Pharmacy Benefit Managers and the Fight Over Drug Prices

What you need to know

The debate over rising prescription drug prices has identified one possible cause: the role of Pharmacy Benefit Managers (PBMs) in setting prices.

Pharmacy Benefit Managers (PBMs) negotiate drug prices behind the scenes and play a significant role in determining the prices Americans pay for prescriptions.
The industry has traditionally been lightly regulated.
Congress passed legislation in February 2026 that imposed new regulations and disclosure requirements.

What are Pharmacy Benefit Managers?

PBMs are the middlemen of the pharmacy industry. They negotiate drug prices between pharmaceutical companies, insurers, and pharmacies. The goal is to negotiate price reductions from drug manufacturers by offering to make bulk purchases of widely used drugs. The result, in theory, is lower drug prices for consumers.

Critics of PBMs point out that only three PBM companies account for 80% of drug sales in the United States, and that PBMs operate largely in secrecy. Concerns have been raised that drug manufacturers offering higher-priced drugs have offered rebates to PBMs in exchange for PBMs' efforts to get insurers to include these drugs in their medical plans. In this way, PBM negotiations might lead to higher drug prices rather than lower prices.

Another consequence of PBMs is that consumers who purchase drugs directly from manufacturers (because their insurance plan does not cover the drug) can pay significantly higher prices.

Finally, research shows that in some cases, PBMs charge federal programs, such as Medicare (which provides health care for seniors), higher prices for drugs than the PBM pays producers, thereby increasing PBM profits. Producers span a variety of functions, including selling policies, advising clients, negotiating terms with insurers, and maintaining renewals with clients, and can generally be categorized as a captive agent (only works with one insurance company), independent agent (works with multiple insurance carriers), or insurance broker (legally represents the client rather than an insurance company or carrier). Producers usually get paid through a commission, bonus, and/or profit-sharing arrangement.

What is Congress doing about PBMs?

Legislation aimed at PBM operations is an exception to the rule of deeply partisan conflict in Congress. For example, The Pharmacists Fight Back Act (H.R. 9096) was sponsored by a diverse coalition of liberals, moderates, and conservatives. The legislation would ban practices that increase PBM profits, including spread pricing (when a PBM charges an insurer or health plan more for a drug than it pays the company that produces it, keeping the difference as profit) and steering (when PBMs require or pressure patients to use pharmacies the PBM owns). It would also require PBMs to pass along any rebates they receive to insurers and their customers. Finally, the Act would add new disclosure requirements for PBM negotiations with drug companies. Another proposal, the PBM Reform Act of 2025 (H.R. 4717), would prohibit PBMs from overcharging Medicare for drugs, as discussed earlier.

On February 3, 2026, Congress passed a bipartisan spending bill to fund the federal government for the remainder of the 2026 fiscal year (through September 31, 2026). This bill also included the provisions of H.R. 9096 and 4717.

The Takeaway

The PBM industry is enormously powerful in setting the drug prices Americans pay for prescription drugs.

Congress recently enacted bipartisan proposals to increase regulation of this industry.

These efforts are a reminder that even in highly partisan times, members of Congress can sometimes build consensus around common goals.

The enactment of PBM reforms as part of an appropriations bill is also a reminder that spending bills sometimes include potentially impactful policy changes.

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Sources

Abelson, R., & Robbins, R. (2026). Congress Reigns In Drug Middlemen in Effort to Lower Prescription Prices. https://tinyurl.com/57vab7cs, accessed 03/10/26.

Freed, M., Cubanski, J. Williams, E., & Pestaina, K. (2026). What to Know About Pharmacy Benefit Managers (PBMs) and Federal Efforts at Regulation. https://tinyurl.com/2yua7yvy, accessed 03/10/26.

Congress.gov. (2025). H.R.4317 - PBM Reform Act of 2025. https://tinyurl.com/ytdc6jrp, accessed 03/10/26.

Congress.gov. (2025). H.R.6575 - CommonGround for Affordable Health Care Act. https://tinyurl.com/3y4f98x9, accessed 03/10/26.

Congress.gov. (2025). H.R.6703 - Lower Health Care Premiums for All Americans Act. https://tinyurl.com/4hxvwjc8, accessed 03/10/26.

Congress.gov. (2023). H.R.9096 - Pharmacists Fight Back Act. https://tinyurl.com/mrbaa6hd, accessed 03/10/26.

Congress.gov. (2025). S.3345 - PBM Price Transparency and Accountability Act. https://tinyurl.com/xctec8dt, accessed 03/10/26.

Contributors

Lindsey Cormack (Content Lead) is an Associate Professor of Political Science at Stevens Institute of Technology and the Director of the Diplomacy Lab. She received her PhD from New York University. Her research explores congressional communication, civic education, and electoral systems. Lindsey is the creator of DCInbox, a comprehensive digital archive of Congress-to-constituent e-newsletters, and the author of How to Raise a Citizen (And Why It’s Up to You to Do It) and Congress and U.S. Veterans: From the GI Bill to the VA Crisis. Her work has been featured in The New York Times, The Washington Post, Bloomberg Businessweek, Big Think, and more. With a drive for connecting academic insights to real-world challenges, she collaborates with schools, communities, and parent groups to enhance civic participation and understanding.

Robert Holahan (Content Lead) is Associate Professor of Political Science at Binghamton University (SUNY). He holds a PhD in Political Science from Indiana University where his advisor was Nobel Laureate Elinor Ostrom. His research focuses on natural resource policy, particularly in domestic oil and gas production, but also extends into international environmental policy. He was PI on a National Science Foundation grant that utilized a 3000-person mail-based survey, several internet-based surveys, and a series of laboratory economics experiments to better understand Americans’ perspectives on energy production issues like oil drilling and wind farm development.

‍William Bianco (Research Director) is Professor of Political Science at Indiana University and Founding Director of the Indiana Political Analytics Workshop. He received his PhD from the University of Rochester. His teaching focuses on first-year students and the Introduction to American Government class, emphasizing quantitative literacy. He is the co-author of American Politics Today, an introductory textbook published by W. W. Norton, now in its 8^th edition, and authored a second textbook, American Politics: Strategy and Choice. His research program is on American politics, including Trust: Representatives and Constituents and numerous articles. He was also the PI or Co-PI for seven National Science Foundation grants and a current grant from the Russell Sage Foundation on the sources of inequalities in federal COVID assistance programs. His op-eds have been published in The Washington Post, Indianapolis Star, Newsday, and other venues.