As frustration with rising prescription drug costs continues to mount, a growing number of U.S. states are taking aim at pharmacy benefit managers (PBMs), the largely invisible middlemen who play a major role in determining which medications patients can get—and at what price.
Arkansas recently passed one of the country’s most aggressive laws targeting PBMs, and other states are poised to follow suit.
These developments mark a significant shift in the healthcare and pharmaceutical landscape, with wide-reaching implications for major pharmacy chains, independent pharmacies, benefits managers, healthcare providers, and consumers alike.
What Are PBMs and How Do They Work?
Pharmacy benefit managers act as intermediaries between insurance companies, drug manufacturers, and pharmacies. When a patient fills a prescription, the PBM decides which drugs are covered by insurance plans, negotiates discounts and rebates with pharmaceutical companies, and sets the reimbursement rates that pharmacies receive.
Originally designed to lower drug costs and streamline pharmacy benefits, PBMs have come under fire for operating with limited transparency. Critics argue that their business model—which often includes owning or partnering with pharmacies—creates inherent conflicts of interest.
For example, PBMs can steer patients toward pharmacies they own, while underpaying or marginalizing independent competitors. The rebates they negotiate with drugmakers are also not always passed on to patients or health plans, raising concerns that PBMs may be inflating, rather than lowering, drug prices in practice.
Arkansas's New Law Signals a Turning Point
The Arkansas law, which takes effect on January 1, 2026, has drawn both praise and criticism.
Supporters, including the National Community Pharmacists Association, argue that the measure will help level the playing field for small, independent pharmacies that have long complained about PBMs’ dominance. They claim that vertically integrated PBMs steer patients toward their own pharmacies and reimburse competitors at unsustainably low rates, pushing many local operators to the brink of closure.
On the other side, industry groups and companies like CVS Health—which owns both a PBM and one of the largest national pharmacy chains—warn that such laws could disrupt existing systems that enable efficient medication distribution.
CVS has indicated that if forced to choose between its PBM and its retail pharmacies in Arkansas, it may have to pull out pharmacy operations from the state altogether.
A Nationwide Push to Regulate PBMs
Arkansas is not alone in its crackdown. More than 20 states have considered or passed legislation targeting PBM practices.
Some states, such as Alabama and California, have focused on ensuring fair reimbursement for pharmacies or increasing rebate transparency. Alabama’s Community Pharmacy Relief Act requires PBMs to reimburse independent pharmacies at Medicaid rates.
California’s proposed laws would require PBMs to be licensed and to pass drug rebates directly to insurers and employers rather than keeping a portion of those funds for themselves.
The common thread in this wave of legislation is concern that PBMs, by operating with little oversight, exert too much control over drug pricing and pharmacy operations. Lawmakers argue that without more stringent regulations, the healthcare system will continue to favor large, vertically integrated corporations at the expense of competition, access, and affordability.
Impacts on Major Pharmacy Chains
For national pharmacy chains like CVS and Walgreens, state-level restrictions on PBMs pose complex operational challenges.
These companies have increasingly integrated PBMs into their business models, creating vertically aligned structures where they both manage drug benefits and dispense medications. Laws like Arkansas’s would force these companies to unbundle their operations in affected states—potentially leading to divestitures or closures of retail locations.
The financial implications are also significant. PBMs are a major revenue source for companies like CVS Health. If more states follow Arkansas’s lead, such firms may have to rethink their entire business strategy or seek new ways to preserve profitability while complying with a patchwork of state laws.
Opportunities and Relief for Independent Pharmacies
Independent pharmacies have long argued that PBM practices put them at a disadvantage. They often receive lower reimbursement rates for dispensing the same medications, and they say PBMs favor affiliated pharmacies by redirecting patients through narrow networks.
By preventing PBMs from owning pharmacies and requiring fairer payment structures, the new laws may help restore competitiveness and sustainability for local pharmacy operators.
In rural areas where independent pharmacies may be the only providers of prescription services, supporters of these laws see the reforms as crucial to maintaining community access to healthcare.
Consequences for PBMs and the Insurance Industry
PBMs are now under more scrutiny than ever. Industry leaders argue that their model helps control costs by leveraging scale to negotiate lower drug prices. But critics counter that this cost-saving role is largely opaque and possibly overstated. Some studies have shown that the discounts and rebates negotiated by PBMs are not always passed on to consumers or insurers.
With more states introducing regulatory measures, PBMs may be forced to open their books, restructure their operations, or even separate from affiliated pharmacy businesses. The implications for the insurance industry are equally serious, as insurers may need to reassess their reliance on PBMs for cost control and consider alternative benefit management strategies.
What It Means for Healthcare Providers and Consumers
For doctors, changes in PBM rules could impact how medications are approved and reimbursed, potentially simplifying or complicating prescription workflows depending on the structure of the new regulations.
In some cases, doctors may find it easier to prescribe medications without facing restrictions imposed by PBM formularies. In others, the transition away from integrated PBM systems could temporarily increase administrative complexity.
For consumers, the effects are mixed and may vary by region. Supporters of PBM reform argue that more competition and transparency will lead to lower drug prices in the long term.
However, there could be short-term disruptions in medication access as companies reconfigure their networks. If large chains scale back pharmacy operations in response to state laws, patients could face fewer options for prescription fulfillment, particularly in underserved areas.
Looking Ahead: Federal Action on the Horizon?
While state legislatures have taken the lead on PBM reform, federal lawmakers are beginning to consider similar measures.
A bipartisan proposal in Congress, known as the Patients Before Monopolies Act, would prohibit joint ownership of PBMs and pharmacies across the country. The Government Accountability Office has also called for greater federal oversight, noting that PBMs’ lack of transparency makes it difficult to assess their true impact on healthcare costs.
With the pharmaceutical and insurance industries facing mounting pressure to reform, PBMs are likely to remain at the center of the debate over drug pricing. As more states act independently, the momentum may eventually push Congress to establish nationwide standards—reshaping how millions of Americans access and pay for their medications.
