The PBM industry and Health Insurers oppose these types of bills on the grounds that they impose an unnecessary regulatory burden that won't necessarily affect prices for consumers.
Drug revenues go to several entities in the supply chain. According to PoliticoPro's 2018 analysis of 2016 data, of the 480 billion spent on pharmaceutical drugs in 2016 (listed in order of the supply chain):
323 billion went to the drug manufacturers
23 billion went to PBMs
18 billion went to wholesalers
73 billion went to pharmacies
35 billion went to healthcare providers
9 billion went to insurers.
Several states have tried to regulate this segment of the market by increasing transparency of the PBM business and protections for the patient. Nearly every state has now passed at least one PBM-related law.
For many years, the federal government has floated ideas to reduce the cost of healthcare, which include adjustments to the system, including PBMs. For example, a federal bill to remove legal protections that allowed the PBMs to keep the prescription co-pay assistance (co-pay cards), rather than passing the assistance to patients. That co-pay assistance was intended to benefit the patients directly.
In March 2023, the Congress and Senate are holding hearings on PBM transparency that advocates hope will result in change. According to Politico, "Over the years, lawmakers have largely failed to make sweeping changes to the way the industry operates."
What are PBMs?
Pharmacy Benefit Managers are third-party administrators of prescription drug coverage for insurers and employers who pay a fee to the PBM for their services. Examples of PBMs are CVS Caremark, OptumRX, and ExpressScripts. PBMs contract to develop and maintain formularies, process claims, and negotiate discounts and rebates. These contracts are not public information. Drug manufacturers pay rebates -likely based on the cost of the medication- to PBMs.
PBMs are therefore motivated to favor medications with higher prices. The higher the cost of the medication, the larger the rebate to the PBM. PBMs manage plans for millions of Americans who have health insurance from a variety of sponsors, including commercial health plans, self-insured employer plans, Medicare Part D plans, state government employee plans, and Medicaid managed care organization (MCO) plans.
Further reading
PoliticoPro 2019 description of PMB 'Price Spreading': https://votervoice.s3.amazonaws.com/groups/spondylitis/attachments/Ppro%20datapoint.pdf
PoliticoPro's 2018 description of the pharmaceutical spending supply chain: https://votervoice.s3.amazonaws.com/groups/spondylitis/attachments/how-much-prescription-drug-revenue-go.pdf