Perhaps you received a text in June from your local CVS Pharmacy alerting you to a big legislative fight? Or maybe you’ve just read about it in the papers. Either way, there’s been a lot of debate over the last few months about “Pharmacy Benefit Managers,” colloquially known as PBMs. But what exactly is a PBM, and why is there so much controversy?

What is a PBM?

In short, PBMs are companies that serve as intermediaries between insurers, employers, pharmacies, and drug manufacturers. Specifically, according to the Journal of the American Medical Association, they engage in:

  • Formulary Design: PBMs work with medical experts to decide which drugs will be covered and at what cost to patients. This process takes into account safety, effectiveness, and price.
  • Price Negotiation: Acting on behalf of insurers and employers, PBMs negotiate with manufacturers for rebates and discounts—often bringing down the net cost of expensive medications.
  • Pharmacy Network Management: PBMs create networks of pharmacies to serve patients efficiently and at lower prices, leveraging competition among pharmacies for inclusion.
  • Utilization Management: Through tools like prior authorization or step therapy, PBMs help ensure patients use the most cost-effective and appropriate drugs.
  • Mail-Order Pharmacy Services: Many PBMs also operate mail-order pharmacies that improve convenience and adherence while reducing costs.

PBMs make money through various mechanisms including keeping a portion of the rebates they negotiate, charging administrative fees, and sometimes through the difference between what they reimburse pharmacies and what they charge insurance plans, a practice called “spread pricing.”

What’s All the Fuss?

While these are businesses that started operating in the 1960s, over the past two decades, the PBM industry has expanded significantly and has become both highly concentrated and vertically integrated. That’s what’s causing some concern among PBM critics, who question their pricing practices, transparency, and influence.

According to a study by the U.S. Federal Trade Commission, in 2004, the top three PBMs managed about half of all prescription drug claims for 190 million people. Today, those same three, often referred to as the “Big Three”—CVS Caremark, Express Scripts, and OptumRx—control roughly 80% of all prescription claims for about 270 million Americans. When combined with the next three largest PBMs (Humana Pharmacy Solutions, MedImpact, and Prime), the “Big Six” now handle 94% of the U.S. market.

Beyond this consolidation, PBMs have become vertically integrated into large healthcare conglomerates that span the entire pharmaceutical supply chain—from drug manufacturing and distribution to retail pharmacies and insurance coverage—giving them immense influence across the healthcare sector.

Critics point to the complexity of PBM pricing that has made it difficult for consumers or the public to see exactly how the savings, touted by the companies, are distributed and whether consumers always benefit. They argue that PBMs have become too powerful, citing concerns about a lack of transparency in rebate sharing, conflicts of interest when PBMs own pharmacies, and excessive market concentration.

Of course, as with any regulations in the marketplace, attempts to regulate PBMs and change their business practices can have real unintended consequences by weakening PBMs’ ability to negotiate and potentially driving up costs elsewhere in the healthcare system. For example, Act 474 of the 2025 Louisiana Regular Legislative Session banned “spread pricing,” a means of profit for PBMs.

Earlier this year, Arkansas attempted to outright ban PBMs from owning pharmacies in-state, potentially forcing all CVS locations within Arkansas to close. The law has been temporarily halted by a judge who wrote that the law “likely violates” the U.S. Constitution’s commerce clause. The ongoing legal challenge is currently proceeding through the federal courts.

What’s the Latest in Louisiana?

The Pharmacy Benefit Manager Monitoring Advisory Council, established by statute in 2019, is tasked with advising the legislature, the Commissioner of Insurance, and the Board of Pharmacy on regulation of PBMs to protect public interests. The Council has met twice this fall, with meetings generally taking on a critical tone toward PBMs.

Nearly all invited testimony so far has represented critics of PBM practices, with speakers urging the state to regulate private contracts, limit fees, and cap negotiated rebate amounts. However, at the most recent meeting, an economics professor testified on behalf of the Pharmaceutical Care Management Association, defending the competitive role PBMs play in the marketplace, but his comments were met with frustration from Council members.

The chairman closed the meeting by calling on the Department of Insurance to issue a ruling on the licensure status of the Big Three PBMs in Louisiana after they failed to respond to requests for testimony before the Council. The Council is expected to meet regularly between now and the Spring 2026 legislative session.