management, comprehensive records management, and full visibility into pharmacy operations. In addition, PrimeRx recently expanded its portfolio to include PrimeRx MARKET, the nation’s foremost online marketplace for prescription drug purchasing.

While PrimeRx can’t eliminate the onerous impact PBMs have on local pharmacies, it can help mitigate the impact, and ensure a high-functioning, well-managed operation.

Pharmacy Benefit Managers – A Brief History

Pharmacy benefit managers first arrived on the scene in the 1960’s when, according to a report from the U.S. House Committee on Oversight and Accountability, they originally functioned as “passive processors of prescription drug claims.” Since then, they have come to have an outsized role in setting the course for sales and disbursements of prescription medications.

According to the House report, in 2024 there were 66 PBMs operating in the United States. However, the three largest, CVS Caremark, Express Scripts, and Optum Rx, control approximately 80% of the market. The largest six PBMs collectively control 96% of the market.

What exactly is the role of the PBM in healthcare? According to the Pharmaceutical Care Management Association (PCMA), PBMs administer prescription drug plans for more than 275 million Americans who receive health insurance from a variety of sponsors including commercial health plans, self-insured employer plans, union plans, Medicare Part D, the Federal Employees Health Benefits Program (FEHBP), state government employee plans, and managed Medicaid plans, among others.

PBMs areas of concentration, according to the Journal of American Medicine Health Forum include:

• Development and maintenance of drug formularies.

• Utilization management practices including step therapy, supply limits, and prior authorization requirements.

• Price negotiations with pharmacies, wholesalers, and drug manufacturers on behalf of plan sponsors. PBMs negotiate prices both through upfront discounts and rebates. (Until 2024, rebates were clawed back from pharmacies, after a transaction had taken place.)

• Creation and management of networks of pharmacies (including specialty pharmacies)through which plan beneficiaries can obtain medications.

What exactly is the role of the PBM in healthcare?

PBMs operate by acting as “middlemen” in negotiating drug prices with pharmaceutical
companies on behalf of health plan operators, or “payers.”

The House Oversight Committee

PBMs negotiate with individual pharmacies “by offering a pharmacy a place in the plan’s
network, increasing the pharmacy’s potential for business.

A PBM controls costs through its formularies – lists of drugs eligible for reimbursement – by insisting on certain discounts in order for a drug to be included on the formulary. Drugs left off a formulary will not be reimbursed by an insurer, which dramatically reduces the likelihood of it being prescribed by a doctor. Thus, PBMs exert significant control over both the precise drugs available to patients, and the cost.

PBMs also interact directly with pharmacies. According to the House Oversight committee report, PBMs negotiate with individual pharmacies “by offering a pharmacy a place in the plan’s network, increasing the pharmacy’s potential for business. In return, the PBM reimburses pharmacies at a set amount for dispensing prescriptions.”

PBMs are for–profit companies and, according to The Wall Street Journal, earn money through several channels that include:

• Service fees for processing prescriptions
• Operating mail–order pharmacies
• Negotiating with pharmacies and drug makers; and
• Incentives for cutting costs

However, PBMs have become the focus of much controversy. Serious allegations have been made about the companies’ business practices, including claims that PBMs deploy anti competitive pricing strategies that raise prescription drug prices and undermine community pharmacies. Several specific allegations are detailed below.

Not surprisingly, PBMs reject these claims, and point the finger back at drug manufacturers, pharmacies, and plan administrators. As cost-cutters, PBMs note they are doing their jobs, finding ways to reduce drug costs for the employers and government groups that employ them. The situation has become so untenable, that dozens of legislative bills have been introduced, both at the state level and in the U.S. Congress to address different aspects of alleged PBM excesses.

The New York Times

“PBMs sometimes pay their own pharmacies more than what they pay local drugstores for the same medications.”

Pharmacy Benefit Manager Impact on Community Pharmacists

Before discussing the reforms the U.S. Congress almost succeeded in enacting during the final hours of the 2024 legislation session, it’s helpful to understand the problems the legislation was attempting to correct. Following is an overview of some of the more egregious PBM practices that have directly affected the nation’s community pharmacies.

Declining reimbursements. Pharmacies – independent pharmacies in particular — are especially vulnerable to PBM control over drug reimbursement rates. When a pharmacy enters into a contract with a PBM, a reimbursement rate is agreed upon for brand drugs, generics and specialty pharmaceuticals. As reported by Forbes, the reimbursement rate for brand and specialty drugs is usually based on a straightforward formula (average wholesale price less some percentage, plus a dispensing fee). But the reimbursement rate for generics is more complicated 6 and is based on a fixed amount called the “maximum allowable cost (MAC). The MAC is the maximum amount that a plan will pay for a specific drug. However, the PBM can adjust the MAC without notifying the pharmacy, often resulting in reimbursement rates that do not cover purchase prices for the affected drugs.

