While drug prices keep climbing, states like Arkansas target the only actors with the power to curb them: Pharmacy Benefit Managers (PBMs). But by passing laws like Act 624, legislators risk doing the opposite of what they promise: increasing costs, reducing access, and leaving patients unprotected.
PBMs have become a convenient scapegoat in the drug pricing story. The narrative claims PBMs, which negotiate drug prices with pharmaceutical companies on behalf of consumers, are to blame for high prices. PBMs’ critics allege they act as greedy middlemen, driving up access costs.
The opposite is true. In reality, PBMs prevent drug prices becoming even more unaffordable for patients. They negotiate directly with manufacturers on behalf of insurers and employers, leveraging the volume of millions of covered patients to secure discounts and manage lists of reimbursed drugs.
Contrary to the narrative their enemies push, PBMs do not set prices. Instead, they negotiate them down. They do so with slim profit margins, averaging around 2%, far below the margins of pharmaceutical companies or large S&P 500 companies, which hover around 12%.
From an economic perspective, PBMs operate with a vertically integrated model, meaning they are present at different stages of the value chain, from negotiating with manufacturers to distribution through their own pharmacies. Some anti-PBM policies – such as Act 624 in Arkansas, which is due to take effect in January 2026 – originate from concerns about this structure, such as PBMs owning pharmacies. Those concerns are misplaced. PBMs owning pharmacies does not undermine competition. In fact, it can increase efficiency, ensure stable supply, and reduce costs for patients.
For example, mail-order pharmacies, sometimes managed by PBMs like CVS Caremark, are essential for seniors and chronic patients. Integrating different stages of the chain does not mean excluding competition, but rather offering more predictability and scale in a fragmented and highly regulated market. Without PBM-owned CVS, states like Arkansas would suffer serious accessibility issues, as has happened elsewhere. After all, if patients can’t access the drugs they need at all, then pricing becomes a secondary issue.
Naturally, the scale and efficiency of these intermediaries pose a challenge for independent pharmacies. But instead of focusing on differentiation or innovation to compete, politicians too often prefer to mobilize legislative and legal powers to reshape the rules of the game in their favor, attempting to eliminate competition through legislation.
The existence of PBMs has become an inconvenience for three powerful forces: pharmaceutical companies, which lose control over the prices they want to charge; independent pharmacies, which prefer to eliminate competition through legislation; and political leaders like Governor Sarah Sanders in Arkansas, who find an easy scapegoat in PBMs.
The collective pressure from these actors was so strong that, in Arkansas, it culminated in Act 624. This new law, which Gov. Sanders enthusiastically supports, prohibits PBMs from owning pharmacies in the state. This is despite there being no evidence that PBMs have engaged in market abuse, a lack of justification that led federal judge Brian Miller to issue a preliminary injunction.
This is a serious example of coercive state intervention in the private sector. There are no judicial convictions or evidence of anti-competitive practices, yet the state imposes a forced restructuring of private activity. History shows this type of intervention will not protect patients. On the contrary: in rural areas, it could force the closure of the only existing pharmacies. For chronic patients, it could cut access to specialized medications, treatments which are predominantly dispensed through PBM-affiliated specialty pharmacies, which account for around two thirds of all specialty drug revenue in the U.S.
There is a clear attempt to shift the focus. Drug pricing is a knotty and difficult issue. Truly solving it would require widespread and perhaps unpalatable reforms to Medicaid. Instead, it is politically convenient to lean into the anti-PBM narrative. Meanwhile, pharmaceutical companies continue to benefit from prolonged monopolies through practices like “patent thickets” or “pay-for-delay” agreements, which delay the entry of generics into the market and keep prices artificially high.
Intermediaries like PBMs are not the villains. They have been essential in ensuring innovative drugs like Keytruda, an immunotherapy used to treat various cancers, and Zolgensma, a gene therapy for a rare and often fatal neuromuscular disease in infants, are available in the United States years before they reach Europe, where prices are state-regulated but access is slower and more uneven. This contrast makes clear rigid government regulation risks delaying life-saving treatments.
State legislators should not legislate based on ideological perceptions and corporate pressures, especially when there is no evidence of specific abuses. Act 624 in Arkansas is currently blocked by a federal injunction, raising doubts about its constitutionality and potential interference with federal programs like TRICARE. The focus should be on the best interests of the individual regarding access, savings, and efficiency.
