Prescription drug prices do not become opaque by accident. They become opaque because the middlemen who manage drug benefits are allowed to hide many of their revenue streams from the employers, insurers, pharmacies, and patients who ultimately pay the bill. Congress has already recognized the problem. Federal pharmacy benefit manager (PBM) reporting requirements are scheduled to reshape what PBMs must disclose, but many of the most important provisions will not take effect until 2028. That delay creates a basic question for state lawmakers: why wait?
PBMs claim they lower prices by negotiating discounts. But without transparency, no one can verify whether those savings are being passed through to patients or quietly absorbed as revenue. This prevents insurers, employers, and other healthcare purchasers from effectively comparing PBMs when deciding who should manage their drug benefits. According to the Federal Trade Commission, it also allows PBMs to markup the costs of critical medicines such as cancer and HIV drugs.
PBMs sit between insurers, employers, drug manufacturers, pharmacies, and patients. Their compensation is often embedded in retained manufacturer rebates, spread pricing, administrative fees, pharmacy clawbacks, and have been accused by the Federal Trade Commission of favoring high-cost drugs when larger rebates make them more profitable. Employers and insurers cannot negotiate effectively if they do not know what a PBM received, retained, charged, or paid. This is the information needed to judge whether a PBM is actually doing its job.
The federal government has moved in the right direction, but delayed implementation gives PBMs more time to operate under the same opaque model that prompted reform in the first place. States should not use the federal timeline as an excuse for inaction. They should use the upcoming reforms as a blueprint. Federal rules will require robust PBM reporting on rebates, fees, spread pricing, and compensation—the precise information needed to introduce competition into the PBM market. State governments can bring this transparency to patients, employers, and healthcare providers without waiting until 2028.
Some states are already showing what this can look like. North Carolina’s SCRIPT Act requires reporting on PBM rebates, spreads, affiliated pharmacies, pharmacy fees, and retained rebates. Kansas went further by targeting spread pricing directly, requiring PBMs to report rebate and reimbursement information, and forcing public reporting when pharmacy reimbursement significantly departs from the National Average Drug Acquisition Cost. Neither law is perfect. North Carolina keeps too much information confidential, and Kansas moves closer to reimbursement regulation than market transparency. But both states show that lawmakers do not need to wait until 2028 to start forcing PBMs to disclose where the money goes.
The key is to ensure that the reporting requirements match the upcoming federal requirements. That means using standardized definitions of terms such as “rebate,” “fee,” “spread pricing,” and “pharmacy reimbursement” so state laws plug directly into the federal reporting structure. That alignment matters. A poorly designed state law could create competing definitions, duplicative reports, and compliance costs. But a federal-aligned state law does the opposite. It tells PBMs to begin collecting and reporting the same information they will soon have to disclose anyway. States should require reporting on the core federal categories now: rebates, spread-pricing, administrative fees, pharmacy reimbursement, and clawbacks. That would reduce compliance confusion while giving employers, insurers, pharmacies, and patients useful information before the federal rules arrive.
Even if states cannot duplicate the entire federal reporting scheme, implementing core elements would greatly improve the transparency of the industry. Basic information about where manufacturer rebates go, and whether discounts are passed through to patients, would provide a major insight into how the market actually works. Requiring reporting of administrative fees and pharmacy clawbacks would also help employers, insurers, and pharmacies negotiate from a position of knowledge rather than guesswork.
Transparency is not magic, but it is often a precondition for competition. Employers cannot switch to better PBMs, patients cannot choose cheaper options, and pharmacies cannot challenge abusive reimbursement unless the numbers are visible. The point of PBM transparency is to let consumers benefit from real price competition. When PBMs must disclose rebates, spreads, fees, and reimbursement rates, employers can choose better contracts, insurers can demand pass-through pricing, and pharmacies can compete on fairer terms.
Congress has already admitted the PBM market needs sunlight. But patients, employers, and pharmacies should not have to wait until 2028 for basic information about where their prescription drug money goes. States have a narrow but important window. They can pass PBM transparency laws now, align those laws with the coming federal reporting requirements, and give consumers the benefit of competition. Open the books now, and let employers, pharmacies, and patients decide whether their PBM is earning its keep.
Justin Leventhal is a senior policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on X @ConsumerPal.
