Pharmacy benefit managers: Where is the country headed?

INTRODUCTION

Since the January inauguration of President Trump, many rapid changes to government policy have been implemented—from governmental agency structure to foreign financial policies. But one area that suggests a potential for continuity with the Biden administration is oversight over Pharmacy Benefit Managers (“PBMs”). At his Senate Finance Committee confirmation hearing, Robert F. Kennedy Jr., now the U.S. Secretary of Health and Human Services, assured the public that the Trump Administration aims to enact long-awaited federal PBM reform within the next four years: “Trump is absolutely committed to fixing the PBMs,” Kennedy said at his hearing. “Trump wants to get the excess profits away from the PBMs and send it back to primary care, to patients in this country.”[1]

Kennedy’s recent sentiments confirm President Donald Trump’s previous commitment in December 2024 to “knock out” PBMs, denouncing PBMs as “horrible middlemen.”[2] In the arena of PBM scrutiny and condemnation, this passing of the baton from the Biden Administration to the Trump Administration, might suggest a reason for optimism amongst advocates of PBM-industry reform and regulation. However, recent actions by President Trump—including the March 18, 2025, firing of FTC Commissioners Alvaro Bedoya and Rebecca Kelly Slaughter, despite their terms not ending until 2026 and 2029, respectively[3]—could give such advocates cause for concern. This is particularly true because Commissioners Bedoya and Slaughter each voted to issue two critical interim reports on PBMs, published in July 2024 and January 2025.

Following on the authors’ November 2023 article, which offered an overview of the FTC’s position on PBMs during the early years of the Biden Administration,[4] this article offers a summary of the FTC’s two interim reports on PBMs that were filed in the final six months of the Biden administration: (1) Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies[5] and (2)  Specialty Generic Drugs: A Growing Profit Center for Vertically Integrated Pharmacy Benefit Managers.[6] The article also looks to the current Chair of the Federal Trade Commission, Andrew N. Ferguson, for clues into how the current administration might uphold its earlier-professed commitments to “knock out” PBMs.

OVERVIEW

PBMs play a significant, if overlooked, role in the healthcare system, acting as intermediaries between insurers, pharmacies, and drug manufacturers. PBMs assert that their primary responsibility is to negotiate drug prices and manage prescription drug plans, aiming to reduce costs for insurers and consumers. For example, Caremark, the largest PBM in the United States, notes that “Pharmacy benefit managers, or PBMs, manage prescription drug benefits for clients ranging from health insurers and Medicare Part D drug plans to large employers. PBMs are one of the few parts of the prescription drug supply chain specifically dedicated to lowering costs.”[7]  However, PBMs have faced extensive criticism for contributing to rising drug prices and lacking transparency in their operations, in contrast to their stated missions.

In 2022, the Federal Trade Commission (FTC) launched an inquiry into the PBM industry, focusing on how PBMs might be causing competitive harm to the pharmaceutical market, as well as to every American consumer feeling the rising drug costs. In July 2023, the FTC issued a statement indicating that it would be taking a more active role in regulating PBMs in light of PBM consolidation and rising drug prices.[8] The statement highlighted structural factors in the PBM industry and noted how “current market structures and business practices may undermine patients, pharmacies, and fair competition.”[9] The concerns voiced by the FTC were two-fold: “(1) “how PBMs may be using market power to undermine competition from independent pharmacies”; and, (2) “the role of PBMs in determining the prices consumers pay for prescription drugs, including the impact of PBM rebates.”[10]

Since the FTC’s 2023 statement, the FTC has published two interim reports, tracking these two major concerns. In July 2024, the FTC published its first official report, which underscored the PBMs’ effect on the accessibility and affordability of prescription drugs, detailing how prescription drug middleman profit at the expense of patients by inflating drug costs and squeezing independent pharmacies.[11] Then, at the FTC’s first Open Commission Meeting of 2025, the group unanimously voted to release its second interim staff report on PBMs, which focused on PBMs’ control over specialty generic drugs. This report found that the PBMs’ involvement resulted in significant price markups for medications treating for cancer, HIV, and a variety of other conditions.[12] These reports were part of the FTC’s ongoing investigation into PBMs and their impact on healthcare costs and competition during the Biden Administration.

