The latest misguided attack levied at PBMs comes from state attorneys general urging Congress to prohibit PBMs and their parent companies from owning pharmacies. Unfortunately, the State AGs are not only overlooking the safety of patients but fundamentally misunderstand the economics of the pharmaceutical supply chain, and doing such a thing would exacerbate the very problems it is supposed to fix.
Vertical integration itself is not inherently anticompetitive: It only becomes problematic if it directly facilitates exclusionary practices or abuse of market dominance, and no one is asserting that either of these is occurring in the PBM space. For instance, most patients can almost always obtain their drugs from the pharmacy of their choice.
Moreover, existing antitrust laws already adequately police such conduct without dismantling beneficial business structures that provide tangible economic benefits.
There is a wealth of empirical evidence in economics suggesting that the potential consequences of banning vertical integration are significant, as it would lead to higher transaction costs, diminished bargaining power against pharmaceutical companies, and fragmented patient care, each of which would lead to higher drug prices. Disrupting these relationships could inadvertently hurt consumers and drive healthcare spending even higher. Indeed, integrated PBMs streamline drug distribution, leverage data to promote patient adherence, and efficiently manage formularies, all of which also help to control pharmaceutical spending in a market dominated by powerful drug manufacturers.
Rather than scapegoating PBMs for high drug prices, policymakers should target the actual source of inflated pharmaceutical costs–namely, the limited competition in the pharmaceutical market, abetted by slow and cumbersome regulatory approval processes. Accelerating FDA review and approval of new drugs—especially generics and biosimilars—would expand competitive forces within the pharmaceutical market. When more drugs enter the market, PBMs can leverage this competition to negotiate lower prices for consumers. Indeed, evidence suggests PBMs are most effective in markets characterized by vigorous drug competition.
Streamlining FDA processes does not mean sacrificing patient safety or product effectiveness: The FDA can maintain its stringent standards while improving administrative efficiency, reducing unnecessary bureaucratic delays, and better prioritizing the review of high-impact competitors. This fundamentally market-driven approach has been proven to lower costs without imposing counterproductive market restrictions.
If policymakers genuinely seek to lower prescription drug prices and protect consumers, the solution is not to disrupt efficient, integrated pharmacy services but to enhance competition among drug manufacturers by reforming the FDA’s regulatory pathways. PBMs—armed with more competitive drug offerings—can then do precisely what they were designed to do: drive down drug costs through robust negotiation, streamlined distribution, and increased efficiency.
Let’s stop misdiagnosing the problem and start empowering competition. Consumers deserve real solutions, not symbolic regulatory interventions that risk making healthcare less affordable.
