Clash Between Pharma and PBMs Reignites in Washington

A renewed battle is brewing in Washington, D.C., as pharmaceutical companies clash with pharmacy benefit managers (PBMs) under the new Trump administration. The industry's top lobbying group, PhRMA, has unveiled policy priorities for 2025, emphasizing the need to "empower patients" by sharing savings directly and holding PBMs accountable.

In response, PBMs, including CVS Caremark (CVS), have defended their role in healthcare cost management. However, the industry faces growing scrutiny over its rebate strategies and the potential impact on patient savings.

According to an American Journal of Managed Care article, "research has linked higher rebates to higher list prices and higher out-of-pocket costs for patients." This has prompted policymakers to investigate PBMs' practices, including whether they prioritize drugs with higher rebates.

CVS Health's executive vice president, Prem Shah, maintained that PBMs aim to reduce branded drug costs while acknowledging that pharma companies recently raised drug prices by 4.5%. He emphasized the effectiveness of PBMs in driving down drug costs, including through promoting generic drugs.

Shah noted that over 90% of prescriptions in the U.S. are now generic, saving clients money. He credited former President Trump's 2018 law that allowed pharmacists to inform patients about lower-cost options, which previously impacted PBMs' contracts.

Despite PBMs' efforts, new models offer low-cost prescription access. Walmart, GoodRx (GDRX), and Mark Cuban's Cost Plus Drugs provide alternative options. CVS itself has launched CostVantage, a similar program.

Shah believes that PBMs remain essential for health insurance companies despite these new services. CVS's PBM business generated $178 billion in revenue in 2024.

The ongoing battle pits pharmaceutical companies against PBMs, with policymakers under pressure to address patient costs and industry practices. Anjalee Khemlani, Yahoo Finance's senior health reporter, provides in-depth analysis of this evolving issue.