Arkansas governor Sarah Huckabee Sanders (R) signed House Bill 1150 into law
in April, prohibiting pharmacy benefit managers (PBMs) from owning or operating pharmacies in Arkansas. This legislation, effective in 2026, is the first of its kind in the U.S.
Though there has been significant momentum to reduce drug prices in America, previous legislation surrounding PBMs has stopped short of an outright ban on pharmacy ownership. Sanders defended this bill, stating that PBMs have "taken advantage of lax regulations to abuse customers" and "inflate drug prices." This legislation is a great first step in reforming the current -- and problematic -- drug pricing system in the U.S.
PBMs are third-party administrators that manage prescription drug benefits on behalf of insurers and employers. They play a major role in determining which drugs are covered, how much patients pay, and which pharmacies are in-network. More importantly, PBMs create formularies and tiers, which influence drug costs.
Although PBMs were originally created to streamline logistics and reduce costs (by managing the administrative side of processing claims and negotiating discounts with drug manufacturers), their role has since morphed into something far more powerful and controversial, and something which lacks necessary transparency.
As much as 20% of PBM revenue comes from negotiating rebates from drug manufacturers in exchange for better drug formulary placement. A better tier placement allows for the manufacturer's drug to be more easily purchased for a greater number of patients. PBMs are generally incentivized to give preference to higher-priced drugs so they can get larger rebates.
This was confirmed by a 2024 report from the House Oversight Committee. The committee concluded that PBMs frequently place more expensive medications in preferred formulary tiers because they yield higher rebates -- even when lower-cost options exist.
Today, just three PBMs -- CVS Caremark, Cigna Express Scripts, and UnitedHealth Group's OptumRx -- control over 80% of America's drug benefit market. These PBMs own their own pharmacies, and can use tactics to drive consumers to them and inflate prices. This level of control partly explains why drug prices are higher in America than other countries.
HB 1150 directly addresses one of the most problematic aspects of the PBM business model: ownership of pharmacies. By banning PBMs from dispensing the very medications they manage, Arkansas is dismantling a structural conflict of interest that has distorted the prescription drug market for years.
Though HB 1150 is the first bill of its kind to outright ban PBM ownership of their own pharmacies, it has the potential to generate momentum for similar pharmaceutical policies. Currently, California is considering SB 41, which would ban PBMs from favoring their own pharmacies. Last year, Pennsylvania passed HB 1993, which increases transparency and regulatory oversight.
Arkansas's law is not a magical solution. But it is a good first step and a signal that states are no longer waiting for Congress to untangle the complexities of prescription drug pricing.
At the federal level, bipartisan proposals such as the Pharmacy Benefit Manager Transparency Act (S. 526) and the PBM Reform Act (H.R. 4137) are aimed at banning spread pricing, increasing PBM reporting, and passing negotiated savings directly to patients.
While these efforts move through Congress, state action can close loopholes and address conflicts of interest more quickly and precisely. Lawmakers across the country should take note. If PBMs are allowed to both set the rules and reap the rewards, the result is predictable: higher costs, fewer choices, and declining trust in the system. Lawmakers should follow the momentum from HB 1150 and pass similar legislation.
Zain Khawaja, MD, is a resident physician at Northwestern University in Chicago, with interests in health policy and advocacy. Ammar Kazi is a venture capital associate.
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