Federal authorities take big steps to rein in drug middlemen

by Marty Schladen, Iowa Capital Dispatch
February 23, 2026

Federal authorities in recent weeks have taken huge steps aimed at curbing the practices of drug middlemen known as pharmacy benefit managers, or PBMs.

The steps come after years of complaints from small pharmacies and attempts to rein in the huge corporations by lawmakers in Ohio and other states.

PBMs act on behalf of insurers — including those working in Medicare and Medicaid — to administer drug transactions.

The three biggest — Express Scripts, CVS Caremark and OptumRx — are each part of one of the 13 largest corporations in the United States.

Together, the three companies control nearly 80% of drug transactions, prompting suspicions that the sector is not competitive.

PBMs create “formularies,” meaning they decide which drugs are covered by insurance.

Because they control access to millions of patients, they’re able to negotiate huge, often non-transparent rebates from drugmakers.

The companies claim they use this power to get better deals for consumers. But critics say it creates an incentive not to put the cheapest, best drugs on their formularies, but those for which they get the fattest rebates.

Another basic function of PBMs is to create pharmacy networks. They decide how much to reimburse them for the drugs they dispense and they charge pharmacies various fees.

But there’s a seeming conflict.

Each of the PBMs’ owners also owns a mail-order pharmacy and CVS owns the nation’s largest retail chain.

So the conglomerates are deciding fees and how much to reimburse their own pharmacies and those of their competition.

Again, because the big PBMs control access to so many patients, independent and small-chain pharmacies usually conclude that they have no choice but to do business with them on whatever terms the PBMs offer.

They say it’s no coincidence that thousands of pharmacies have closed their doors over the past decade.

To end the conflict, a bipartisan bill was filed this month that would prohibit the health conglomerates from owning providers such as pharmacies and doctors’ offices at the same time they own insurance companies and PBMs, which control how much consumers have to pay them.

While that bill has a long way to go, other big changes are now law. President Donald Trump on Feb. 3 signed a bipartisan spending bill containing reforms that the National Community Pharmacists Association called “the first major PBM reform in decades.”

Among its provisions, the new law:

• Prohibits PBMs from being compensated by Medicare Part D plans as a percentage of the price of a drug or from manufacturer rebates. The idea is to remove incentives to cover higher-priced drugs over cheaper ones as PBMs chase profits. The companies will now be paid a “‘bona fide service fee’, which will be a flat dollar amount that reflects the fair market value of services provided by PBMs, beginning January 1, 2028,” reported KFF, the independent health-information provider.
• Requires PBMs serving Part D plans to disclose details of their contracts with drugmakers, their deals with pharmacies owned by the same company, and their pricing. The intent is to shed light on what previously were opaque transactions.
• Requires PBMs serving employer plans covered by the Employee Retirement Income Security Act, or ERISA, to pass 100% of any manufacturer rebates back to health plans instead of pocketing often-undisclosed amounts as they have in the past.
• Requires PBMs serving Part D plans to contract with any pharmacy on terms deemed to be “reasonable and relevant.”

The PBM industry reacted bitterly to the law’s passage.

A spokesman, Brendan Buck, issued a statement on behalf of their industry group, the Pharmaceutical Care Management Association.

“It’s a remarkable moment,” he wrote. “Not for the impact on drug prices (higher). But rather because it is the culmination of a years-long effort by drugmakers to convince Congress that PBMs are the problem with high drug costs.”

Buck said the law wasn’t the product of good policy, but of effective lobbying by drugmakers.

“The pharmaceutical industry deserves serious credit for this campaign, which managed to persuade people that discounts are in fact bad, and PBM transparency, somehow, is the roadblock to falling drug prices,” he said. “It’s absurd on its face. But it worked. So good for them.”

Antonio Ciaccia is a Columbus-based drug-pricing expert. He consults with employers and government payers on how to reduce their drug costs.

He’s worked with lawmakers and attorneys general in Ohio and other states on reforms that he said the middlemen often quickly circumvented.

“Whether we think that these things are going to be effective or not, there is no mistaking that this is an unprecedented, multifaceted assault on the legacy PBM business model,” Ciaccia said. “It is coming from multiple directions… We haven’t seen anything at this level in the federal space ever.”

In another major development, the Federal Trade Commission earlier this month settled a lawsuit against Express Scripts over insulin pricing.

The suit accused the PBM — as well as CVS Caremark and OptumRx — of excluding cheaper forms of the lifesaving drug from its formularies.

The settlement requires an end to the practice, and that Express Scripts report its costs for drugs alongside pharmacy reimbursement, among other measures.

The suit against the other two big PBMs is ongoing.

Ciaccia said that as with the new PBM law, the intent was to remove incentives for middlemen and drugmakers to raise prices.

“If the PBM is the buyer and the manufacturer is the seller, both are making more money off of higher list prices…,” he said.

“It’s a perverse incentive if the buyer is relying on more money through a higher list price. This would move them to a more fee-oriented structure, which is intended to make them more agnostic when faced with a high list-price drug with a high rebate versus a low list-price drug with a low rebate.”

Iowa Capital Dispatch is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Iowa Capital Dispatch maintains editorial independence. Contact Editor Kathie Obradovich for questions: info@iowacapitaldispatch.com.