“I’d like my meds without the side effect of bankruptcy, please!”
Pharmacy Benefit Managers (PBMs) have faced criticism for practices that prioritize profits over the needs of patients, pharmacies, and payers.
Below is a list of key offenses based on reported concerns and investigations, presented in a way that reflects common criticisms while acknowledging the complexity of the issue:
1. Spread Pricing: PBMs often charge health plans or insurers a higher price for a drug than what they reimburse pharmacies, pocketing the difference as profit. This practice can inflate costs for payers and patients without adding value to the care process.
2. Rebate Retention: PBMs negotiate rebates from drug manufacturers to include medications on formularies, but they may keep a portion of these rebates rather than passing them fully to insurers or patients. This reduces potential cost savings for clients and can drive up out-of-pocket expenses.
3. Formulary Manipulation: PBMs may favor higher-cost drugs that yield larger rebates or fees over lower-cost, equally effective alternatives, such as generics or biosimilars. This can limit patient access to affordable options and increase overall healthcare costs.
4. Exclusionary Formularies: By excluding lower-cost drugs from formularies to secure higher rebates, PBMs can restrict patient access to affordable medications, forcing patients to pay more or switch to less suitable options.
5. Clawbacks and Copay Overcharges: In some cases, PBMs require pharmacies to collect copays higher than the drug’s actual cost, then “claw back” the excess from the pharmacy. This leaves patients paying more than necessary, with PBMs retaining the difference.
6. Gag Clauses: PBMs have historically included contract terms that prevent pharmacists from informing patients when a drug’s cash price is lower than the insurance copay, leading patients to overpay unknowingly.
7. Steering to Affiliated Pharmacies: PBMs, especially those owned by vertically integrated companies, may direct patients to their own mail-order or specialty pharmacies, limiting patient choice and potentially increasing costs or delays for those who prefer local pharmacies.
8. Unfair Reimbursement Practices: PBMs often reimburse independent pharmacies at rates below their acquisition costs, squeezing their margins and driving closures. This reduces competition and patient access to community-based care while funneling business to PBM-affiliated pharmacies.
9. Opaque Fee Structures: PBMs impose complex fees, such as administrative or network fees, that lack transparency. These fees can erode savings for payers and pharmacies, making it hard for clients to understand true costs.
10. Prior Authorization Barriers: PBMs may impose stringent prior authorization requirements to favor certain drugs or delay access, creating administrative burdens for providers and potentially delaying patient care for the sake of cost control or profit.
These practices stem from the PBMs’ role as middlemen with significant market power, often controlling which drugs are covered, at what price, and where patients can fill prescriptions. Critics argue this structure incentivizes profit-driven decisions over patient-centered care. However, PBMs claim they negotiate to lower drug costs and manage benefits efficiently, and not all practices are universally applied or inherently harmful. The debate remains contentious, with ongoing scrutiny from regulators and lawmakers.
The practices I mentioned—spread pricing, rebate retention, formulary manipulation, and others—are widespread issues in the pharmacy benefit manager (PBM) industry, and no single PBM is uniquely “guilty” as these behaviors are often systemic, driven by market incentives and varying by contract or context. However, specific PBMs have been called out in reports, lawsuits, or investigations for engaging in one or more of these practices. The major players most frequently criticized include:
– CVS Caremark: Often cited for spread pricing, steering patients to its own pharmacies, and opaque rebate practices that favor higher-cost drugs. Its vertical integration with CVS Health and Aetna amplifies conflicts of interest, like prioritizing its mail-order services.
– Express Scripts: Criticized for formulary decisions that exclude lower-cost generics or biosimilars in favor of rebated drugs, as well as under-reimbursing independent pharmacies while charging payers more.
– OptumRx: Flagged for similar issues, including spread pricing and leveraging its UnitedHealthcare ties to steer patients to affiliated pharmacies, alongside complex fee structures that obscure costs.
– Humana Pharmacy Solutions: Less dominant but noted in some cases for rebate retention and restrictive formularies that limit patient access to affordable options.
– Prime Therapeutics: Criticized for spread pricing and lack of transparency in how rebates are shared with payers, though it’s smaller than the big three.
– MedImpact Healthcare Systems: Occasionally mentioned for formulary manipulation and prior authorization practices that delay or restrict access to certain drugs.
These six handle over 90% of U.S. prescriptions, so their practices set the tone for the industry. Smaller PBMs may engage in similar tactics but have less market impact. It’s worth noting that while these companies face scrutiny, they argue their actions lower costs through negotiation and benefit management. The reality likely depends on specific contracts, clients, and drugs involved—there’s no universal “guilt” but a pattern of profit-driven behavior across the board.
