The Hidden Costs of PBM Profiteering: Why Congress Must Act Now

Pharmacy Benefit Managers (PBMs) began as intermediaries meant to negotiate lower drug prices. Over the years, they’ve morphed into profit engines.

As someone who spent years inside the corporate machine of private health care, I’ve seen how the industry operates up close. At Cigna, where I once served as head of communications, I witnessed firsthand the relentless pursuit of profit, often at the expense of patients, providers, and even regulators. Among the most insidious mechanisms driving these profits today are pharmacy benefit managers (PBMs) — shadowy middlemen that have become central to Big Insurance’s playbook. If Congress doesn’t act soon to rein in PBMs, we risk cementing a system that drives up drug prices, exploits patients, and threatens the survival of community pharmacies.

PBMs began as intermediaries meant to negotiate lower drug prices on behalf of insurers, employers, and patients. Over the years, however, they’ve morphed into opaque profit engines. Big insurers like UnitedHealth, Cigna, and Aetna (now part of CVS) have strategically acquired PBMs — OptumRx, Express Scripts, and CVS Caremark, respectively—and transformed them into critical tools for disguising profits and manipulating markets. Today, these three PBMs alone control 80% of the market, a staggering level of consolidation that has only deepened the industry’s ability to game the system.

Here’s how it works: PBMs negotiate drug prices with pharmaceutical companies, ostensibly to secure discounts through rebates. But the discounts rarely, if ever, trickle down to patients. Instead, the rebates often flow back to insurers or PBMs themselves, inflating their profits while keeping actual drug prices high. At the same time, PBMs charge pharmacies fees and reimburse them at rates that barely cover their costs—or worse, undercut them entirely. Independent pharmacies, already struggling to compete, are left on the brink of closure, while patients face skyrocketing out-of-pocket costs at the pharmacy counter.

Worse still, PBMs often steer patients toward their own corporate-owned specialty or retail pharmacies, claiming it’s for “efficiency” or “cost savings.” But behind the scenes, they’re inflating the prices their PBM pays to their pharmacy, then passing those inflated costs off as medical expenses for their parent company. This sleight of hand allows insurers to report higher medical costs, skirting regulations designed to cap profits and ultimately enriching themselves at patients’ expense.

This dangerous cycle thrives in the shadows, thanks to the lack of transparency and regulation surrounding PBMs. To break this cycle and protect patients, Congress must prioritize comprehensive PBM reform before the end of the year. The reforms must include three key pillars: transparency; patient protections; and measures to address industry consolidation.

Transparency. But with Teeth

Transparency is a buzzword in health care. But for PBM reform, it needs to be more than that. PBMs must be required to disclose the net price they pay for drugs—after accounting for rebates and other payments—to insurers, pharmacies, and the public. Defining “net price” broadly is crucial to prevent PBMs from inventing new mechanisms to obscure the true cost of drugs. Transparency should also extend to prohibiting PBMs from charging patients more for a drug than they reimburse the pharmacy. These measures would shine a light on PBMs’ practices and empower patients, employers, and policymakers to make informed decisions. For transparency regulations to be effective, they must have penalties for companies that violate these rules, and those penalties should be significant, not just a small slap on the wrist that PBMs will absorb as a cost of doing business. 

Ending Games That Exploit Patients

Transparency alone won’t be enough to protect patients from PBM profiteering. Congress must directly tackle the pricing schemes that drive up costs. Spread pricing, in which PBMs charge payers more for a drug than they reimburse pharmacies and pocket the difference, must be outlawed. Additionally, all rebates negotiated by PBMs should be passed directly to patients, lowering their out-of-pocket costs at the pharmacy counter. Allowing rebates to be passed back to health insurers/plan sponsors would only let insurers funnel those rebates back into their PBM-owned coffers, perpetuating the cycle of profit hoarding.

Addressing Industry Consolidation

The PBM market’s extreme concentration is perhaps its most troubling feature. When the same corporations own insurance plans, PBMs, and pharmacies, they wield immense power to manipulate the system. PBM reform must prohibit steering patients to corporate-owned pharmacies, a practice that not only reduces competition but also exacerbates cost inflation. Additionally, Congress must close loopholes that allow PBMs to count inflated payments to their own pharmacies as medical expenses for their parent insurers. By prohibiting costs above the net acquisition price of a drug from being classified as medical expenses, lawmakers can curb this exploitation and ensure a level playing field.

Reform Has Bipartisan Support, So Act NOW

The longer Congress delays PBM reform, the more entrenched these practices will become — and the harder it will be to undo the damage. The profiteering playbook is evolving, and PBMs are already developing new ways to outmaneuver oversight. If we fail to act now, patients will continue to pay the price, independent pharmacies will continue to close their doors, and Big Insurance will tighten its grip on the health care system.

Congress has a rare opportunity — and bipartisan support—to address these abuses head-on. By enacting bold reforms that prioritize transparency, eliminate spread pricing and rebate games, and address the dangers of consolidation, lawmakers can lower drug prices, protect community pharmacies, and restore fairness to the health care system.

I’ve seen what happens when corporate greed is allowed to flourish unchecked, and I know how high the stakes are. Congress must act now to ensure PBMs serve the interests of patients and communities, not the bottom lines of Big Insurance. For the sake of every American struggling with the cost of their prescriptions, let’s get this done.