Escalating Battle in Washington over Pharmaceutical Industry and Pharmacy Benefit Managers

The pharmaceutical industry and pharmacy benefit managers (PBMs) face a growing dispute in Washington, D.C., as the new Biden administration takes office. PhRMA, the drug industry's largest lobbying firm, has outlined its policy priorities for 2025, including measures to "prioritize patients over PBM profits."

In response, PBMs such as CVS Caremark (CVS) have defended their value within the healthcare system. However, their operations are facing increased scrutiny from lawmakers, who question their rebate strategy and its impact on patient costs.

Research has suggested that higher rebates lead to inflated list prices and higher out-of-pocket expenses for patients, prompting policymakers to investigate PBMs and their potential preference for high-priced drugs with higher rebates.

CVS Health executives emphasize PBMs' role in lowering drug costs. They note that PBMs have been instrumental in driving down the cost of branded drugs for decades. Additionally, PBMs play a crucial role in promoting the use of generic drugs, which are significantly cheaper than branded alternatives.

Despite these efforts, PBMs are facing renewed pressure to demonstrate their effectiveness in reducing costs. Alternative models such as Walmart's $4 generic program, GoodRx coupons, and Mark Cuban's Cost Plus Drugs have emerged as popular options for accessing low-cost prescriptions. CVS has also launched its own CostVantage program, which aims to reduce the need for high rates on some drugs to subsidize others.

Telehealth companies are also partnering directly with drug manufacturers, offering access to low-cost medications. Online platforms like Hims & Hers, Ro, and Amazon Pharmacy have entered the fray as well.

However, CVS maintains that PBMs will continue to play a vital role in the healthcare system. PBMs generated $178 billion in revenue for CVS in 2024, indicating their significant contribution to the company.