Developments in Pharmacy Ownership and Operation

By: Kendall Jackson, Esq.

Although it may feel like the buzz surrounding pharmacy benefit managers (PBMs) has increased exponentially in the last year, the concerns began many years ago. The mechanisms integral to PBMs’ functions and their role in the healthcare industry have been examined for quite some time, with governmental entities repeatedly taking notice.

Just over two years ago, the Federal Trade Commission (FTC) issued an Interim Staff Report titled “Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies.” This report was issued as part of the FTC’s larger effort to examine PBM practices and delve into the existing structures in the pharmacy landscape.

The report highlighted the six largest PBMs, noting that these PBMs “manage nearly 95 percent of all prescriptions filled in the United States.” Not only do these six PBMs dominate the market by managing the vast majority of prescriptions, but they also maintain significant control within the concentrated market due to vertical integration. The FTC’s report found that this gives PBMs “significant power over the pharmaceutical supply chain” and allows them “to profit at the expense of patients and independent pharmacists.” Beyond the effects on patients, the FTC reported that “PBMs hold substantial influence over independent pharmacies by imposing unfair, arbitrary, and harmful contractual terms.” Unfortunately, this directly affects independent pharmacies’ ability to stay profitable and remain in business.

In the two years since this report was published, substantial legislation has been proposed in an attempt to address the concerns highlighted by the FTC report. Notably, Arkansas was the first state to pass a law that prohibits PBMs from owning and operating pharmacies within the state, severely impacting PBM operations. Although this was a considerable step forward in the fight against vertical integration, the Arkansas law was challenged, and due to a federal preliminary injunction, is not currently being enforced. On the federal level, the currently-pending Patients Before Monopolies (PBM) Act was reintroduced to address pharmacy ownership by PBMs on a broader scale. While the act was introduced in 2024, the renewed bipartisan effort to see this bill become law further demonstrates the commitment to restructuring the pharmacy industry.

In addition to the concerns surrounding PBMs’ ownership of pharmacies, legislators have attempted to address the effects on independent pharmacies as well. In Alabama, “The Community Pharmacy Relief Act” passed in 2025 and primarily focuses on protecting independent pharmacies. The law prevents PBMs from imposing an incentive or penalty that would affect a plan participant’s choice of pharmacy, prohibits PBMs from reimbursing independent pharmacies less than the Medicaid reimbursement rate, and forbids PBMs from rejecting payment of a claim that is submitted by an independent pharmacy when the drug is available through another in-network pharmacy. These efforts to protect independent pharmacies, ensure proper reimbursement, and limit steerage and self-dealing help to remedy the concerns noted in the FTC report. With the level of vertical integration and horizontal consolidation, independent pharmacies can rely on this legislative support where they would otherwise lack leverage to negotiate favorable terms when enrolling in a PBM’s pharmacy network.

Other measures taken to address monopolization of the market include Colorado House Bill 1094. The implications of this bill are massive. PBMs operating in Colorado will no longer be able to earn income based on the price or cost of a prescription drug. Instead, PBMs will earn revenue “from the assessment of a flat-dollar service fee for the provision of a prescription drug,” which significantly disrupts existing practices. Furthermore, the bill includes protections for independent pharmacies by requiring that PBMs reimburse unaffiliated pharmacies in an amount equal to the National Average Drug Acquisition Cost (NADAC) for the dispensed prescription drug ingredients, as well as a reasonable dispensing fee. This bill was signed into law on May 30, 2025, and is set to take effect on January 1, 2027.

Similar protections for independent pharmacies were implemented in Kansas as well. On April 9, 2026, Kansas enacted the Kansas Consumer Prescription Protection and Accountability Act. This Act prohibits PBMs from reimbursing pharmacies an amount for a prescription drug or pharmacy service that is less than the NADAC at the time that the drug is administered or dispensed.

The legislation discussed above is evidence of a strong movement to address all aspects of pharmacy ownership. Limiting PBM ownership and protecting smaller independent pharmacies counters many of the issues highlighted in the FTC report. Despite the report finding that around 10% of independent rural pharmacies closed between 2013 and 2022, legislators are actively taking a stance against the six large PBMs to support independent pharmacies by demanding adequate reimbursements. This helps to preserve independent pharmacies’ presence in the market and shield patients from higher drug costs, moving us closer to a more balanced and affordable market.