Lewis & Clark Law Review
First Page
627
Abstract
Pharmacy Benefit Managers (PBMs) have evolved from simple third-party payors into powerful intermediaries controlling prescription drug access for over 289 million Americans. Operating with minimal federal oversight, just six PBMs dominate 96% of the market, employing practices that systematically increase drug costs while claiming to reduce them. This Comment examines four primary mechanisms through which PBMs exploit the pharmaceutical supply chain: rebate manipulation, spread pricing, step therapy requirements, and formulary control. Federal regulatory efforts remain nascent and ineffective. The Centers for Medicare and Medicaid Services requires only basic reporting without substantive restrictions. Proposed federal legislation has repeatedly stalled, leaving states to craft their own regulatory frameworks.
This Comment analyzes three distinct state approaches. Florida’s comprehensive 2023 Prescription Drug Reform Act mandates pass-through pricing and restricts step therapy. Colorado incrementally constructed similar protections through multiple statutes over two decades. Oregon, despite recognizing PBMs’ harmful practices, maintains only minimal registration requirements without prohibiting spread pricing or rebate retention. This Comment concludes that meaningful PBM reform requires state action. States must prohibit spread pricing, mandate rebate pass-through, and limit formulary manipulation. Until federal legislation materializes, state legislatures bear responsibility for protecting consumers from practices that artificially inflate prescription drug costs while enriching pharmaceutical middlemen.
Recommended Citation
Patrick W. Schrader,
Middlemen at a Price: The Role of State-Level Laws in Restricting Pharmacy Benefit Managers,
29
Lewis & Clark L. Rev.
627
(2025).
Available at:
https://lawcommons.lclark.edu/lclr/vol29/iss3/6
Included in
Administrative Law Commons, Health Law and Policy Commons, State and Local Government Law Commons