PBM Reform Is Cracking the Door Open

Over the past two years, there has been a steady build-up of attention to the serious issue of pharmaceutical drug costs in America. Pressure for reform is coming from four directions.

• • Insurers are facing funding difficulties as more and more innovative medications are coming on to stream, and these usually have very high costs while protected by patents. The insurance industry is faced with a dilemma, the only options being to deny these medications to their members; to impose high co-payment levels; or to raise premiums. None of these are satisfactory solutions for either the companies or their customers.
  • The Federal government agencies (chiefly Medicare Part D, Medicaid/CHIP, VA, or TriCare) have to operate within the constraints of government budgets, which means that even the last two options (co-pay or increased premiums) are off the table. Largely, the only way they have been able to tackle this is to lobby Washington for additional funding, or to strictly control costs, largely by enforcing controls like mandating the use of generic drugs even if this means less-than-optimal results for the patients.
  • The public is becoming increasingly aware that something fundamental is broken in the whole structure of pharmaceutical pricing. The prices of drugs that pharmacies charge U.S. customers are two to three times as much as those charged in almost every other advanced economy. The opening up of the market thanks to the availability of online international sourcing has opened the public’s eyes to the fact that, for whatever reason, U.S. consumers are not getting what they are paying for.
  • Revelations in the media concerning the widespread practice of Pharmaceutical Benefit Managers (PBMs) who have been manipulating retail drug prices by exercising their enormous buying power to leverage drug manufacturers and wholesalers to offer them substantial discounts, which have been channeled into insurance companies’ bottom-line profits, rather than passed on to consumers.

A turning point appears to be just around the corner. Bills have been tabled in both the Senate and Congress that explicitly curb the ability of PBMs to manipulate drug prices. This is a “crack in the door” that will in due course allow the light to pour in, illuminating all of the flaws and problems that have led to the situation that is placing U.S. drug consumers under such pressure.

Public perceptions are steered towards the concept that roughly 40% of the population has some form of government-funded pharmaceutical cover. But if the outlying groups of young children and retired people are stripped out of the equation, it’s then clear that less than 20 percent of the working-age public get any sort of government cover, and the real numbers are quite stark: three-times as many people get no direct contribution from government coffers than those that do!

In fact, almost one half of the total U.S. population has to rely on either company or private health insurance or their own back pockets when it comes to anything to do with healthcare, including drugs!

Why PBM reform is suddenly in the hot seat

Pharmacy benefit managers sit between drug manufacturers, insurers, and pharmacies. For years, their work happened mostly out of public view. That is changing. Lawmakers from both political parties are now asking hard questions about pricing practices and contract structures.

• • Three large companies dominate much of the market, which concentrates negotiating power in a small space.
  • Federal committees and regulators have opened investigations into pricing practices and contract transparency.
  • Public frustration about high drug prices has increased pressure on lawmakers to act.
  • Industry trade groups argue that PBMs help control costs, but critics question who truly benefits from the savings.

This growing focus has helped drive interest in PBM transparency legislation, which aims to make financial flows easier to track and understand.

PBMs are fighting back

Trade groups representing PBMs have stepped up lobbying and public messaging. Their position is that limiting traditional rebate systems could reduce their ability to negotiate discounts with manufacturers.

• • Lobbying spending from PBM trade associations has increased sharply in recent years.
  • Campaigns have been launched to question government reports that accuse PBMs of inflating costs.
  • State and federal proposals targeting spread pricing and hidden rebate structures have been strongly opposed.
  • Industry messaging often focuses on the idea that reform could raise premiums for employers and workers.

This pushback highlights how central PBMs have become to employee benefits drug pricing and overall plan design.

What the proposed PBM reform actually targets

Most reform proposals do not eliminate PBMs. Instead, they aim to reshape incentives and reduce conflicts of interest.

• • Changes to how rebates are handled, often called rebate model changes, to prevent hidden profits.
  • Requirements for clearer reporting of fees, discounts, and payment structures.
  • Limits on spread pricing, where different prices are charged to plans and pharmacies.
  • Steps to reduce excessive market concentration and increase oversight.

Together, these measures are designed to improve pharmacy cost containment while also making pricing systems easier to understand.

