Behind the Curtain: Reforming PBMs to Prioritize Patients Over Profits

Unmasking Traditional PBMs: Why Patient-Focused Reform Is Essential

Pharmacy Benefit Managers (PBMs) have become central to managing prescription drug benefits in the U.S., acting as intermediaries between insurers, pharmacies, and pharmaceutical manufacturers. While their original purpose was to simplify access and control drug costs, PBMs have evolved into powerful entities whose practices often come at the expense of the very individuals they are meant to support. The lack of transparency and growing concerns over profit-driven behavior have sparked urgent calls for reform to realign the system around patients' needs.

The Role PBMs Were Meant to Play

PBMs were introduced to handle the complex logistics of prescription drug benefits. Their core responsibilities include negotiating with drug manufacturers, managing drug formularies, and processing pharmacy claims. Ideally, this structure would keep medication costs manageable and ensure seamless access for patients. In practice, however, the reality is often far more convoluted.

When Profits Take Priority

Over time, PBMs have been widely criticized for structuring their operations in ways that prioritize financial gain. Their profit strategies typically involve:

• Rebate Structures: PBMs negotiate rebates with drugmakers based on the placement of drugs on their formularies. Instead of fully passing these savings to patients or health plans, a large portion is often kept as revenue, encouraging the selection of higher-cost medications that offer bigger rebates.

• Spread Pricing: This practice involves charging insurers more for a drug than what is reimbursed to the dispensing pharmacy, with PBMs retaining the difference. This hidden markup adds to overall costs without providing additional value to the patient.

• Formulary Design Manipulation: PBMs control which drugs are covered and where they fall within the tier system. Often, lower-cost generics are excluded or placed in higher tiers, while high-rebate brand-name drugs are favored, even if they’re more expensive for patients.

The Impact on Patients

The consequences of these practices are felt directly by patients trying to access the medications they need. Here are some of the most common barriers:

1. Unpredictable Costs at the Pharmacy: Prescription costs can be shockingly high, especially when a drug is assigned to a costly formulary tier. Individuals managing chronic conditions may be forced to shoulder steep, ongoing expenses due to PBM-tiering decisions.

2. Coverage Confusion: Drug coverage often shifts without clear explanation. A medication that was previously affordable might suddenly require prior approval or become subject to higher out-of-pocket expenses, causing confusion and financial stress for patients.

3. Delays in Receiving Medication: Prior authorization protocols frequently delay access to vital treatments. In addition, practices like "white bagging"—which mandates that certain medications be dispensed through specific specialty pharmacies—can introduce logistical delays and additional costs, particularly when driven by profit-aligned agreements.

4. Limited Access to Prescribed Treatments: Patients are sometimes forced to switch medications because their prescribed drug is excluded or restricted by the formulary. This can undermine the provider’s clinical judgment and may lead to suboptimal treatment outcomes or additional side effects.

The Case for Reform

The need for substantial reform is clear. A patient-focused approach would involve:

• Greater Transparency: Patients and plan sponsors deserve full visibility into drug pricing, rebate flows, and formulary decisions. Transparency builds accountability and allows for better healthcare decisions.

• Rebate and Pricing Regulation: Oversight is needed to ensure rebates benefit those paying for and using the drugs—not just intermediaries. Eliminating spread pricing would also bring pricing clarity and reduce unnecessary markups.

• Improved Prior Authorization Processes: Simplifying these processes would reduce delays and administrative friction, ensuring patients get the treatments they need without unnecessary hurdles.

A Vision for a Better System

A reimagined PBM model must prioritize patients above all else. This includes creating clear, honest communication about drug coverage, removing financial incentives that distort prescribing decisions, and facilitating faster, more reliable access to essential medications. Patients should never have to choose between affordability and their health.

Conclusion: Putting People First in Pharmacy Benefits

PBMs occupy a pivotal position in the healthcare system, but their growing misalignment with patient interests has prompted an urgent demand for change. Patients continue to suffer under a system that often values profit more than people. By pushing for transparency, fairness, and accountability, stakeholders can help shift the industry toward a more ethical and patient-centered future—one where healthcare decisions are guided not by rebates and margins, but by outcomes and well-being.

Key Points:

• PBMs have shifted from cost managers to profit centers, using opaque practices like rebate retention and spread pricing that often increase patient out-of-pocket costs.

• Formulary manipulation limits patient access to affordable or clinically appropriate medications, prioritizing high-rebate drugs over effectiveness or cost-efficiency.

• Patients face significant barriers, including unpredictable coverage changes, delayed treatment due to prior authorizations, and restricted access to prescribed therapies.

• Reform is urgently needed to introduce transparency, regulate financial incentives, streamline administrative hurdles, and restore a patient-first focus in pharmacy benefit management.