Below, are sources that substantiate the claims about PBM practices like spread pricing, rebate retention, formulary manipulation, and others, while also tying these to the major PBMs mentioned (CVS Caremark, Express Scripts, OptumRx, Humana Pharmacy Solutions, Prime Therapeutics, and MedImpact Healthcare Systems). These sources include government reports, congressional hearings, industry analyses, and legal documents that reflect the complexity and ongoing scrutiny of PBM practices. I’ve organized them to align with the key offenses you listed, ensuring broad coverage without implying universal misconduct, as practices vary by context.
1. Spread Pricing
– FTC Interim Staff Report on Prescription Drug Middlemen (2024): The Federal Trade Commission detailed how PBMs engage in spread pricing, charging payers more than they reimburse pharmacies and retaining the difference. The report highlighted CVS Caremark, Express Scripts, and OptumRx, noting their market dominance (handling ~80% of U.S. prescriptions) enables this practice, inflating costs for payers and patients.
– House Committee on Oversight and Accountability Report (2024): Titled “The Role of Pharmacy Benefit Managers in Prescription Drug Markets,” this report found that CVS Caremark, Express Scripts, and OptumRx used spread pricing to overcharge payers, citing over 140,000 documents showing profits from pricing disparities.
– Ohio Attorney General Audit (2018): An audit revealed CVS Caremark’s spread pricing cost Ohio’s Medicaid program nearly $225 million, demonstrating how PBMs pocketed differences between pharmacy reimbursements and payer charges.
2. Rebate Retention
– FTC Interim Staff Report (2024): The FTC noted that PBMs like CVS Caremark, Express Scripts, and OptumRx negotiate rebates but often retain portions rather than passing them fully to insurers or patients, reducing cost savings.
– Center for American Progress (2024): Their report, “5 Things To Know About Pharmacy Benefit Managers,” explained how PBMs keep rebates as profit, incentivizing higher list prices since rebates are percentage-based, impacting patient out-of-pocket costs.
– Congressional Hearing (July 2024): Testimony before the House Oversight Committee accused CVS Caremark and Express Scripts of withholding rebates, with evidence suggesting this practice limits savings for payers like employer-sponsored plans.
3. Formulary Manipulation
– FTC Interim Staff Report (2024): The FTC found that PBMs, including CVS Caremark, Express Scripts, and OptumRx, prioritize drugs with higher rebates over lower-cost generics or biosimilars, skewing formularies to maximize revenue.
– House Oversight Committee Report (2024): The report cited 300 instances where PBMs placed higher-cost drugs in preferred formulary tiers, even when cheaper alternatives existed, implicating CVS Caremark, Express Scripts, and OptumRx.
– American Economic Liberties Project (2023): Their analysis criticized Express Scripts and OptumRx for formulary designs that favor rebated drugs, limiting access to cost-effective options.
4. Exclusionary Formularies
– FTC Interim Staff Report (2024): The FTC highlighted how PBMs exclude lower-cost drugs to secure higher rebates, with CVS Caremark and Express Scripts noted for agreements that block generics or biosimilars from formularies.
– Pharma Technology Focus (October 2024): This publication reported that PBMs like OptumRx and CVS Caremark exclude drugs to drive larger rebates, restricting patient access to affordable medications.
– Stanford Health Economist Kevin Schulman (2024): Schulman noted that rebates grew from 27–29% of drug manufacturer revenue in 2011 to 67% by 2019, suggesting PBMs like Express Scripts use exclusions to extract higher rebates, harming affordability.
5. Clawbacks and Copay Overcharges
– FTC Interim Staff Report (2024): The FTC documented clawbacks where PBMs like CVS Caremark and Express Scripts require pharmacies to collect excessive copays, then reclaim the surplus, increasing patient costs.
– Class Action Lawsuits (2024): Independent pharmacies, including Old Baltimore Pike Apothecary and Smith’s Pharmacy II, sued CVS Caremark, Express Scripts, and MedImpact, alleging clawbacks that forced higher copays, harming both pharmacies and patients.
– Consumer Reports (2018): An investigation revealed widespread clawback practices, with CVS Caremark and OptumRx cited for requiring copays above drug costs, pocketing the difference.
6. Gag Clauses
– Pharmacy Times (2018): Before federal bans in 2018, gag clauses were common, with CVS Caremark and Express Scripts criticized for contracts preventing pharmacists from disclosing lower cash prices, leading to patient overpayments.
– Senate Commerce Committee Report (2018): This report confirmed PBMs like OptumRx used gag clauses, prompting bipartisan legislation to outlaw them, though some argue enforcement remains uneven.
– National Community Pharmacists Association (2017): Their advocacy highlighted gag clauses in contracts from Prime Therapeutics and Humana Pharmacy Solutions, impacting patient costs.
