2024 in review: The year of PBM accountability.

From the introduction of landmark bills like the PBM Accountability Act, to the rising scrutiny of pharmacy rebate aggregators, the momentum for transparency and structural reform reached new heights in 2024. Congressional hearings, employee lawsuits, and sweeping legislative efforts reshaped the public and regulatory perception of traditional PBMs.

Let’s explore the key events that defined 2024 and how they impact the future of pharmacy benefits.

FTC report exposes PBMs.

One of the most impactful developments of the year was the release of the Federal Trade Commission’s (FTC’s) long-awaited report on PBM practices —a cornerstone moment in the push for PBM accountability. The report highlighted the significant influence of PBMs on prescription drug pricing and access and helped catalyze key efforts behind the PBM Accountability Act and broader federal PBM legislation. The report brought to light several issues.

Anti-competitive practices.

The report revealed how PBMs leverage market dominance to favor their affiliated pharmacies, often at the expense of independent competitors. It cited specific examples, such as exclusive network arrangements that effectively barred non-affiliated pharmacies from participating even if they provided the same or better pricing.

Rebate aggregators.

The FTC uncovered evidence of entities called "rebate aggregators". These third-party entities, created or controlled by PBMs, negotiate contracts and rebates with drug manufacturers. While PBMs claim these aggregators increase bargaining power for better savings, experts suggest they also serve to retain revenue from new fees and evade regulatory reforms. Internal documents reveal these aggregators generated $7.6 billion in fees by 2022, raising concerns about their legality, ethical implications, and reduced oversight.

Limited generic drug access.

It was revealed that PBMs and brand drug manufacturers sometimes negotiate rebate contracts that restrict access to lower-cost generic alternatives. These agreements often exclude generic drugs and biosimilars from formularies in exchange for higher rebates from manufacturers.

These findings highlighted the need for new PBM models that prioritize transparency, align with plan sponsors’ interests, and improve access to affordable medications—goals shared by both lawmakers and industry leaders.

Congressional hearings demand PBM accountability.

In July, the U.S. House Committee on Oversight and Accountability held a hearing titled "The Role of Pharmacy Benefit Managers in Prescription Drug Markets Part III: Transparency and Accountability." Bipartisan lawmakers raised concerns over opaque pricing practices, alleged anti-competitive behaviors, and the impact of PBM policies on drug affordability for consumers. Executives from the three major PBMs testified, and key findings included:

• Market dominance and vertical integration: The Committee's investigation highlighted that the three largest PBMs, CVS Caremark, Express Scripts, and OptumRx, control approximately 80% of the market. This concentration has enabled them to implement anticompetitive policies, such as steering patients toward pharmacies they own and imposing pricing tactics that can elevate drug costs.

• Inflated drug costs: Evidence indicated that PBMs often place higher-cost medications in more favorable formulary positions, even when lower-cost, equally effective alternatives are available. This practice can lead to increased out-of-pocket expenses for patients and restrict access to necessary medications.

• Lack of transparency: The opaque nature of PBM operations, including complex rebate structures and pricing mechanisms like spread pricing, makes it challenging for plan sponsors and patients to understand the true cost of medications and the extent of savings, if any, being passed on to consumers.

The July 2024 hearing played a pivotal role in shaping legislative strategies to address concerns about PBM practices and increase the transparency and accountability of PBMs. The hearing played a significant role in the introduction of reform bills like the PBM Accountability Act.

Federal legislative accelerates PBM reform.

This year marked a strong legislative push to reform traditional PBM practices. Inspired by Congressional action, many states also introduced and enacted measures between 2023 and 2024 to enhance price transparency and address problematic PBM tactics like opaque pricing, spread pricing, and rebate mismanagement. Below are some key examples of these initiatives.

The PBM Accountability Act.

This federal bill aims to increase transparency in PBM practices, prohibit spread pricing in Medicaid, and ensure pass-through of rebates to plan sponsors. It was introduced on April 18, 2024, and remains under consideration in Congress.

Modernizing and Ensuring PBM Accountability Act.

This bill aims to reform PBM operations in Medicare and Medicaid by delinking PBM compensation from drug prices, banning spread pricing in Medicaid, and enhancing transparency through standardized reporting and flat-fee compensation models. It was introduced on September 28, 2023, and remains under consideration in the Senate.

Medicare PBM Accountability Act.

This bill focuses on improving transparency within Medicare Part D by requiring PBMs to disclose detailed information on drug costs, rebates, and reimbursement practices to plan sponsors. It also aims to ensure that negotiated savings benefit Medicare beneficiaries. The bill was introduced on September 12, 2023, and is currently under review in the House.

The Lower Costs, More Transparency Act.

This bill would requires PBMs to provide employers with semi-annual prescription drug spending data like total out-of-pocket spending and formulary placement rationale. Though it was overwhelmingly passed in the House last year, it is still currently pending Senate action.

New York Senate Bill 9040.

Signed into law on September 27, 2024, this bill prohibits PBMs from penalizing pharmacies that inform customers about the costs of prescription medications, including the pharmacy's reimbursement rates.

Idaho House Bill 596.

Effective January 1, 2025, this law prohibits PBMs from limiting pharmacy networks to affiliated pharmacies, mandates the pass-through of manufacturer rebates to clients, and bans spread pricing practices.

These efforts were also supported by advocacy coalitions like the PBM Accountability Project, which brings together employers, patients, unions, and pharmacy groups to push for transparent and ethical PBM practices across both public and private sectors.

Employee lawsuits.

Throughout 2024, employees brought to light major fiduciary failings by their employers related to PBM oversight. These lawsuits revealed critical gaps in employers’ diligence in protecting their workforce from inflated drug costs and unethical PBM practices. Notable cases include:

Johnson & Johnson.

A class-action lawsuit was filed against the company, accusing it of violating fiduciary duties under the Employee Retirement Income Security Act (ERISA) by overpaying for prescription drugs. Allegations included:

• J&J paid nearly 500% above pharmacy purchase prices, costing employees millions in unnecessary expenses.

• The company neglected to audit PBM practices, allowing steep price increases that inflated premiums, deductibles, and copays for employees.

Wells Fargo.

Wells Fargo was accused of neglecting its fiduciary duties and mismanaging prescription drug benefits, in violation of ERISA and the Consolidated Appropriations Act (CAA). Allegations included:

• Significant price disparities for specialty generic drugs compared to benchmarks.

• Consultants retained portions of PBM rebates from pharmaceutical manufacturers.

These cases underscore a growing legal and ethical obligation for employers to scrutinize PBM relationships more closely—and reflect the broader push for transparency, accountability and reform throughout the healthcare benefits landscape.

Looking ahead: The future of PBM accountability.

The scrutiny of PBMs is far from over. Increased attention from Congress, the FTC, media outlets, and patients underscores the urgency for change. At the same time, organizations are stepping up to protect their interests and prioritize their employees’ well-being.

This new era of oversight means organizations must be proactive in addressing PBM practices. Employers who fail to align with legislative mandates or neglect to audit their PBMs risk increased costs, potential litigation, and reputational harm. Partnering with a PBM that is compliant with evolving regulations like Rightway offers a significant advantage. Rightway’s transparent, fiduciary-aligned PBM approach ensures compliance with current and future legislative requirements while delivering an unmatched member experience for your teams.