Trump plans for Medicaid come up as House subcommittee deliberates on PBM reform

Pharmacy benefit managers (PBMs) and their drug pricing systems remain targets of lawmakers in Washington, D.C.

The House Energy & Commerce Committee’s Health Subcommittee convened Feb. 26 for "An Examination of How Reining in PBMs Will Drive Competition and Lower Costs for Patients." The hearing included statements from legislators and testimony from four industry experts. There was no shortage of partisan jabs about PBM meaningful reform, or lack of it, along with threats of cuts to Medicaid health insurance.

‘PBMs’ greed’

Four pharmacy and drug price experts testified Feb. 26, 2025, during a hearing of the House Energy & Commerce Committee Health Subcommittee.

The point of reining in PBMs is to drive competition and lower costs for patients, said Subcommittee Chair Rep. Buddy Carter (R-Georgia). He cited an example of a 16-year-old Georgia boy with a rare genetic disorder. CVS Caremark denied his access to a lifesaving drug he had used for two years, Carter said.

“Let me be clear: PBMs’ greed sent a 16-year-old back to the hospital, in critical condition. While tragic, this story is far from unique,” Carter said.

Three PBMs control more than 80% market, Carter said.

“They own or are owned by insurers and have vertically and horizontally consolidated their businesses to own doctors, pharmacies, group purchasing organizations, and more,” Carter said. “We have heard directly from our constituents that the harmful and anticompetitive tactics of some PBMs have only gotten worse, and that Congressional action is desperately needed.”

There are numerous examples of PBMs’ egregious behavior, not least Express Scripts overcharging the American Postal Workers Union Health Plan by nearly $45 million, Carter said. He said President Donald J. Trump is committed to holding PBMs accountable.

Same old, same old?

Carter noted the same subcommittee last year advanced legislation that would delink PBM compensation from drug list prices. In her opening, Ranking Member Rep. Diana DeGette (D-Colorado) said Republicans and Democrats last year agreed on meaningful PBM reforms that were part of the federal budget in December. Those reforms were removed at the behest of President Donald J. Trump and tech billionaire Elon Musk, now serving as leader of the Department of Government Efficiency (DOGE), DeGette said.

The hearing was repetitious and frustrating, DeGette said. PBM reform should already have been passed, she said. If it was, the subcommittee could have focused on other topics such as mass layoffs at the U.S. Department of Health and Human Services, the growing threat of avian flu, or the effects of gutting Medicaid for families to pay for tax cuts for the wealthy, DeGette said.

She asked Carter explicitly about a majority plan to get PBM reforms to the floor of the House. Carter said the majority was uncertain about exactly what would happen, but it would be cleared up soon.

Scare tactics

Committee Chair Rep. Brett Guthrie (R-Kentucky) and Rep. Neal Dunn, MD (R-Florida), also mentioned the previous subcommittee work on PBM reform. They predicted continuing bipartisan support for those provisions.

Committee Ranking Member Rep. Frank Pallone (D-New Jersey) said Republicans are supporting a budget resolution would cut at least $880 billion from programs within the committee’s jurisdiction.

“The bottom line is if people don't have health care, they're not going to get drugs at all. And PBM reform won’t even matter to them,” Pallone said. The people using Medicaid live in Republican districts, including 31% of the people in Guthrie’s district, with 42% of children there relying on Medicaid and the Children’s Health Insurance Program.

Pallone added up the figures over nine years. But later in the hearing, Rep. Morgan Griffith (R-Virginia) said the legislators hoping to cut federal expenses had options beyond just Medicaid. Cutting Medicaid by $1 trillion over a decade is a Democratic talking point meant to scare Americans, Griffith said.

‘Governed by tweet’

Rep. Alexandria Ocasio-Cortez (D-New York) (center) displays a poster with a tweet from tech billionaire Elon Musk during a hearing of the House Energy & Commerce Committee Health Subcommittee on Feb. 26, 2025.

During the hearing, which lasted approximately hours, Democrats offered comments hammering on potential Medicaid cuts and alleged undue influence of Musk, causing Republicans who supported PBM reform to cave. Rep. Alexandria Ocasio-Cortez (D-New York) displayed a poster with an example of one of Musk’s 2024 social media posts on X, formerly Twitter. Democrats claimed Musk used his influence to derail bipartisan PBM reform at the end of last year.

“He sends one tweet and all of a sudden, everyone backs off,” Ocasio-Cortez said. “And it kills drug pricing reform that saves people money on their insulin, on their asthma inhalers, on everything that they need.

“The problem here is not a substance issue, it’s not a process issue,” she said. “It’s an oligarchy issue, it’s a power issue. And this room is where the power of the people of the United States reside. Whether you’re a Democrat, or you’re a Republican, everyone here was elected to be accountable to the people of the United States, not to be governed by tweet.”

Rep. John James (R-Michigan) used a recorded audio with Trump telling reporters his plans do not include cuts to Social Security, Medicare or Medicaid.

‘A level playing field’

The hearing did not include testimony by representatives from any pharmacy benefit managers. But four other experts offered their views on the drug pricing market.

