Lawmakers on both the left and right are increasingly blaming pharmacy benefit managers (PBMs) — the intermediaries that negotiate prescription drug prices between manufacturers, insurers, and pharmacies — for rising healthcare costs. Last month, a bipartisan group of legislators reintroduced the Patients Before Monopolies Act, which would prohibit companies that own PBMs from also owning retail pharmacies.
Supporters of the legislation argue that vertical integration between PBMs and pharmacies is inherently anti-competitive and contributes to higher prices. But this reflects a familiar antitrust mistake: treating integration as evidence of market failure rather than recognizing the efficiencies it can create.
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Today, healthcare giants such as Cigna, CVS Health, and UnitedHealth Group operate across multiple segments of the prescription drug market. Through subsidiaries, they own insurers, pharmacies, and the “Big Three” PBMs — Express Scripts, CVS Caremark and OptumRx.
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This structure has drawn scrutiny from policymakers who contend that pharmacy-owned PBMs face conflicts of interest when negotiating drug prices. Yet the existence of integration alone does not demonstrate harm. In many industries, firms integrate because doing so lowers costs, improves coordination, and benefits consumers.
By coordinating operations across different stages of the supply chain, integrated firms can reduce transaction costs, eliminate redundancies, and improve service quality. Greater scale also allows companies to invest in technology, logistics, and customer service that would be more difficult to provide through fragmented organizations. Over time, those efficiencies translate into lower costs and better access for patients.
Unfortunately, skepticism toward mergers and acquisitions — particularly vertical mergers — has become a defining feature of trendy antitrust policy. Increasingly, policymakers treat integration itself as suspect despite decades of economic research showing vertical arrangements are often pro-competitive.
These assumptions are driving many efforts to regulate the PBM industry. Last year, Gov. Sarah Huckabee Sanders (R-AK) signed legislation barring PBM-pharmacy integration in Arkansas, arguing the measure would curb drug-price inflation and market manipulation. On the federal level, lawmakers such as Josh Hawley have similarly portrayed vertically integrated healthcare companies as examples of monopolistic behavior.
The problem is that these arguments often assume the very point they need to prove. Owning multiple stages of a supply chain does not automatically confer monopoly power or enable a company to raise prices. The relevant question is not whether PBMs and pharmacies are integrated, but whether that integration actually harms consumers.
Faulty reports by the Federal Trade Commission (FTC) failed to prove that PBMs price-gouge, as they relied on a small, unrepresentative sample of data. Rather, quite the opposite occurs. When PBMs and pharmacies operate under the same corporate umbrella, they share information, streamline administration, and better coordinate prescription fulfillment and patient services.
Forcing PBMs and pharmacies to separate would likely make the prescription drug supply chain more cumbersome and expensive. Functions currently coordinated internally would have to be negotiated across separate entities, increasing administrative costs and eliminating operational synergies. Instead of promoting competition, structural separation could make it harder to manage costs and improve patient outcomes.
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And as seen in states with laws like Arkansas, restrictions on integrated pharmacy business models can result in store closures. Patients, particularly in rural communities, then face longer travel times, reduced access to medications, and fewer healthcare resources.
If lawmakers are serious about lowering prescription drug costs, they should focus on the underlying drivers of healthcare spending rather than dismantling business arrangements that often generate efficiencies. Breaking apart PBMs and pharmacies may satisfy political demands for action, but it is unlikely to make medicines more affordable. Undermining cost-saving efficiencies and leaving patients with fewer choices and higher prices shouldn’t be the only option.
Sam Raus is the David Boaz Resident Writing Fellow at Young Voices. Follow him on X: @SamRaus1.
