A bipartisan group of lawmakers is pushing to reform the incentive structure for Pharmacy Benefit Managers (PBMs), arguing that it drives up patient costs by encouraging them to favor higher-priced drugs while withholding potential savings.
Led by physician and GOP Iowa Rep. Mariannette Miller-Meeks, the group introduced the ‘Delinking Revenue from Unfair Gouging (DRUG) Act’ on Tuesday, requiring that PBMs in the commercial market only charge a flat fee for their services related to a specific prescription drug, versus letting them continue to charge a percentage of the drug price.
PBMs are third-party intermediaries between insurance companies, drug manufacturers and pharmacies that serve to control drug prices and access. The current incentive structure for PBMs, according to the DRUG Act’s sponsors, encourages them to drive up the list price of drugs to increase profits.
‘Pharmacy benefit managers (PBMs) have excessive influence over the prices patients pay at the pharmacy counter,’ said Miller-Meeks. ‘Local Iowa pharmacies are closing due to greedy PBM practices, impacting proximity and access to medications for Iowans. The DRUG Act will put downward pressure on prescription drug prices and insurance premiums by removing the incentive for PBMs to drive up the list price of medications.’
According to the Iowa Pharmacy Association, PBMs have been using opaque reimbursement models that often pay back pharmacies less than the list cost of a drug and the services provided to dispense it.
As a result of these practices, pharmacies in Iowa and across the country have been forced to close, the association said in a January report. Twenty-nine Iowa pharmacies and 2,300 pharmacies nationwide closed their doors in 2024, according to the association.
While PBMs have played important roles in making drugs more widely available, through decades of mergers and acquisitions, the three largest PBMs now manage nearly 80% of all prescriptions filled in the U.S., according to a 2024 report from the Federal Trade Commission.
The DRUG Act’s reforms serve to address this anti-competitiveness, which the bill’s sponsors say will also help lower costs.
‘Pharmacy Benefit Managers (PBMs) contribute to high drug costs because they are incentivized to steer patients towards drugs that are more profitable for PBMs, but may be less clinically effective for consumers,’ said Rep. Nannette Barragán, D-Calif., one of the bill’s co-sponsors. ‘This broken system disproportionately harms low-income individuals, seniors, and those with chronic illnesses who rely on life-saving prescriptions to manage their health.’
Rep. Donald Norcross, D-N.J., another co-sponsor of the DRUG Act, said families in his district ‘are crying out for relief from high prescription drug prices.’
‘Americans deserve access to quality health care and affordable prescription drugs,’ Norcross said. ‘The DRUG Act reins in prescription drug prices by removing the incentive for pharmacy benefit managers to drive up costs, increasing transparency and prioritizing patients over profits.’