A reescalating battle between pharmaceutical companies and pharmacy benefit managers is brewing in Washington, D.C., as President Donald Trump’s new administration takes shape.
The drug industry’s biggest lobbying firm, PhRMA, released its policy priorities for 2025 Tuesday, including, “Put patients before PBM profits by sharing negotiated savings directly with patients and holding PBMs and health plans accountable for limiting patient choices.”
That has spurred PBMs like CVS Caremark (CVS) to defend their companies’ value in the overall healthcare system.
But that defense comes at a time of bipartisan scrutiny of how PBMs operate and whether or not their rebate strategy — to negotiate discounts off of list prices in exchange for ensuring patients get access to certain drugs — is a net positive to cost savings.
“Research has linked higher rebates to higher list prices and higher out-of-pocket costs for patients, raising important questions about the equity of this approach. This has led policy makers to increase their scrutiny of PBMs, including investigating whether PBMs favor high-list price drugs with higher rebates over drugs with a lower net cost,” according to an article in the American Journal of Managed Care late last year.
CVS Health group president and executive vice president Prem Shah told Yahoo Finance that PBMs, used by a majority of Fortune 500 companies, endeavor to lower costs of branded drugs — yet just last month, pharma companies increased list prices on drugs by 4.5% compared to the prior year’s price.
“PBMs have been in the industry for the last 30-40 years, and they’ve been very effective tools in the US to help drive and lower costs of drugs. And if you think what their role is inside of the supply chain, they work every day to deliver and lower costs of drugs to their customers,” Shah said in an interview.
That includes pushing patients towards generic drugs, which often cost less than the branded options once the patents expire.
“In the US, over 90% of prescriptions are now generic. Those lower-cost generics help our clients save money,” Shah said, noting that Caremark customers, on average, pay $8 per prescription out of pocket.
But that statistic is only possible after Trump, during his first administration in 2018, enacted a law that allowed pharmacists to tell patients about lower-cost options — a move that impacted PBMs because it was their contracts that prevented patients from finding out about generic and lower-cost options in the first place.
