While this marks another federal push for disclosure, states have already been quite active in this space. Since 2017, 24 states have passed 38 laws targeting healthcare transparency, with a strong focus on unraveling the complex economics of pharmacy benefit managers (PBMs).
But has all this legislation actually provided clarity—or just more red tape?
Below, I analyze four state reports on manufacturers’ rebate and fee payments to PBMs. The findings are dispiriting: mandated disclosures have yielded little actionable, reliable data. Lawmakers got to pat themselves on the back for “transparency,” but the data tell a different story. Federal efforts haven’t been much better.
Should we continue down the path of government-mandated reporting, or should plan sponsors be left to negotiate their own deals? I’ll explore these questions and more during DCI’s upcoming live video webinar, PBM Industry Update: Trends, Challenges, and What's Ahead on April 4, 2025. Click here to learn more and sign up.
THE TEXAS TWO-STEP
Let’s start deep in the heart of Texas, where Insurance Code Section 1369.502 requires PBMs to file annual reports on rebates, fees, and other payments. Under the Texas code, PBMs are required to report the “aggregated rebates, fees, price protection payments, and any other payments collected from pharmaceutical drug manufacturers” and the breakdown of these payments into three mutually exclusive categories:
- Payments passed through to plan sponsors
- Payments retained as revenue by the PBMs
- Payments provided to plan beneficiaries at the point of sale
The latest data tell a story consistent with our earlier analyses. For 2023, Texas received information from 15 PBMs that reported receiving rebates, fees, and price protection payments from pharmaceutical manufacturers. Payers received 95% of the money collected by PBMs, which retained only 4% of manufacturers’ payments as revenue. Payers shared little of the rebates directly with patients.
But before you get too invested in these data, check out the chart below. It tells a disappointing story about transparency.
[Click to Enlarge]
As you can see, total PBM-reported payments were less than $1 billion for 2016 through 2019. In 2021, when we had last reviewed these data, reported payments were a plausible $5.7 billion.
By 2023, reported payments from manufacturers to PBMs had declined to only $2.2 billion. We don’t know exactly what happened. I suspect that Texas legislators didn’t anticipate the emergence of such PBM-affiliated group purchasing organizations (GPOs) as Ascent Health Services (Cigna), Emisar Pharma Services (UnitedHealth Group), and Zinc (CVS Health).
We review the latest information about these GPOs in Section 5.2.4. of DCI’s new 2025 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.
STATES OF CONFUSION
Other states’ mandated disclosures have also provided questionable degrees of insight and reliability:
- Nevada stipulates that its Nevada Department of Health and Human Services (DHHS) compiles and publishes certain information regarding prescription drugs essential for treating diabetes in the state. However, these data do not appear to be reliable.
For 2017, PBMs reported $1.8 billion in negotiated rebates, of which the PBMs retained $78 million (4%). For 2023, PBMs reported only $115.1 million in negotiated rebates, of which the PBMs retained $9.5 million (6%). (source)
When I asked DHHS about the massive 94% decline in reported rebates, they told me: “DHHS has no way of validating any of the information provided to us. We currently do not have a process to audit any information that is required by the statute.” In other words: ¯\_(ツ)_/¯
- Oregon requires PBMs to report information to the state’s Drug Price Transparency (DPT) Program. PBMs are required to report “all payments the PBM received from manufacturers directly and any payments received from manufacturers by the PBM's subsidiaries, any other entities that the PBM holds an ownership in, or any entities that hold an ownership interest in the PBM.”
For 2023, eight of 17 PBMs reported $287.6 million in total rebates and payments from manufacturers, of which only $1.6 million (0.6%) was reported by PBMs as being retained by the PBMs. (source)
However, the state noted that the nine PBMs reporting no rebate revenue “may not have included amounts retained as revenue by their related entities.” There was no data from self-insured plans, no data on multiple categories of "other income," and basic math errors in the report. For my annotated dissection of the flaws in Oregon’s report, see my LinkedIn post describing the major data omissions.
- Washington state’s Health Care Authority (HCA) operates a Drug Price Transparency program, which includes PBMs. Its most recent annual report has a cover date of 2023, but includes data only through 2020. So timely!
According to the report, the total value of all paid drug claims at list price (wholesale acquisition cost; WAC) was $1.15 billion in 2020. That figure represents a 32% decline from the $1.7 billion value in 2019. So, drug spending dropped in 2020?
Meanwhile, PBMs in Washington state reported receiving an implausible $774 million—67% of gross sales—in rebates and fees from manufacturers. For 2020, a total of 16 PBMs retained $227.5 (29%) of the $774 million in rebates and fees paid by manufacturers. Four of these 16 PBMs received 96% of total manufacturer-paid amounts retained by PBMs.
These data make no sense to me, but HCA reported these figures without any commentary or explanation about their reliability.
Last November, HHS released Prescription Drug Spending, Pricing Trends, and Premiums in Private Health Insurance Plans, the first mandated report on data submissions for calendar years 2020 and 2021. This little-read report includes nothing more than highly aggregated information on gross and net plan spending and provides zero data on rebates and fees for brand-name drugs. What's more, the report's authors reveal that PBMs reported the data in a way that “limits the ability to use the data to understand what portion of rebates is retained by PBMs.”
WHO WANTS TRANSPARENCY?
Survey data show that plan sponsors are dissatisfied with transparency about how both large and small PBMs make money. However, plan sponsors also rank “Transparency” as the fifth most important factor when selecting a PBM. It’s far below “Pricing/Cost,” which is overwhelmingly the most important factor.
In my controversial article If Plan Sponsors Are So Unhappy with Their PBMs’ Transparency, Why Won’t They Change the Model?, I pondered this puzzle:
“[P]lan sponsors are dissatisfied with transparency about how both large and small PBMs make money. Smaller PBMs have an edge, but it’s narrower than you might think.After sifting through state and federal reports, one thing is clear: transparency laws may generate a lot of paperwork, but they rarely generate clarity.
Perhaps PBMs’ clients are unable or unwilling to negotiate better deals, write more effective contracts, and switch to more satisfying relationships. Or maybe they don’t mind the current system, despite the challenges for patients. Some argue that transparency could swoop down to solve this problem. Riddle me this: Should we watch what plan sponsors say, or what they do?”
If you’re ready to cut through the noise and talk about what actually matters in the PBM industry, join me for PBM Industry Update: Trends, Challenges, and What's Ahead, a live video webinar on April 4, 2025. Because unlike government reports, this discussion won’t leave you guessing.
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