7. Steering to Affiliated Pharmacies
– FTC Interim Staff Report (2024): The FTC found that CVS Caremark, Express Scripts, and OptumRx steer patients to their own pharmacies (e.g., CVS mail-order, Optum specialty), with 68% of specialty drug revenue going to PBM-affiliated pharmacies.
– House Oversight Committee Hearing (July 2024): Executives from CVS Caremark and OptumRx were questioned about steering, with evidence showing patients were nudged to mail-order pharmacies despite delays or higher costs.
– Healthcare Dive (2024): Reported that CVS Caremark and Express Scripts use formulary rules to favor affiliated pharmacies, limiting patient choice and squeezing independent competitors.
8. Unfair Reimbursement Practices
– FTC Interim Staff Report (2024): The FTC noted that PBMs reimburse independent pharmacies below acquisition costs, with CVS Caremark, Express Scripts, and OptumRx cited for practices that led to rural pharmacy closures (10% of independent pharmacies closed from 2013–2022).
– House Oversight Committee Report (2024): Found that PBMs under-reimbursed independent pharmacies while overcharging payers, citing CVS Caremark and Express Scripts.
– National Community Pharmacists Association (2024): Their data showed Humana Pharmacy Solutions and Prime Therapeutics set reimbursement rates that forced pharmacies to dispense at a loss, threatening their viability.
9. Opaque Fee Structures
– FTC Interim Staff Report (2024): The FTC criticized PBMs for complex fees (e.g., administrative, network) that obscure costs, with CVS Caremark, Express Scripts, and OptumRx noted for lack of transparency.
– Mercer Report (2024): Highlighted how PBMs like Prime Therapeutics and MedImpact impose fees that payers struggle to track, eroding negotiated savings.
– Tennessee Department of Insurance Audit (2025): Found Express Scripts charged millions in opaque fees to commercial plans, complicating cost accountability.
10. Prior Authorization Barriers
– FTC Interim Staff Report (2024): The FTC reported that PBMs use prior authorizations to favor certain drugs, with MedImpact and Humana Pharmacy Solutions cited for delays that impact patient care.
– House Oversight Committee Report (2024): Noted that CVS Caremark and OptumRx impose stringent prior authorizations, slowing access to generics and biosimilars.
– American Medical Association (2023): Their survey showed physicians faced administrative burdens from PBMs like Express Scripts, with prior authorizations delaying treatments.
PBM-Specific Criticisms
– CVS Caremark: Frequently cited for spread pricing (Ohio audit, FTC 2024), steering to CVS pharmacies (House Oversight 2024), and opaque rebates (FTC 2024). Its integration with Aetna and CVS Health amplifies steering and formulary manipulation concerns.
–Express Scripts: Criticized for formulary exclusions favoring rebated drugs (FTC 2024), under-reimbursement (NCPA 2024), and spread pricing (Tennessee audit 2025).
– OptumRx: Flagged for steering via UnitedHealthcare ties (FTC 2024), spread pricing (House Oversight 2024), and clawbacks (lawsuits 2024).
– Humana Pharmacy Solutions: Noted for restrictive formularies (FTC 2024) and low reimbursements (NCPA 2024), though less prominent than the top three.
– Prime Therapeutics: Cited for spread pricing and rebate retention (House Oversight 2024), with transparency issues raised by payers.
– MedImpact Healthcare Systems: Mentioned for formulary manipulation and prior authorization delays (FTC 2024), but smaller market impact.
General Context
– FTC Investigation (2022–ongoing): Launched in June 2022, targeting CVS Caremark, Express Scripts, OptumRx, Humana, Prime, and MedImpact, with findings in 2024 confirming systemic issues like vertical integration and market power (96% of claims handled by these six).
– Congressional Oversight (2024): The House Oversight Committee’s hearings and report emphasized anticompetitive practices by CVS Caremark, Express Scripts, and OptumRx, based on extensive document reviews.
– Lawsuits (2024): Independent pharmacies filed suits against CVS Caremark, Express Scripts, and MedImpact, alleging price fixing and unfair reimbursements, reinforcing systemic critiques.
– Industry Analyses: Reports from Drug Channels (2024) and Covington (2024) confirm the dominance of the top three PBMs (79–80% market share) and their use of group purchasing organizations (e.g., Zinc, Ascent) to obscure rebate practices.
Nuance and PBM Defense
PBMs argue they lower costs through negotiations and benefit management, as noted in statements from the Pharmaceutical Care Management Association (2024) and OptumRx’s CEO during congressional hearings (2024). Some practices, like prior authorizations, aim to ensure appropriate drug use, though critics argue they’re overused for profit. The sources acknowledge variability—practices depend on contracts, clients, and drugs, and not all PBMs apply every tactic uniformly. However, the pattern of profit-driven behavior is consistent across reports, with the top six PBMs shaping industry norms due to their market control.
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