Once again, progressive bureaucrats are out to repair what they broke. This time, the target is Pharmacy Benefit Managers (PBMs). These private-sector companies negotiate drug prices, manage formularies, and cut costs for insurers, employers, and patients alike. Critics love to call them “middlemen,” but PBMs are one of the few actors in the healthcare system that actually deliver measurable value.
I view PBMs as a necessary puzzle piece — one of the only forces capable of holding off our bloated healthcare bureaucracy while still allowing the industry to profit and, with the right regulation, protect the consumer. Unfortunately, what’s happening right now is heading in the opposite direction.
At the moment, leaders from California to Washington, D.C., are demanding more regulation. Last month, the Federal Trade Commission filed a lawsuit against the three largest PBMs, claiming they drive up costs. But the FTC report behind the action relied on a cherry-picked sample of just 51 drugs (which equates to 2% of drug expenditures), ignored real-world savings data, and drew sweeping conclusions from narrow anecdotes. Even some of the FTC’s own commissioners publicly questioned the methodology.
Now the crusade has gone state-level. And as usual, Sacramento is out front, pretending that regulation equals progress. California never misses a chance to brag about its economic rank, calling itself the fourth or fifth-largest economy in the world, depending on the month. But here’s the real question: if the model works so well, why is the East Coast economy 136% larger than California’s — and 92% larger than the entire West Coast?
For all the talk of dominance, California is not preparing for a private-sector resurgence. The growth is not innovation-driven. It’s built on government churn, where spending and taxation recycle through the system and show up as artificial GDP gains.
Healthcare exposes this clearly. Rather than allow PBMs to push back against inflated drug pricing, the state keeps expanding its regulatory footprint. More money flows into bureaucratic overhead and less into anything that actually lowers costs or helps patients.
Last year, California passed Senate Bill 966 to regulate PBMs into submission. Governor Gavin Newsom vetoed it, citing the need for more data. But the legislature came back with Senate Bill 41, and new compliance mandates: licensing requirements, rebate disclosures, a ban on spread pricing, and penalties feeding yet another state-controlled fund.
Proponents claim it’s about “transparency.” According to the California Senate Judiciary Committee’s own analysis, the bill gives the state visibility into how PBMs operate. That may play well in a press release. In practice, it just layers more bureaucracy onto an already over-regulated sector — doing nothing to lower prices at the pharmacy counter.
It’s not just California. States like New York, Oregon, and Illinois are pushing similar bills. So are Minnesota, Massachusetts, and New Jersey. The pattern is the same: expand government, restrict private-sector tools, then act surprised when costs climb.
Even red states are beginning to cave. Iowa’s Republican-led legislature just approved new PBM regulations, echoing the same “transparency” language driving California’s efforts. Their bill mandates new licensing rules, bans on spread pricing, and aggressive reporting requirements — all in a state where private-sector competition is essential for keeping rural healthcare afloat. When even Iowa starts importing Sacramento’s regulatory playbook, it’s clear the politics have overtaken the economics.
Meanwhile, in Washington, the Senate Judiciary Committee held a May 13th hearing titled PBM Power Play, using the usual antitrust playbook to scrutinize the “Big Three” PBMs — CVS Caremark, Express Scripts, and OptumRx. I’ve worked in healthcare investment banking long enough to know: when both parties start throwing around terms like “market dominance” and “price suppression,” they’re setting the stage for bad policy. There’s no serious discussion of outcomes, incentives, or how formularies actually work. Just recycled sound bites about access and fairness, delivered by lawmakers who’ve never sat across from a pharmacy CFO, much less structured a multi-plan drug agreement.
Banning spread pricing might poll well, but it cuts into one of the only flexible mechanisms PBMs use to balance costs across drug plans. These firms already operate on razor-thin margins. Regulating them into irrelevance won’t save consumers a dime — it’ll just leave employers, insurers, and patients with fewer options and higher bills.
PBMs are not perfect, but they’re one of the few entities in the system applying pressure where it counts. They negotiate over $145 billion in savings each year, primarily by forcing price concessions from drug manufacturers and managing complex formularies that most employers could never navigate alone. In a healthcare environment shaped by government distortion, rent-seeking, and regulatory capture, PBMs function as a rare market-based check. Strip them of that role with layers of red tape, and the result won’t be lower costs — it’ll be a blank check for the manufacturers and consultants who helped break the system in the first place.
The answer to high drug costs is not more licensing boards, more audits, or another stack of state-level rules written by consultants who’ve never filled a prescription. The answer is less government. The answer is simple: cut the red tape and let PBMs do their job. Otherwise, Democrats will keep pushing us closer to a single-payer system — not because it works, but because it centralizes control.
The better path is to let the private market iron out inefficiencies and deliver real solutions for consumers. Like them or not, PBMs are delivering value. Undermine them, and we’ll all pay the price. Keeping drug prices in check is one of the last defenses we have against a broken, bloated system — and right now, PBMs are doing that job far better than the regulators ever will.