Attorney General Bonta Calls on Congressional Leaders to Pass Law Prohibiting PBMs from Owning or Operating Pharmacies

Bipartisan coalition of attorneys general writes that federal action is needed to protect consumers and small businesses

OAKLAND — California Attorney General Rob Bonta today joined a bipartisan coalition of 39 attorneys general in urging the leaders of the U.S. House of Representatives and U.S. Senate to enact a law that prohibits Pharmacy Benefit Managers (PBMs), their parent companies, or affiliates from owning or operating pharmacies. Created in the late 1960s to process claims for drug companies, PBMs were supposed to help consumers access low-cost pharmaceutical care through negotiated volume-pricing discounts, generic substitution, manufacturer rebates, and other tools. However, the attorneys general write, PBMs have overtaken the market and now wield outsized power to reap massive profits at the expense of consumers and local community pharmacies. In particular, PBMs’ use of affiliated pharmacies — pharmacies owned by either the PBM itself or the PBM’s parent company — has exacerbated the problem of manipulated prices, the growth of pharmacy deserts, and the unavailability of certain prescription medications. 

“PBMs’ priority is not consumers, but rather their own bottom line. They must be reined in,” said Attorney General Bonta. “Drug prices have skyrocketed in recent years, and PBMs have exacerbated the problem. To protect consumers and small businesses, we need more competition — not less — in the marketplace. A federal law prohibiting PBMs, and their parent companies or affiliates, from owning or operating pharmacies is long overdue, and I’m proud to be part of a bipartisan coalition of attorneys general that is calling on Congressional leadership to make it a reality.”

In the letter, the attorneys general emphasize that:

• Over the past few decades, horizontal consolidation and vertical integration have transformed PBMs from useful administrative service providers into market-dominating behemoths that control the industry. Horizontal consolidation here is the merger of competing PBMs and vertical consolidation here is the acquisition of pharmacies by PBMs at the expense of competitors of those PBMs and pharmacies.
• The three largest PBMs — CVS Caremark, Optum Rx, and Express Scripts — process 80% of the nation’s prescriptions and bring in 70% of the specialty drug revenue. Furthermore, each of the top six PBMs operate their own affiliated pharmacies, while five of the top six are also a part of parent conglomerates that operate insurance companies and health care clinics.
• In addition to owning pharmacies, PBMs also contract with non-affiliated pharmacies, including independent pharmacies, to create pharmacy networks that control where their members can get their drugs and at what prices. This creates the situation where the PBMs — through ownership of affiliated pharmacies — are contracting with and have power over their own pharmacies’ competition. The PBMs then use their place as middlemen to exert this power in ways that harm independent pharmacies, forcing these small businesses to accept contractual terms that are “confusing, unfair, arbitrary, and harmful” and ultimately causing them to go out of business.
• Over the course of the last decade, approximately 10% of rural independent pharmacies in the United States have closed. The closure of independent pharmacies, and the community services they provide, is felt strongly by consumers — especially those in rural or otherwise underserved areas who are left with dwindling access to retail pharmacies that are ever farther away.

In sending today's letter, Attorney General Bonta joins the attorneys general of Alaska, American Samoa, Arkansas, Arizona, California, Delaware, the District of Columbia, Hawaii, Illinois, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virgin Islands, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.

A copy of the letter can be found here.