How PBMs influence employer drug spending

• Spread pricing, where plans are billed more than pharmacies are paid.
• Rebate structures that reward higher list prices.
• Formulary design that favors drugs with larger rebates over lower net-cost options.
• Vertical integration with insurers and specialty pharmacies, which limits market transparency.

For employers, these dynamics translate into rising premiums, higher stop-loss thresholds, and increased cost shifting to staff. Even aggressive utilization management rarely addresses the underlying pricing architecture.

There is a quiet shift already happening inside bigger PBMs

Even before major laws pass, some large PBMs have started adjusting their models. Public pressure and employer concerns are influencing these decisions.

• • Movement away from traditional rebate-heavy structures toward more fixed-fee models.
  • Greater attention to cost predictability for employers and plan sponsors.
  • Increased scrutiny from clients who want clearer explanations of pricing.
  • Interest in performance guarantees tied to real cost outcomes.

This internal shift suggests that reform is not only coming from Congress, but also from market forces.

International pharmaceutical sourcing acts as a pressure-release valve

As discussions continue, some employers and plan advisors are exploring international drug sourcing as one of several tools. This includes carefully regulated programs involving international prescription drug sourcing from verified suppliers.

• • Transparent pricing structures that are easier to audit.
  • Reduced dependence on complex rebate flows.
  • Partnerships with global pharmacy suppliers that meet safety and compliance standards.
  • Use as part of broader alternative pharmacy sourcing models rather than a stand‑alone fix.

Looking abroad for affordable drug sourcing

One response gaining attention among benefit strategists is structured international drug sourcing. This refers to working with regulated pharmacies in countries where national policy directly controls retail medicine pricing.

How drug pricing works in other advanced systems

• National negotiation or price caps.
• Reference pricing tied to international benchmarks.
• Margin controls on wholesalers and pharmacies.
• Regular, system-wide price reductions.

These mechanisms create structurally lower starting prices that remain stable over time. For employers focused on pharmacy cost containment, this difference is highly relevant.

Comparing major international sourcing regions

Canada

• • Federal oversight through the Patented Medicine Prices Review Board.
  • Familiar language and labeling.
  • However, prices remain relatively high compared with other regulated systems.

United Kingdom and Europe

• • Strong national purchasing power.
  • Strict formularies and export constraints.
  • Limited availability of direct export channels to U.S. plans.

Australia

• • Centralized negotiation under the Pharmaceutical Benefits Scheme.
  • Tight reimbursement controls.
  • Export programs remain limited.

Israel

• • Government-approved maximum prices.
  • Mandatory periodic price reductions.
  • Strict regulation of pharmacy and distribution margins.
  • Wide availability of internationally recognized branded medicines.

When done through a registered and licensed pharmacy like IsraelPharm, international sourcing is compliant and traceable. It allows employers to purchase the same branded medications at significantly lower costs while maintaining regulatory oversight and quality assurance.

Among internationally regulated sourcing options, Israel has emerged as a particularly stable and transparent provider. Israel’s national pharmaceutical pricing framework sets government-approved maximum prices, mandates periodic price reductions, and tightly regulates pharmacy and distribution margins. This creates a predictable, compliance-driven environment that contrasts sharply with the volatility of U.S. retail drug pricing.

IsraelPharm operates within this regulated system and has developed extensive experience serving U.S. patients and plan sponsors seeking compliant cross-border solutions. Its model emphasizes:

• • Dispensing through a fully licensed, nationally regulated pharmacy.
  • Sourcing from authorized manufacturers and distributors with full product traceability.
  • English-language labeling and pharmacist support for continuity of care.
  • Validated international logistics and temperature-controlled shipping where required.
  • Operational familiarity with employer and self-funded plan needs.

For benefit leaders, the objective is not to replace domestic pharmacy networks, but to introduce a complementary supply channel capable of reducing acquisition costs for selected high-value therapies. When structured appropriately, this approach can deliver meaningful savings while maintaining regulatory oversight, product integrity, and clinical confidence.

In this context, IsraelPharm represents not simply an overseas vendor, but a potential strategic partner in long-term pharmacy cost management.

