2019 was a year that focused on drug pricing and placed significant pressure on drug manufacturers and PBMs. The potential withdrawal of the rebate safe harbor was perhaps the biggest threat to PBMs in 2019. Removal of the harbor would have been a radical change to PBM business practices and was an attempt to remove some of the perverse incentives of rebates and lack of transparency. While the rebate safe harbor proposal was later withdrawn, it was not the end of the PBM industry’s challenges. A slew of state laws passed in 2019 targeted common, and disliked, PBM practices including clawbacks and gag clauses while others attempted to allow states to regulate a broader set of PBM practices.1 A brewing battle over the ability of states to regulate PBMs is now reaching the Supreme Court and may have profound implications on how states can dictate PBM business and whether this has priority over ERISA, a federal law limiting the ability of states to disrupt employer sponsored benefits.2 The PBM industry has always proven itself to be adaptable so one may ask, “How will the industry change?”

PBM responses to these challenges will be a mix of visible and behind the scenes actions. Protecting the rebate revenue stream is a key goal for PBMs and was demonstrated in a lobbying campaign via the PBM lobby group, Pharmaceutical Care Management Association. However, less transparent was the move by Express Scripts (ESI) to create Ascent, a Switzerland-based Group Purchasing Organization (GPO) that would provide ESI a potential loophole to continue to collect administrative fees and, at a lower tax rate, even if the rebate safe harbor were to go away.3 The Ascent relationship may have also played a role in Prime Therapeutics’ decision to transfer pharmacy benefit rebating to ESI for 2020 and beyond.To address high drug costs and help dissuade a government takeover of prescription drug negotiation, PBMs are consolidating and becoming larger, joining with some of the nation’s largest health plans or even with other PBMs (ESI + Prime). These new drug management behemoths seem destined to test the concept of “bigger is better” and will have considerable negotiating leverage on manufacturers and channel partners.

For manufacturers, there should not be an expectation that PBM business practices will change radically in the near future. There will remain a focus on low net cost, high rebates, strict management, and driving business through pharmacies owned by the PBM. Solutions, such as accumulators and exclusion lists, are likely to spread as employers struggle to contain drug costs. However, the consolidation of PBMs with health plans provides manufacturers a new opportunity to discuss how their products impact the total cost of care and health resource utilization. PBMs, previously only involved in drug benefits, now have skin in the game on medical costs as well. There also may be opportunities for manufacturers to partner with owned entities of PBM/health plans including specialty pharmacies, clinics, or even hospitals to improve how care is delivered and build advocacy for the manufacturer within the PBM-payer organization. The key for manufacturers will be identifying how their PBM customer’s goals are changing, and provide innovative solutions that align goals and build partnership.


  1. Our Independent Voice. 20 States Pass Pharmacy Benefit Manager (PBM) Transparency Legislation in 2019—State Drug Pricing Legislation Likely to Continue in 2020. Oct 9, 2019. Available at:  https://www.ourindependentvoice.com/news/news-item/2019/10/08/20-states-pass-pharmacy-benefit-manager-(pbm)-transparency-legislation-in-2019-state-drug-pricing-legislation-likely-to-continue-in-2020.
  2. STAT Supreme Court will Review an Arkansas Law Governing Pharmacy Benefit Managers. January 11, 2020. Available at: https://www.statnews.com/pharmalot/2020/01/11/supreme-court-arkansas-pbm-pharmacies/.
  3. Drug Channels. Drug Channels News Roundup, May 2019: Express Scripts’ New GPO, More on Amazon/PillPack, a BS Update, and Vegas Video. May 30, 2019. Available at: https://www.drugchannels.net/2019/05/drug-channels-news-roundup-may-2019.html.
  4. Drug Channels. Express Scripts + Prime Therapeutics: Our Four Takeaways From This Market Changing Deal. Jan 7, 2020. Available at: https://www.drugchannels.net/2020/01/express-scripts-prime-therapeutics-our.html.