Washington, D.C. — Amid a growing bipartisan consensus on the need to stop the national crisis of pharmacy closures and rising drug prices by checking the power of pharmacy benefit managers (PBMs), the American Economic Liberties Project and 17 other advocacy organizations sent a letter yesterday to Democratic and Republican Congressional leadership endorsing several legislative solutions and urging Congress to pass this much-needed reform this session.

“Without immediate congressional action, the largest PBMs will continue to use their market power to squeeze pharmacies out of business, allowing more patients to suffer and, in some cases, die from avoidable causes,” said Emma Freer, Sr. Policy Analyst for Healthcare at the American Economic Liberties Project. “Critically, Congress must go beyond imposing transparency requirements on PBMs and reform this rigged market. Congress can begin this process by passing two bipartisan pieces of legislation already under consideration—the Pharmacists Fight Back Act and the Lower Costs, More Transparency Act—which would establish baseline reimbursement rates in line with pharmacies’ acquisition and labor costs. Additionally, Congress should consider implementing a Glass-Steagall Act for health care to prevent PBMs from owning pharmacies; such common ownership incentivizes PBMs to reimburse independent pharmacies less than their own affiliates.”

PBMs are middlemen who negotiate prescription drug benefits on behalf of health plans with drug manufacturers and pharmacies. The “Big Three” PBMs—CVS Caremark, Cigna Group’s Express Scripts, and UnitedHealth Group’s OptumRx—control nearly 80% of US prescription drug claims. The Big Three’s market power—combined with a rebate-driven business model that biases PBMs towards higher list price drugs, as Economic Liberties detailed in a February 2023 policy brief—has driven up the cost of prescription drugs. The list price of one brand-name insulin rose by more than 1,200% between 1999 and 2017 largely due to PBMs, according to the FTC.

The Big Three also leverage their market power to demand untenably low reimbursement rates from independent pharmacies in exchange for inclusion in their networks. Many pharmacies accept these rates for fear of losing access to a large share of the covered patients who make up their customer base. But these rates are squeezing them out of business at an accelerating pace, stranding their most vulnerable customers—including older Americans, rural residents, and individuals with chronic conditions—in pharmacy deserts without access to care.

The letter lays out three legislative approaches that can address America’s pharmacy crisis:

• First, Congress should consider implementing a “Glass-Steagall” law for health care, which Economic Liberties detailed in an April 2024 brief and an op-ed in The Hill. PBMs and pharmacies should be structurally separated given the inherent conflicts of interest of such common ownership.
• Second, the Pharmacists Fight Back Act (H.R. 9096), introduced by Representatives Jake Auchincloss (D-MA) and Diana Harshbarger (R-KY) and now co-sponsored by 53 bipartisan members, would bolster independent pharmacy revenue by setting baseline pharmacy reimbursement rates in federal healthcare programs. The legislation would also prohibit PBMs acting on behalf of federal healthcare programs from engaging in anticompetitive business practices, such as patient steering and spread pricing, in which a PBM charges a health plan far more for a prescription than it reimburses a pharmacy for dispensing it.
• Third, The Lower Costs, More Transparency Act (H.R. 5378) by Representative Cathy McMorris Rodgers (R-WA) would similarly require all state Medicaid managed care programs and the PBMs with whom they contract to reimburse pharmacies according to their acquisition and dispensing costs. In doing so, the bill would establish parity in pharmacy reimbursements across Medicaid managed care and fee-for-service settings. It would also prohibit spread pricing.

Critically, these approaches go beyond transparency requirements, which are a low-hanging but insufficient response to PBM reform. As the letter makes clear, knowing how much they are being underpaid by PBMs does not help pharmacies stay in business.

Read the letter here.

Read Economic Liberties’ policy brief, “Why We Should Ban PBM Rebates,” here.

Read Economic Liberties’ policy brief, “Medicare Advantage and Vertical Consolidation in Health Care,” here.

Read Economic Liberties’ op-ed in The Hill, “Too big to care: It is time for a Glass-Steagall Act for health care,” here.

Learn more about Economic Liberties here.

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.