Frequently Asked Questions (FAQ)

PBMs are third-party companies that act as middlemen between health insurance providers, drug manufacturers and pharmacies. Their primary role is to manage prescription drug benefits on behalf of health plans, employers, unions and government programs. PBMs say their goal is to control costs and streamline the delivery of prescription medications, but the reality is far different. The Federal Trade Commission and the U.S. House Oversight Committee have both found evidence of anti-competitive PBM tactics that have driven locally operated pharmacies out of business, limiting patient choices and inflating drug prices.

• PBMs negotiate discounts and rebates with drug manufacturers to reduce drug costs for health plans. But these savings often fail to trickle down to patients, who may still face high out-of-pocket costs. Local pharmacies are also harmed when PBMs keep a larger share of the negotiated discounts, cutting into already thin profit margins.
• PBMs aim to streamline the prescription claims process for pharmacies and insurers. But this efficiency often comes at the expense of local pharmacies, which face administrative burdens and delayed reimbursements due to PBM control.
• PBMs create drug formularies to ensure patients receive effective medications while controlling costs. Unfortunately, these formularies can favor higher-rebate drugs that maximize PBM profits, potentially steering patients away from more affordable or effective medications

PBMs manage the claims process for prescriptions filled at pharmacies. When a patient fills a prescription, PBMs determine drug availability under the patient’s health plan and the reimbursement amount the pharmacy will receive. But PBMs often take advantage of this interaction by reimbursing locally operated pharmacies at unsustainably low rates while charging health plans significantly more for the same prescriptions. This practice, known as spread pricing, allows PBMs to pocket the difference, putting local pharmacies at a financial disadvantage.

Despite their intended purpose, PBMs prioritize profits over patient care through:

• Lack of Transparency: Opaque pricing and rebate systems. PBMs don’t reveal how they determine drug prices or reimbursements.
• High Out-of-Pocket Costs: Patients often don’t see the savings from PBM-negotiated discounts.
• Conflict of Interest: PBMs frequently prioritize their own mail-order or retail pharmacies over competitors by steering patients to their own outlets and providing better reimbursement rates to their affiliated pharmacies. This practice disadvantages locally operated pharmacies and unaffiliated chain pharmacies, creating an uneven playing field.
• Threats to Local Pharmacies: PBMs’ low reimbursement rates make it difficult for small pharmacies to survive. Pharmacies often lay off staff, trim operating hours, cut important services or close altogether under pressure from unfair PBM practices.

• Unsustainable Reimbursements: PBMs often reimburse pharmacies below the cost of acquiring the medication, threatening their financial stability.
• Spread Pricing: PBMs charge health plans more for medications than they reimburse pharmacies, keeping the difference as profit.
• Patient Steering: PBMs push patients toward their own mail-order or affiliated pharmacies, reducing business for local ones.
• Administrative Burdens: Complex audits and clawbacks consume resources and time, adding stress to local pharmacies.

• Loss of Access: Local pharmacies often close due to PBM practices, leaving rural and underserved areas without access to medications.
• Higher Costs: PBM pricing practices can lead to increased out-of-pocket costs for patients.
• Reduced Services: Closures of local pharmacies eliminate access to personalized care, compounding services, same-day delivery, and other critical services.
• Erosion of Trust: Patients lose confidence in the system when profit-driven PBM practices take precedence over community needs.

• Arkansas has seen a net closure of about 65 pharmacies during the past nine years, including 21 in the past year. Even well-functioning pharmacies are under immense pressure from falling reimbursements and rising costs, risking closures in the near future.
• Fewer pharmacies mean fewer options for patients, higher prices, and less personalized care.

Across the country, states and the federal government are recognizing that PBMs are bad for drug prices, patient access to care and the quality of care. Arkansas has been a leader in addressing the harmful practices of PBMs. The state passed the landmark Act 900, which was upheld by the U.S. Supreme Court in 2020. This law requires PBMs to reimburse pharmacies at or above their acquisition cost for medications, protecting pharmacies from unsustainable losses. But PBMs continue to skirt the law and operate unfairly, harming patients and locally operated pharmacies. Arkansas needs tougher laws to hold PBMs accountable, level the playing field for all pharmacies, and ensure fair prices, local access and better care.