Arkansas Takes Bold Steps to Combat Pharmacy Benefit Managers Inflating Drug Costs

Prescription drug prices have surged due in part to the opaque role of pharmacy benefit managers (PBMs), middlemen operating between drug manufacturers, insurers, and patients. These entities have contributed to complicated insurance policies and the decline of local pharmacies. Arkansas is now taking decisive action to address these challenges.

Arkansas has become the first state to outlaw the anti-competitive behaviors that enable PBMs to dominate the prescription drug market. This move aims to inspire other states and federal lawmakers to follow suit.

Originally, PBMs were established to negotiate between pharmacies and insurance companies, helping to navigate fluctuating drug prices, insurance options, and regulations to keep patient costs manageable. However, their role has shifted, often leading to increased expenses for consumers.

Many PBMs now own their own pharmacies or have been acquired by large pharmacy chains, creating significant conflicts of interest. This consolidation has pressured patients to avoid independent pharmacies, driving up drug costs. Currently, the three largest PBMs handle 80 percent of all prescriptions nationwide, with their affiliated pharmacies capturing 70 percent of specialty drug revenue. These entities have generated massive profits, including an excess of $1.6 billion from just two cancer medications over less than three years.

This situation poses particular risks for rural communities like those in Arkansas. For example, a patient from Camden, Arkansas, who relied on her local community pharmacy for years, encountered severe difficulties when her health plan, managed by a major PBM, denied her claim for a critical inhaler refill.

She was instructed to use a pharmacy owned by the PBM’s parent company, located an hour and a half away, forcing her to choose between a long trip, paying out-of-pocket at her trusted local pharmacy, or switching to mail-order prescriptions.

Opting for mail-order meant navigating cumbersome requirements including new doctor visits and extensive paperwork. These delays left her without essential medication for weeks. When she finally received the inhaler, she was later informed that mail orders were no longer covered.

Such bureaucratic hurdles are more than inconvenient—they can be life-threatening. These obstacles primarily benefit corporate interests profiting from the system rather than the patients themselves.

Arkansas’s new legislation prohibits PBMs from owning pharmacies, ensuring they cannot exploit their dual roles. While PBMs may continue operating within the state, they must no longer engage in practices that harm patients or unfairly exclude other pharmacies.

Unsurprisingly, these powerful companies have launched aggressive opposition campaigns. Prior to the law’s enactment, CVS aired alarmist advertisements statewide. Now, CVS threatens to shutter all its pharmacies in Arkansas rather than separate its PBM operations from its retail pharmacies. A company spokesperson claimed the law would reduce competition and increase drug prices, while they assess options to maintain store operations.

CVS and Express Scripts, two dominant PBMs, are employing extensive legal resources to challenge Arkansas’s law. It is anticipated that lobbyists will intensify efforts nationwide to defend these corporate interests.

Despite these pressures, Arkansas remains steadfast, prioritizing the wellbeing of veterans, seniors, and rural patients over corporate profits.

Just months ago, such a challenge to entrenched interests seemed unlikely. However, recent federal executive actions targeting PBMs reflect a shifting landscape aiming to eliminate middlemen inflating drug costs.

There is an opportunity for lawmakers to lead on this critical issue. By rejecting PBM intimidation and advocating for patients and independent pharmacies, states can reform a broken system that has long hindered accessible, affordable healthcare.