Hesitancy with Reform: Why it Happens

Even when legislators agree that PBM practices deserve scrutiny, many become cautious when reform proposals appear likely to cause immediate cost spikes, network instability, or pushback from large insurers and PBMs. Because most PBM reforms fundamentally change how prescription drug pricing flows through the healthcare system, the short-term effects can be unpredictable — and opponents use this uncertainty to stall or dilute legislation.

A. Short-Term Cost Increases for Employers and State Plans

PBMs often argue that they keep premiums low through tools like spread pricing, formulary control, and rebates. When states ban or restrict these tools, even if it lowers long-term patient costs, the transition period often shifts financial responsibility onto employers, insurers, or state Medicaid programs.

Why lawmakers hesitate:

• Budget cycles: Legislators worry that reform could trigger a sudden increase in plan costs during the next fiscal year, creating budget holes.

• Employer pushback: Business groups often warn that immediate premium increases could harm small and mid-sized employers.

• Uncertainty: Actuaries sometimes cannot definitively estimate the cost impact because removing PBM opacity changes the pricing dynamic itself.

Examples of scenarios lawmakers fear:

• Eliminating spread pricing may require upfront increases in dispensing fees or administrative costs.

• Making rebates transparent or pass-through might reduce PBM revenue, prompting PBMs to raise service fees to maintain margins.

Even if long-term savings are expected, short-term volatility can be politically unpalatable.

B. Risk of Insurance or PBM Retaliation (Network Disruptions)

Large PBMs — especially those owned by insurers — control enormous networks of pharmacies, specialty services, mail-order sites, and clinical programs. States have seen (or been warned about) scenarios where aggressive reforms cause:

• Narrowing of pharmacy networks

• Dropping non-affiliated pharmacies from preferred tiers

• Suspension or withdrawal of certain services

• Shifting volume to mail-order as a cost-offset tactic

Legislators worry that overly aggressive reforms could provoke abrupt access changes that affect patients, particularly in rural regions.

A common legislative fear:

“If we pass this, will the big PBM simply cut half the community pharmacies from its network next year?”

Even if such warnings are partially strategic, they carry weight with lawmakers who must answer to constituents.

C. Fear of Losing Large PBM or Insurer Investment in the State

Some states rely heavily on large integrated PBMs for:

• Mail-order distribution facilities

• Specialty pharmacy hubs

• Call centers

• Claims-processing centers

Sweeping reforms may trigger threats that the PBM will relocate or scale back operations — which can influence state economic policy, especially where the PBM is a major employer.

Impact on legislative caution:

• Economic development agencies may oppose the bill.

• Governors may fear appearing anti-business.

• Legislative leaders may compromise or slow reforms to avoid corporate confrontation.

D. Complexity of Transitioning to a New Model

Major reforms — particularly those banning certain ownership structures, limiting formularies, or restructuring rebate contracts — require substantial operational changes. States may hesitate because:

• Medicaid plans may need new third-party vendors.

• State employee plans may require months of renegotiation.

• Pharmacy networks may need recredentialing.

• Data systems may need redesign.

The transition period can appear risky, and legislators fear being blamed for any service interruptions.

E. PBM Messaging Effectively Amplifies These Concerns

PBMs and aligned insurers strategically use actuarial studies and economic analyses to amplify concerns about short-term risks. Critics note that many of these reports:

• Rely on PBM-provided data

• Assume no change in PBM profit strategies

• Overestimate cost impacts by ignoring long-term market corrections

But in a fast-paced legislative session, fear-based analysis can be persuasive.

Legislators often prefer:

• Incremental reforms (e.g., transparency requirements)

• Conditional reforms (e.g., changes that activate only if cost analyses show no dramatic increase)

• Sunset clauses to revisit impacts after several years

This “test and adjust” model feels safer politically when short-term risk is portrayed as high.

F. Why Some States Embrace Reform Despite These Concerns

Conversely, states that have passed aggressive reforms often do so because:

• They experienced major access crises (pharmacy closures, Medicaid overbilling).

• Rural pharmacies made a compelling case about survival.

• Audits revealed unsustainable pricing structures.

• Legislators had bipartisan anti-oligopoly sentiment.

In these states, the long-term benefits — transparency, fairness, sustainability — are judged to outweigh transitional costs.



Concerns about short-term cost spikes and access disruption create a powerful inertia that keeps many states from enacting sweeping PBM reforms. These concerns may be partially valid — healthcare financing is complex — but they can also be strategically amplified by PBMs and insurers seeking to maintain profitable status quo arrangements. As a result, many states opt for incremental changes rather than broad restructuring, even when long-term evidence suggests that deeper reforms could improve patient choice, fairness, and healthcare sustainability.