For far too long, a hidden cadre of middlemen has quietly distorted the economics of the medication prescribed to Americans, forcing U.S. patients and struggling pharmacists to pick up the tab. It is time for lawmakers to respond, by reforming the role of pharmacy benefit managers (PBMs) and therefore narrowing the stark price gap between what Americans and EU citizens pay for the same medicines.
PBMs are supposed to create value by facilitating the sale of manufactured goods to retailers and customers. In the medical industry PBMs negotiate rebates and discounts with drug manufacturers; they design formularies, assemble pharmacy networks, and adjudicate prescription claims, all in support of insurers, employers, and government plans. In theory, the concept is sound: buying power is aggregated, costs are controlled, and delivery is streamlined. In practice, however, PBMs have led to misaligned incentives and a consolidation of power.
Currently, just a handful of PBMs — the largest being CVS Caremark, Express Scripts, and OptumRx — control an overwhelming share of the U.S. prescription-drug market, collectively managing roughly 79 % of U.S. prescriptions. This level of concentration, paired with vertical integration (PBMs owned by or affiliated with large insurers) gives these firms immense leverage. They operate with minimal transparency, and zero accountability.
The patients they claim to serve are at best a secondary consideration.
Under the current system, PBMs negotiate rebates from drug manufacturers, yet instead of passing the savings along to patients, PBM middlemen routinely keep a substantial portion of the negotiated savings. When the list price of a drug goes up, PBMs often boost their own revenue by demanding larger rebates, perversely favoring more expensive drugs over cheaper generics or lower-cost alternatives that would actually benefit patients.
Despite the rebates and discounts that are quietly awarded behind the scenes, patients are increasingly forced to pay more out of pocket, not less, and overall drug spending remains high. Americans often face sticker-shock, even with insurance.
The consequences for pharmacies are serious: 5,800 pharmacies have closed since 2018, and almost 1,000 zip codes are now without any pharmacies at all. Yet, PBMs routinely continue to force pharmacies to fill prescriptions at a financial loss.
It is no wonder that U.S. patients pay more for their drugs than consumers in Europe, Asia and our neighbors in Canada. According to recent analyses, U.S. drug prices are often nearly three times higher than those in other high-income countries. This gap reflects deep structural distortions built into the U.S. system, which is dominated by opaque middlemen who enrich themselves through savings that were meant to be passed along to patients.
Where are the American people? According to an August 2025 Morning Consult survey, 83% of Americans say that the closing of their local pharmacy would concern them - the same level of concern about the closing of their primary care physician and just two points shy of the level of concern about their nearest hospital. And, 97% of Americans say it's important for steps to be taken to prevent pharmacy closures.
In its mission to end foreign freeloading on high U.S. drug prices, the Trump White House has sought to align domestic drug prices with foreign ones, and the effort is resonating with many Americans. The growing mandate has sent a bold, clear message to Congress, yet a bill addressing the seemingly esoteric subject of PBM drug pricing calculus, which enjoyed wide bi-partisan support, was removed from the December 2024 spending bill at the 11th hour.
Many innovators, along with their investors and supporters, argue that international price comparisons can be misleading, and that wholesale foreign price controls could threaten innovation and supply. But the real roadblock to affordable care lies not overseas, but here at home. Reforming PBMs would go straight to the heart of the problem.
Congress must demand transparency from PBMs, including a public reporting of rebate amounts and a full disclosure of exactly what gets passed along to insurers, employers, and patients. Any reforms must prohibit the practice of “spread pricing,” whereby insurers are charged more than pharmacies, allowing PBMs to pocket the difference.
There also must be a mandate to ensure that all manufacturer rebates and discounts get passed along directly to patients or health plans.
In addition, reforms already in place for Medicare under the Inflation Reduction Act should be extended by Congress to commercial insurance markets.
Under such reforms, the government would be granted leverage to negotiate drug prices, and the loopholes that PBMs currently exploit would be closed. Other reforms, such as the the capping of out-of-pocket costs for insulin, would benefit all Americans.
Congress must not be swayed by artificial “free market” defenses of PBMs. The mathematics of the current system, not just the prices set by drugmakers, drive the pricing disparities between the U.S. and Europe.
For the millions of families already rationing their medicines, that is not right. The American people — and their health — deserve better. By acting, Congress would affirm that the U.S. does not need to choose between medical innovation and patient affordability.
It is time for Congress to move PBM reform down the field and over the goal line – since last December, the bill was on the 2-yard line and was ripped out of the spending package before passage. Now, we just need the advocates to line up and sweep left or right or power it right up the middle and score the touchdown for PBM reform. The time is now for bipartisan action.
Jack Kalavritinos was a senior HHS and FDA official in the Trump and Bush 43 Administrations and founder of the Washington Health Innovation Council and JK Strategies.
