States Move to Lower Drug Prices by Reining in Big Pharma

States target pharmacy benefit managers to cut drug prices amid rising consumer concerns

States across the U.S. are stepping up legal and regulatory pressure on pharmacy benefit managers (PBMs), the middlemen that negotiate drug prices for insurers and health plans, as Americans face record-high medication costs. At least 12 states have introduced or advanced legislation this year to limit PBM pricing practices, while federal scrutiny has intensified after a Senate committee report found the industry extracts an estimated $1.2 trillion annually from patients and taxpayers through opaque rebates and fees.

The push comes as drug price inflation outpaces general inflation by nearly 20%, according to the Kaiser Family Foundation. In Kansas, lawmakers are considering a bill that would cap PBM profits at 3% of drug spending—a measure modeled after similar laws passed in Arkansas and West Virginia. Meanwhile, California’s attorney general has filed a lawsuit alleging PBMs inflate costs by manipulating rebate structures, a claim echoed by pharmacy chains like CVS and Walgreens in recent earnings calls.

Why are PBMs under attack?
Pharmacy benefit managers—companies like Express Scripts (now part of Cigna), OptumRx (UnitedHealth), and CVS Caremark—operate as intermediaries between drugmakers, insurers, and pharmacies. Critics argue their business model relies on extracting hidden fees, delaying cheaper generic alternatives, and using complex rebate contracts to obscure true drug costs. A 2025 report by the U.S. Government Accountability Office found that PBMs’ administrative fees alone add $60 billion annually to prescription costs, with little transparency on how those funds are spent.

How states are acting
At least seven states—including Texas, Florida, and Ohio—have passed laws requiring PBMs to disclose their pricing formulas or cap fees. Kansas’s proposed legislation would also mandate that PBMs pass through at least 90% of rebates to consumers, a provision similar to a rule struck down by a federal court in Alabama last year. Legal challenges loom, as PBMs argue such measures violate antitrust laws by restricting their ability to negotiate on behalf of insurers.

What happens next?
Federal action remains stalled, but the Biden administration has signaled support for legislation like the Lower Drug Costs Now Act, which would impose price transparency requirements on PBMs. Industry lobbyists, however, have spent over $100 million this year opposing state-level reforms, according to OpenSecrets. Meanwhile, PBMs are testing voluntary transparency pledges, though critics say these fall short without enforceable caps.

The stakes for consumers
With nearly 40% of Americans reporting they’ve skipped medications due to cost, state-level reforms could offer immediate relief. However, experts warn that PBMs may shift fees to other parts of the healthcare system if not properly regulated. "This is a David vs. Goliath fight," said Dr. Ameet Sarpatwari, a Harvard Medical School researcher tracking PBM practices. "The question is whether states can break the cycle before patients bear even more of the burden."