The AMA Pulls Back the Curtain on PBM Competition and Vertical Integration of Insurers

October 22, 2024

The American Medical Association (AMA) released a new research paper that presents a descriptive analysis of pharmacy benefit managers (PBM) markets and the supply of PBM services to commercial health insurers. Based on 2022 data regarding prescription drug plan (PDP) enrollees and PBMs used by insurers, the research:

• Reveals the ten largest PBMs and drug insurers nationally
• Summarizes PBM market concentration levels (Herfindahl-Hirschman Indices [HHIs]) in prescription drug plan region-level markets
• Quantifies the extent of vertical integration of insurers with PBMs

  What is vertical integration? At first, PBMs were established to mediate interactions among insurers, pharmacies and patients. Today, many PBMs have become directly involved in pharmacy operations and have formed connections with insurance companies – and these arrangements are called vertical integrations.

  Proposed Illinois legislation to regulate PBMs

  Locally, House Bill 4548 was introduced in the spring 2024 session to change Illinois’ insurance law to help state government better regulate PBMs. Proposed changes include requiring PBMs to disclose the net cost of drugs covered by a health benefit plan and restricting pharmacy benefit managers from ushering patients toward using pharmacies owned by associated companies. The bill would also mandate that PBMs pay pharmacies a dispensing fee and reimburse them at a rate equal to the national average drug acquisition cost dictated by Medicaid.

  Due to strong opposition from the insurance industry, the bill failed to advance in the House.

  If you have questions, please contact ISMS Senior Vice President of State Legislative Affairs Erin O'Brien by email.