PBM under-reimbursements is a front burner issue for most pharmacies. For many, declining reimbursements have had an existential effect, with NCPA reporting independent pharmacy closures at a rate of roughly one per day. Additional examples include:

• The New York Times found that with regard to the blood thinner Eliquis, pharmacists located in different states reported reimbursements as much as $100 less than what it cost them to purchase the medication from a wholesaler. The Times research also noted that “PBMs sometimes pay their own pharmacies more than what they pay local drugstores for the same medications.”

• Research by the Oregon State Pharmacy Association determined that roughly 75% of claims examined “were insufficient to cover the pharmacy labor and drug costs.”

• Research by the New York City Pharmacists Society found almost 90% of local independent pharmacies said they had “been forced to turn away patients” due to sub-par reimbursement rates.

• More than half of pharmacy owners are losing money on over 60% of the Part D prescriptions they fill, according to NCPA.

Surge in prescription drug prices. PBMs were created to serve as intermediaries between drug manufacturers and health insurance plans to control drug prices. Yet drug spending in the United States increased by 91% over the 2000-2020 period, according to the Rand Institute. Further, spending is expected to increase by 5% annually through 2030.

While there are many reasons for drug price increases – research and development costs, higher costs associated with specialty drugs, strict FDA rules that prevent rapid market entry of generics, drug makers’ rights to exclusivity for new drugs – PBMs have also had a significant role.

As the Federal Trade Commission (FTC) reported in 2024: “The top three PBMs processed nearly 80% of the approximately 6.6 billion prescriptions dispensed by U.S. pharmacies during 2023. Pharmacies affiliated with these PBMs accounted for 70% of all specialty drug revenue. This outsized influence, the report found, allows PBMs to exercise undue market power against manufacturers and against the health plans and beneficiaries they are supposed to represent.

PBMs operate with little transparency – another source of criticism – and are highly profitable. The Department of Health and Human Services reports that among all intermediaries involved in the prescription drug supply chain, PBMs have the highest profit margin. During 2022 this amounted to $60.6 billion, or 31.2% of total drug expenditures. By comparison, pharmacy margins were $12.2 billion, or 3.2% of total expenditures.

Rebates. PBMs receive price concessions from drug manufacturers in the form of rebates. A rebate may also be offered in exchange for a PBM adding a drug to their list of reimbursable 7 drugs – their formulary. However, the PBMs have no obligation to disclose these rebates to health plans, or to pass along the savings to patients. Further, as the Federal Trade Commission reported, the size of manufacturer rebates and the percentage of the rebate passed on to health plans and patients are often confidential. This encourages manufacturers to set artificially high list prices, which are reduced via manufacturers’ rebates that are not wholly passed along to pharmacies or patients.

Patients Diverted to PBM-owned Pharmacies. According to the House Committee on Oversight, PBMs “limit patients’ abilities to choose their pharmacies,” by making it economically un-feasible to use a non-PBM-owned-pharmacy. Tactics used by PBMs, according to the report, include:

• Patients are prevented from receiving 90-day prescriptions at competing pharmacies.

• Patients are offered a 90-day prescription for the price of 60 days if dispensed through a PBM pharmacy, while prohibiting a local community pharmacy from offering the same pricing.

• Patient data is “abused” by the PBM to target patients with highly profitable medications.

• Specialty medications are only covered if dispensed by a PBM-pharmacy.

• Patients are charged higher copays at competing pharmacies to incentivize patients to use the PBM-owned pharmacy.

Tactics used by PBMs:

“Patients are prevented from receiving 90-day prescriptions at competing pharmacies.”

Spread Pricing. Spread pricing refers to instances in which a PBM pays a certain amount to reimburse a pharmacy but then reports a higher amount to the health plan sponsor, with the difference, “the spread,” accrued to the PBM. Instances of spread pricing have become so widespread, that according to NCPA, “the Congressional Budget Office (CBO) determined that banning spread pricing in state Medicaid managed care programs would save federal taxpayers$1 billion over 10 years.”

2024 – Meaningful Reform Comes Close

During the final days of the 2024 legislative session, the U.S. Congress considered a legislative package called a “continuing resolution,” or a “CR.” Congress has come to rely on the CR as a way to continue funding the U.S. government in the absence of a comprehensive budget plan. Through the CR, spending continues for a determined period of time, while Congress presumably puts the finishing touches on a new spending plan. Failure to enact the CR could result in a government shutdown, which often makes its passage mandatory.

A common practice though, amidst the frenzied negotiations that take place in the waning hours of the congressional session, is the addition of various non-related provisions to the legislative package. Such was the case in December 2024, when PBM reform was added to the continuing resolution.

