What Are Pharmacy Benefit Managers?

Pharmacy Benefit Managers (PBMs) are third-party entities contracted by health insurance companies to manage prescription drug benefits. PBMs negotiate rebates with drug manufacturers in exchange for placement on an insurer’s formulary, which is the list of drugs an insurer covers for its enrollees.

This system creates a perverse incentive for PBMs to favor higher-cost drugs with larger rebate potential. It encourages drug manufacturers to increase the list price of a drug to account for the rebate, which they must provide to earn favorable placement on the formulary.

States and the federal government are considering solutions to this system, such as delinking or divorcing PBM compensation from the list price of a drug and instituting a flat fee. Legislators have also proposed legislation requiring greater PBM transparency and accountability.

Pharmacy Benefit Managers Legislative Map

Select your state to learn whether your state has passed or proposed PBM reform.

Pharmacy Benefit Managers Action Campaigns

Take action against harmful PBM practices by asking your elected officials to support PBM reform, from rebate pass-through to delinking PBM compensation from the price of a drug.