The Trump administration has framed provisions in the 2026 Consolidated Appropriations Act and Federal Trade Commission settlements as “historic victories,” curbing problematic behavior in the pharmacy benefit management industry. These include imposing more transparency and forcing rebate pass-through to patients. But critics say the actions brought about by the FTC and Congress appear weaker than what was originally vowed by the administration.

PBMs are intermediaries that play a key role negotiating prescription drug prices on behalf of employers, health plans and others. They also establish networks with and reimburse pharmacies in addition to managing formularies or lists of covered medicines, adjudicating prescription claims and operating specialty pharmacies. The three biggest PBMs — CVS Health’s Caremark, Cigna’s Express Scripts and UnitedHealth’s Optum Rx — together control 80% of prescriptions in the United States. These PBMs now belong to vertically integrated healthcare conglomerates that own and control specialty pharmacies (supply high-cost, often complex medicines), certain healthcare provider clinics and even manufacturers of pharmaceutical products. They’re also part of health insurance companies. This concentration of market power has drawn the ire of a growing number of legislators who want to eliminate certain practices which they assert are anticompetitive.

The FTC finalized settlements with Express Scripts and CVS Caremark this year to resolve a landmark insulin pricing lawsuit. It’s likely a third settlement with Optum Rx is forthcoming. As the FTC disclosed in its interim and final reports over several years of investigations, drug makers competed for favorable formulary placement not by lowering list prices, but by increasing them. Higher list prices implied larger rebates for PBMs. As a result, PBMs steered patients toward the higher-priced insulins that generated the most rebate revenue. They did this while excluding or disadvantaging lower-list-price alternatives. This seemingly anti-competitive practice isn’t confined to insulin products. It happens in the biologic and small molecule spaces across multiple therapeutic categories.

As a consequence, patients often must spend more on higher-priced items in the deductible phase of their pharmacy benefit. And then once coverage kicks in, their co-insurance is calculated on the basis of a list and not a net price after rebates. The rebates don’t appear to help patients. Instead, they’re designed to benefit PBMs but also drug manufacturers who want their products on formulary with a greater market share.

The opaque processes of rebating have long been criticized by regulators and lawmakers alike. Drug makers offer PBMs rebates that reduce net prices in exchange for preferential positioning on formulary, which in turn can move market share towards preferred products. Though PBMs pass through a considerable portion of these payments to entities with whom they contract, patients generally don’t see these rebates at the point of sale or pharmacy counter. PBMs are typically paid based on a percentage of a drugs’ list prices before rebates and other discounts are applied.

Spread pricing was also a subject of the FTC inquiry. It occurs when PBMs charge plan sponsors a (sometimes much) higher price for medications than the acquisition cost and what they reimburse independent pharmacies, keeping the difference as profit.

Launched under the Biden administration, the FTC investigation was led by a proactive FTC Commissioner, Lina Khan. The main goal was to probe the business practices of the nation’s three biggest PBMs. Khan’s agency hinted that addressing the problems that the inquiry was uncovering would require a major overhaul of the companies themselves.

But President Trump replaced Khan with Andrew Ferguson. And the president’s rhetoric notwithstanding when he seemingly decried PBMs in late 2024 as being “ rich as hell ,” his actions since then haven’t been as robust as promised.

To illustrate, the FTC has faced criticism for not including monetary penalties or admissions of misconduct and liability. There’s no restitution fund, for instance, for patients who paid inflated insulin co-payments. There’s just a consent order which essentially entails promises to behave better along with limited government oversight and monitoring.

There’s no federal ban on rebates or spread pricing either. PBMs are still able to spread price in Medicaid in states where it’s permitted. And while the settlements require PBMs to offer plan sponsors a “standard offering” that passes 100% of manufacturer rebates directly to patients at the pharmacy counter, the agreements allow employer plan sponsors to opt out. Employers can legally choose to keep older, non-transparent contracts if they prefer to use traditional rebates to offset overall premium costs rather than lowering point-of-sale drug prices.

There’s also been no forced break-up of the vertically integrated entities despite a call to do so from lawmakers across the aisle. Legislation first introduced in 2024 by Senators Warren (D-MA) and Hawley (R-MO) would bar insurers from owning PBMs, pharmacies and provider groups all at once — the same vertical integration at the heart of the FTC’s insulin case. According to The New York Times , Warren and like-minded critics of industry mergers have complained that healthcare conglomerates use their size and leverage to steer patients toward their own pharmacies while driving independent ones out of business .

Furthermore, the FTC has faced criticism for not including monetary penalties or admissions of misconduct and liability. There’s no restitution fund, for instance, for patients who paid inflated insulin co-payments. There’s just a consent order which entails promises to behave better along with some government of monitoring.

The CAA law does mandate a 100% pass-through of negotiated drug rebates by commercial and Medicare outpatient (Part D) plans, though this doesn’t go into effect until 2028. Instead of rebates, PBMs may earn “itemized, flat-dollar fair market value fees for actual services rendered,” delinking PBM compensation from list prices. And, beginning in 2029, Part D sponsors must accept any pharmacy willing to meet standard contract terms, with specific network protections designed to stop independent pharmacies from being cut out. The legislation also imposes reporting obligations on PBMs starting in 2028 to provide plans with detailed semiannual reports on prescription drug and spread pricing.

In addition, there’s a proposed Department of Labor rule, first drafted in the form of an executive order in January of this year. It’s currently being reviewed by the department after public comments were submitted this spring. This regulation would mandate that PBMs disclose their earnings through sources such as rebates and spread pricing to self-insured plan sponsors.

The overarching theme of PBM reform is to move away from the high list/high rebate model towards an upfront net cost framework in which drugs with the lowest net cost will be preferred on formularies rather than medications that generate the biggest rebates. But notably, the market is already doing this to some degree. There’s been a decade long trend towards pass-through contracts. And some smaller PBM players like CapitalRx that operate a fully transparent model without rebates have challenged traditional PBMs into restructuring the way they do business. For example, perhaps spurred by the threat of legislative or regulatory action during the past ten years or so, 99% of Part D contracts already included a rebate pass-through prior to passage of the CAA. In essence, what has been occurring is that certain practices that PBMs were already migrating toward are being codified.

And how will all this affect PBMs and their profitability? Well, if I’ve learned anything in my 27 plus years of analyzing PBMs, it’s that they’re adaptable and good at finding new ways to generate revenue. It’s no surprise that they’ve signaled to investors that the regulatory and legislative impact of reforms and what’s happening in the marketplace are manageable. PBMs earn money from multiple sources and sometimes new ones come along unexpectedly.