JULY 2024: FTC’s FIRST INTERIM REPORT ON PBMs

In July 2024, the FTC published their first interim report on PBMs, shedding light on the significant role PBMs play in the pharmaceutical industry, highlighting concerns about their potential to inflate drug costs and negatively impact independent pharmacies. The report, titled “Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies,” underscores the increasing consolidation and vertical integration within the market for pharmacy benefit management services, leading to substantial influence over drug pricing and access.[13]

The report highlighted several key industry-wide findings, summarized at a high level in the following chart:

In all, the FTC’s findings in its July 2024 interim report identify concerns that PBMs in the U.S. healthcare system may contribute to higher out-of-pocket costs for patients, more limited access to affordable medicines, financial strain on independent pharmacies, and reduced competition across the pharmaceutical industry overall.

JANURARY 2025: FTC’s SECOND INTERIM REPORT ON PBMs

At the FTC’s first Open Commission Meeting of 2025, the group unanimously voted to release its second interim staff report on PBMs, [28]following on the agency’s first interim report in July 2024. The Federal Trade Commission's January 2025 report, titled Specialty Generic Drugs: A Growing Profit Center for Vertically Integrated Pharmacy Benefit Managers,[29] highlights concerns about the practices of the “Big 3” PBMs—CVS Caremark, Express Scripts, and OptumRx. The report analyzed 51 specialty generic drugs dispensed between 2017 and 2022. The following chart summarizes some key highlights from this 2025 Report:

Ultimately, the FTC’s January 2025 report highlighted that specialty generic drugs have become a major and rapidly-growing profit center for the Big 3 PBMs, which have leveraged their market position to impose significant markups, steer high-profit prescriptions to their own pharmacies, and generate substantial income through both dispensing and spread pricing. These practices have led to sharply increased costs for both plan sponsors and patients, raising concerns about competition and affordability in the specialty drug market. 

INTO THE LOOKING GLASS: PBM ENFORCEMENT BY FTC CHAIR ANDREW FERGUSON

With the publication of these two interim reports under the Biden Administration, coupled with President Trump’s statements on PBMs, there are potential questions on how aggressively the current FTC Chair might act in pursuing PBM matters. Commissioner Ferguson voted yes to the publication of both the 2024 and 2025 interim reports, although with some reservations in concurring statements. Notwithstanding certain reservations, then-Commissioner Ferguson stated in his January 2025 Concurring Statement that he “remained committed to bringing [this PBM investigation] to a conclusion, culminating in a final report.”[41]

This is all taking place in the shadow of FTC’s administrative litigation against the Big Three PBMs for artificially inflating insulin drug prices, which was filed in September 2024.[42] There, the FTC alleges the Big 3 PBMs manipulate drug formulary placements to compel pharmaceutical manufacturers to compete for favorable placement by raising prices, which provide the PBMs higher rebates, all while increasing insulin costs for patients. At the time of filing, then-Chair Lina Khan, and Commissioners Slaughter and Bedoya voted to file the complaint, with the Commissioner Ferguson and Commissioner Holyoak recused. However, following Chair Khan’s departure, along with the firing of Commissioners Slaughter and Bedoya, the case had no current Commissioners participating in the proceedings. With this, Chair Ferguson has decided to un-recuse himself to participate in the litigation.[43]

Chair Ferguson’s recent recusal decision to now participate in the FTC’s litigation against the Big 3 and his avowed commitment to seeing the FTC’s multi-year investigation through to a final report, gives supporters of PBM reform hope that he will lead an FTC with a continued focus on PBMs. While he may have had some policy disagreements about how to best proceed with the investigation and reports in 2024 and 2025, it seems he will continue to pursue the FTC’s active PBM investigation and litigation. 

CONCLUSION

While both the Trump and Biden administrations have recognized the need for greater PBM oversight, their approaches have been quite different. Despite Secretary Kennedy’s promises of Trump’s commitment to shifting excess profits away from PBMs and sending those savings back to American patients, actions by the FTC to support those claims remain a mixed bag. So far, FTC’s Chairman Ferguson, has vowed to reverse policies implemented by his predecessor Lina Khan—which might include the Khan’s FTC’s focus on the excessive consolidation and vertical integration of PBMs.[44] In a letter to President Trump, Chairman Ferguson made clear that his agenda includes repealing regulations deemed anti-business, permitting mergers that benefit consumers, and focusing antitrust enforcement on Big Tech monopolies accused of censorship—what these commitments mean in terms of PBMs remains to be seen, however. Nevertheless, Chairman Ferguson’s reentry into the FTC’s litigation against the Big Three PBMs and his commitment to seeing the FTC’s multi-year investigation into PBMs through to a final report, gives cause for optimism that PBM scrutiny and oversight will continue under the new administration.