Pharmaceutical Battle Brews in Washington as Drug Companies Target Pharmacy Benefit Managers
The pharmaceutical industry's resurgence is clashing with pharmacy benefit managers (PBMs) as the Trump administration establishes its healthcare agenda.
PhRMA, representing the drug industry's largest lobbyists, outlined its policy priorities for 2025, advocating for "shared negotiated savings" and accountability for PBMs and health plans in limiting patient choices.
PBMs, including CVS Caremark (CVS), have defended their value in the healthcare system amid increased scrutiny of their rebate strategy and potential cost impacts.
"Higher rebates have been linked to inflated list prices and out-of-pocket expenses," according to a recent American Journal of Managed Care article, prompting policymakers to investigate PBM preferences for higher-priced drugs with higher rebates.
CVS President Prem Shah emphasizes PBMs' role in lowering branded drug costs, highlighting their success in promoting generic drugs, which account for over 90% of US prescriptions and low out-of-pocket expenses.
However, the Trump administration's 2018 law allowing pharmacists to inform patients about lower-cost options has impacted PBMs, whose contracts previously restricted such information.
PBMs now face increased pressure to control costs, with alternative models such as Walmart's $4 generics, GoodRx coupons, and Mark Cuban's Cost Plus Drugs gaining popularity. CVS has also launched a similar service, CostVantage, and converted commercial prescription contracts to the new program.
Despite these advancements, Shah believes PBMs remain essential for health insurance companies. In 2024, PBMs were the largest revenue segment for CVS, generating $178 billion.
Anjalee Khemlani, senior health reporter at Yahoo Finance, provides in-depth analysis of the healthcare industry's impact on stock prices and related policies.