PBM reforms added to the CR included:

• Reimbursements would be based on National Average Drug Acquisition Code (NADAC)pricing plus an applicable state’s Medicaid dispensing fee. This formula would apply to Medicaid managed care programs in all 50 states.

• The Centers for Medicare & Medicaid Services would have been required to develop“reasonable” contract terms with regard to pharmacy reimbursements. CMS was also tapped to create a mechanism for pharmacies to dispute contract violations and penalize PBMs.

• Elimination of spread pricing. In its place, PBMs would be paid a flat administrative fee.

PBM reforms added to the CR included:

“Elimination of spread pricing. In its place, PBMs would be paid a flat administrative fee.”  

The PBM reforms, according to The Wall Street Journal, enjoyed bi-partisan support from legislators and “highlighted a growing consensus that PBM models are flawed.” Passage of the reforms seemed to be a done deal. Until it wasn’t. In the final hours of the legislative session, as negotiations among lawmakers continued, the reforms were removed, effectively ending hope that reform would finally come.

Although the PBM reforms were not enacted, the Wall Street Journal notes that they are “far from buried.” The Journal noted that President Donald Trump has expressed support for PBM reform on at least two occasions, and that “Washington has set its sights on PBMs.”The news though, was not all bad. At the state level, laws were enacted in 20 states to impose PBM regulation including spread pricing bans, prohibitions on pharmacy steering practices, and increased reporting requirements. These new laws are in addition to provisions that had been previously enacted.

Pharmacy groups including NCPA have reaffirmed their commitment to meaningful federal reform and urged pharmacists to remain engaged as legislative efforts continue.

PrimeRx can soften the“surprise” of under-reimbursements by helping pharmacists understand how each plancontract is structured, and the terms of each payer’s reimbursement model.

Moving Forward – Technology can Help Mitigate PBM Fallout

As efforts to secure meaningful reform continue, pharmacists have no choice but to manage the fallout from continued PBM practices. For many, finding a way to mitigate the effects of reduced reimbursements and higher costs is a matter of survival. One bright spot is the role technology can have in helping pharmacists add efficiency, gain visibility, control costs, and improve overall pharmacy management. This includes the PrimeRx pharmacy management system, which offers comprehensive functionality presented in a logical, highly user-friendly format. Essential capabilities include:

#1 Planning and Visibility – Reimbursement Management.

PrimeRx can soften the“surprise” of under-reimbursements by helping pharmacists understand how each plan contract is structured, and the terms of each payer’s reimbursement model. Although this will not affect a reimbursement rate, knowing what to expect can help a pharmacist better plan, and understand which plans are especially detrimental to the bottom line.

PrimeRx planning tool.

A unique "planning tool" allows pharmacies to anticipate reimbursements based on historical averages for a particular plan. The planning tool can help with budgeting and forecasting and allows visibility regarding the tremendous impact of these fees on the bottom line.

Understanding patient plan usage.

PrimeRx allows pharmacies to track the plans most-utilized by patients, and the volume of medications dispensed to those patients. This may present opportunities for soliciting additional patients with favorable plans. For example, a pharmacy may decide to engage with a local business that offers a healthcare plan with fair reimbursement practices.

Understanding patient plan usage.

PrimeRx allows pharmacies to track the plans most-utilized by patients, and the volume of medications dispensed to those patients. This may present opportunities for soliciting additional patients with favorable plans. For example, a pharmacy may decide to engage with a local business that offers a healthcare plan with fair reimbursement practices.

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#2 Drug Cost Comparisons with PrimeRx MARKET.

Pharmacies can help manage medication costs by evaluating pricing for all drug purchases. PrimeRx MARKET, offered by PrimeRx, makes the process easier than ever. PrimeRx MARKET is an online platform that connects pharmacies with medication suppliers with benefits that include:

Direct access to more than 40 drug wholesalers and suppliers.

PrimeRx MARKET is the industry leader when it comes to the number of participating suppliers. Pharmacists can easily compare prices, identify best sources for different types of drugs, and seamlessly submit orders with multiple providers.

Single-source solution for all medication/inventory needs.

Pharmacies can shop for a wide range of medicines including brand-name drugs, generics, and over-the-counter products, among other offerings.

Fast, accurate results.

Pharmacists no longer have to spend time checking with multiple suppliers to identify the best pricing for a specific drug. Instead, PrimeRx MARKET generates a comprehensive side-by-side comparison of each supplier’s pricing for a requested drug. The system generates immediate results in a user-friendly format.

Seamless ordering capability.

Once a preferred supplier is identified, thepharmacy can submit an order, without leaving the PrimeRx MARKET platform.