Key factors for businesses to consider when selecting alternate drug supply sources

• • Legitimacy – Operation under a recognized national regulator.
  • Dependability – Consistent inventory and fulfillment timelines.
  • Reliability – Validated logistics for sensitive medicines.
  • Quality – Traceable sourcing from authorized manufacturers.
  • Transparency – Clear documentation and pharmacist support.

These approaches are not presented as a cure-all. Instead, they are viewed as one more option in a wider strategy for managing rising costs.

What this could mean for employee benefit strategies in 2026

Periods of change create both uncertainty and opportunity. Employers, consultants, and third‑party administrators are watching PBM reform closely.

• • Contract terms may become more flexible as pricing models evolve.
  • Greater demand for transparency could shift negotiating leverage.
  • Benefit strategies may include a mix of domestic and international supply options.
  • Early planning can help organizations respond faster as rules become clearer.

In this environment, understanding how PBM reform connects to overall pharmacy strategy is becoming an important planning step.

Key takeaway for decision-makers

PBM reform is not only about one part of the supply chain. It signals a broader reassessment of how prescription drugs are priced, paid for, and delivered.

• • More questions are being asked about where savings actually go.
  • Transparency is becoming a core expectation, not a bonus feature.
  • A wider menu of sourcing and pricing options is entering the discussion.
  • Careful evaluation of these options can support more sustainable long‑term strategies.

Frequently asked questions about PBM reform

What is PBM reform trying to change in the prescription drug system?

PBM reform focuses on how pharmacy benefit managers are paid and how they report their financial arrangements. Many proposals aim to reduce hidden rebate structures and make fees more visible to employers and health plans. Lawmakers want clearer information about who keeps discounts negotiated with drug manufacturers. The goal is not simply to remove PBMs, but to reshape incentives so that cost savings are more likely to reach patients and plan sponsors rather than staying inside complex middle‑layer contracts.

Why are pharmacy benefit managers under increased government scrutiny?

Government agencies and lawmakers are responding to long‑standing concerns about rising drug prices and limited transparency. Reports and hearings have questioned whether certain PBM practices may contribute to higher costs or limit competition. Because PBMs influence which drugs are covered and how much plans pay, their role has become central to the pricing debate. Increased scrutiny reflects a broader push for accountability across the healthcare supply chain, especially where financial arrangements are difficult for employers and the public to see clearly.

How could PBM reform affect employer health plans?

PBM transparency legislation could lead to clearer contracts, more predictable fees, and simpler reporting for employer health plans. Plan sponsors may gain better insight into how drug prices are set and how discounts are handled. This information can support more informed negotiations and benefit design decisions. However, changes may also require updates to existing contracts and administrative processes. Employers are watching closely to understand how new rules might alter pricing structures, performance guarantees, and the balance of financial risk.

Is international prescription drug sourcing connected to PBM reform?

International prescription drug sourcing is not the same as PBM reform, but it is part of the wider discussion about cost control. As traditional pricing models come under pressure, some employers are exploring carefully regulated international supply options. These programs focus on verified pharmacies and approved suppliers that meet safety standards. They are usually considered alongside domestic benefit strategies, not as replacements. The connection lies in the search for greater transparency, predictable pricing, and reduced reliance on complex rebate systems.

Do rebate model changes automatically lower drug prices for patients?

Rebate model changes do not automatically guarantee lower prices at the pharmacy counter. Their main purpose is to change how money flows within the system. By shifting away from hidden rebate arrangements, reformers hope that savings will be easier to track and more likely to benefit plans and patients. However, the final impact depends on how insurers, employers, and PBMs redesign their contracts. The relationship between rebates, premiums, and out‑of‑pocket costs can be complex and may take time to adjust.

What should decision-makers watch as PBM reform continues to develop?

Decision‑makers are paying attention to federal and state legislation, regulatory guidance, and shifts in PBM business models. Key issues include how fees are structured, how transparency rules are enforced, and how contracts define performance measures. Employers and advisors are also monitoring alternative sourcing strategies and market competition. Staying informed allows organizations to evaluate options early and avoid rushed decisions later. PBM reform is evolving, so flexibility and careful review of new information remain important parts of planning.