The PBM practice of spread pricing, or charging and paying different amounts to payers and pharmacies, is costing millions of dollars to public payers including states, said Hugh Chancy, PharmD, pharmacist and co-owner of Chancy Drugs. He also is a former president of the National Community Pharmacists Association.

PBMs use take-it-or-leave-it contracts that make it impossible to negotiate better terms. Basic, yet life-sustaining medications are often under-reimbursed. PBMs are putting retail pharmacies out of business — almost 2,700 last year, Chancy said.

He also described community devastation by Hurricane Helene and how his pharmacy in Valdosta, Georgia, served as a disaster relief hub to collect and deliver supplies including water and baby formula. “Now you tell me, can a PBM do that?” Chancy said.

“We are not asking for favorable treatment. We're asking for a level playing field,” Chancy said. Without reform, there will be more “pharmacy deserts” and less patient access to care across the country, he said.

‘Highly dysfunctional’

Self-funded employers and purchasers have an immediate and pressing need for PBM reform, said Shawn F. Gremminger, MPP, president and CEO of the National Alliance of Healthcare Purchaser Coalitions.

More than 100 million people get health care through self-funded employer health plans governed by ERISA, the 1974 Employee Retirement Income Security Act. Self-funded employers directly contract with PBMs to manage pharmacy benefits, essentially handing PBMs a credit card with the request to spend the money wisely, Gremminger said.

“Unfortunately, over the past several decades, the PBM market has become highly dysfunctional, to the detriment of employers, purchasers, and working families,” he said. Gremminger said he would focus on wasteful formulary placement and deeply rooted opacity. Making PBMs explain their formulary placements and disclose their financial information to employers be significant reform, he said.

“The legislation before you represents the most significant reform to the PBM industry in history,” he said. “It is fundamentally rooted in establishing a more transparent, freer, fairer market. The big PBMs will do everything in their power to stop that from happening.”

He noted PBMs raise objections to reforms and argue employers are happy with their drug vendors. His own agency surveyed members and found 89% of large and mid-market employers would support reform. PBMs claim they pass drug price rebates and discounts, but doggedly oppose bills mandating they do what they already claim to do, Gremminger said.

“There's a reason the big PBMs are willing to make false claims to you: They cannot stand the thought of a functional Market in which empowered employers and purchasers can demand better prices,” he said.

Concerns about costs

In the elections last year, Americans were clear about their concerns about costs, said Anthony Wright, executive director of Families USA, a health care advocacy group.

“And while they've talked about the eggs of the price of eggs for months, they've been screaming about the price of prescription drugs and health care for decades,” Wright said. “Nearly three in 10 adults report rationing, skipping doses or not filling their prescriptions at all because they can't afford it. An estimated 125,000 people die each year as a result of not taking their medications as prescribed in part due to cost. Inflated prescription drug prices affect everyone as they contribute to Rising insurance premiums, higher deductibles, and stagnant wages for workers.”

Wright said the issue affects people like his own late mother, a breast cancer survivor who had diabetes and took 10 different drugs. She benefited from a small pharmacy around the corner from her home in the Bronx, New York. He recommended at least four reforms:

• Require greater transparency of PBM negotiations, their operations and ownership structures.
• Increase oversight and regulation of PBM consolidation.
• Explore ways to eliminate perverse incentives for PBMs to prioritize higher price drugs.
• Seek to ensure all savings paid to PBMs are passed through to payers and consumers.

He also returned to the point about potential cuts to Medicaid.

“However, we must also convey the context that any benefits of PBM reform would be exponentially overwhelmed by negative impacts of massive Medicaid cuts that this Congress is currently considering from the loss of coverage to health impacts to increasing costs,” Wright said. “The uninsured don't have a PBM or a plan or anyone to negotiate drug discounts. As a result, the uninsured pay more for prescription drugs than anyone else in the entire world, and are twice as likely to forego meds as those with Medicaid coverage.”

If there are major cuts to Medicaid, the neighborhood pharmacists in the Bronx and in rural areas likely would go under, he added.

Weak market competition

PBM market competition is weak, by some estimates, with the three largest PBMs controlling almost 80% of the market, said Matthew Fiedler, PhD, the Joseph A. Pechman senior fellow in economic studies of The Brookings Institution.

“Various frictions in this market also dampen competition, the complexity, the contracts between PBMs and their clients who may be insurers or self-insured employers can make comparison shopping hard,” Fiedler said. “This may be particularly true for self-insured employers whose core expertise typically lies outside of health care. Switching PBMs is also challenging, since it requires a plan to enrollees to adapt new formulary rules and pharmacy networks.
“As a result, PBMs wield market power that they can use to demand prices in excess of their costs to delivering services and, in turn, earn excessive profits,” he said.

While greater transparency would make it easier for payers to comparison shop, enforce existing contracts, or press for better terms. But additional regulation might not stop PBMs from collecting other forms of compensation, such as manufacturer rebates. Overall, effects could be both positive and negative, Fiedler said.

“PBM reform is one piece of the puzzle, but it may not be the most important one,” Fiedler said. “PBM profits amount to only several percent of overall drug spending, so even eliminating those profits would only moderately reduce the overall cost to drug coverage. If policy makers want to achieve larger cost reductions, that would require reducing the prices received by other actors in the supply chain, especially drug manufacturers.”