As pharmacies struggle to afford the medications needed for their inventories,PrimeRx MARKET helps ensure price efficiency, with the highest levels of ease andefficiency.

#3 Expanding Pharmacy Revenue Opportunities.

Pharmacies are increasingly looking for ways to increase revenue by adding non-dispensing products and services to their portfolio of offerings.

OTC medicines and consumer products. Pharmacies can address consumers’ growing preferences for convenience by establishing themselves as sources for “one stop shopping” for everything from personal care goods to household supplies to pet food and groceries. The Pointy by Google solution allows pharmacies to promote themselves as viable retail options. Pointy helps a local pharmacy appear in consumer internet searches. A small device attaches to the pharmacy’s point-of-sale barcode scanner. When a product is scanned, it is 10 immediately added to a “Pointy Page” located on the pharmacy’s website. The pharmacy will then appear as a buying option for subsequent searches for that product. PrimeRx pharmacies can integrate directly with the Pointy solution.

Clinical services. Pharmacies are increasingly expanding the scope of clinical services offered, both as a way to better serve their patients while helping their bottom lines. According to the 2023 NCPA Digest, popular offerings include:

▪ More than 90% of community pharmacies offer some type of medication adherence program, including medication synchronization.

▪ 80% offer medication therapy management services.

▪ 87% offer influenza vaccines, with most pharmacies offering at least one other vaccine such as shingles or pneumonia.

▪ 62% offer compounding services.

▪ 59% offer blood pressure monitoring.

▪ In addition, more than 40% of pharmacies had at least one contract in place with a 340B entity during 2022, according to JAMA Health Forum.

PrimeRx also helps pharmacies manage clinical services with capabilities that include:

Immunization Reporting. The system allows direct integration with the Vaccine Registry Reporting solution which seamlessly links to Immunization Information Systems (IIS) registries.

Immunization Reporting. The system allows direct integration with the Vaccine Registry Reporting solution which seamlessly links to Immunization Information Systems (IIS) registries.

Medication Therapy Management. Medication mismanagement is aleading reason for preventable adverse events, as well as for patient non-adherence. PrimeRx helps address this problem with extensivemedication management services, including the ability to sync all refills,thereby minimizing the number of trips a patient needs to make to thepharmacy.

340B Inventory Management. PrimeRx addresses 340B management challenges with functionality that includes:

• Compliance and regulatory support. The system offers automated compliance checks and alerts to ensure that pharmacies are in full compliance and meet program requirements.

• Inventory optimization. PrimeRx creates a unique 340B inventory“bucket” that allows this inventory to be managed separately from the pharmacy’s overall inventory. Pharmacy staff can have real-time visibility into 340B medications, including information about medication usage, expiration dates, and order recommendations.

• Auditing and Reporting. PrimeRx simplifies the auditing and reporting process. The system generates detailed reports, tracks dispensing history, and maintains records for all 340B program activities. This reduces administrative work and minimizes the risk of errors during an audit process.

Workflow Optimization. The PrimeRx management system helps pharmacists save valuable time by automating key pharmacy workflows including prescription intake, dispensing, refills, inventory management, and claims processing, among others. While technology will never eliminate entirely the need for human oversight, the solution dramatically reduces the time required to perform critical tasks. A few examples include:

o Electronic prescriptions arrive seamlessly and are automatically validated and added to the dispensing queue.

o Labels are generated, with special accommodations available for braille, large print, or other patient needs.

o Inventory levels are automatically updated each time a medication is dispensed, and each time new supplies are added.

o The solution automatically transmits a claim to the appropriate payer and tracks the claim until a response is received.

o And critically important, the solution updates patient records each time a prescription is filled, and to reflect clinical services administered, as well as pharmacist-patient discussions

Extensive Patient Records. PrimeRx allows the pharmacist to maintain extensive records for all patient interactions. This includes observations and notes following each patient interactions, along with information about a patient’s health history including immunizations, point-of-care testing, lifestyle/habits, and living arrangements. All information is stored within PrimeRx and can be seamlessly accessed and updated.

Conclusion

In September 2024, South Dakota’s Brandon Valley Journal reported on the closing of the Brandon Pharmacy, which had been in business for 14 years. The reason for the closure? “The pharmacy is taking a loss on every prescription sold,” the paper explained, “as reimbursements from insurance companies took a sharp drop.” A few weeks later, the New York Times reported on the closing of Yough Valley Pharmacy, located in Confluence, Pennsylvania. “Obscure but powerful health care middlemen,” the paper explained, had destroyed another business.PBM policies have shaken America’s community pharmacists. For many, the only option was to shut their doors for good. Others though, are hanging on, hoping that this will be the year when regulatory relief finally arrives. Until it does, PrimeRx stands ready to help, with innovative solutions that optimize efficiency and manage costs

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