By FOCUS, A Leonine Business
Pharmacy Benefit Managers (PBMs) process nearly 90 percent of prescription drug claims. These third-party administrators serve as a liaison between insurers, employers and drug manufacturers, maintaining drug formularies, negotiating rebates and determining reimbursements. They are also under increasing scrutiny at both the state and federal levels as a contributor to rising drug costs.
All 50 states now have laws regulating PBMs in some way, including banning gag clauses on pharmacies, limiting patient cost-sharing and requiring PBM licensure. So far in 2025, Arkansas, Iowa, Massachusetts, Missouri, North Dakota and Utah have enacted new PBM-related laws. Iowa took a bold step with SF 383, which was signed into law by Governor Kim Reynolds on June 11. The new law is a comprehensive attempt at regulating PBMs and includes a rebate pass-through mandate, a ban on copay accumulator programs and a reimbursement mandate among other provisions. On June 30, however, just one day before the bill was set to take effect, the United States District Court for the Southern District of Iowa issued a temporary restraining order, finding that the law is likely preempted by the Employee Retirement Income Security Act of 1974. That same day, the Supreme Court declined to consider the 10th Circuit appeals court’s ruling that federal law preempted parts of Oklahoma law regulating PBMs. Close to 36 states and the District of Columbia had joined the case as “friends of the court” on the side of Oklahoma. The decision leaves states uncertain about the boundaries of their regulatory power regarding PBMs.
At the federal level, bipartisan coalitions continue their efforts to regulate PBMs. On February 11, Senators Chuck Grassley, R-IA, and Maria Cantwell, D-WA, reintroduced bills S 526 and S 527 to increase PBM transparency and prohibit unfair or deceptive practices. S 526 would prohibit “spread pricing” where PBMs charge health plans and payers more for a prescription drug than what they reimburse to the pharmacy and take the difference as profit. S 527 would direct the Federal Trade Commission to investigate anti-competitive practices such as patient steering and the use of proprietary pharmacy data.
With state momentum growing at the legislative level but stalling in the courts, the future of PBM regulation hangs in a delicate balance between consumer protection and legal preemption. FOCUS will continue to monitor policy developments around PBMs at all levels of government.
by Will Beacom 7/14/25
