Pharmacy Benefit Managers’ Market Practices and Their Implications for the Right to Health

STUDENT ESSAY

Noor Abbasi

Abstract

Pharmacy benefit managers (PBMs) occupy a central yet largely unaccountable role in the United States’ pharmaceutical supply chain, controlling access to essential medications for over 275 million Americans. Despite their structural power over formulary design, drug pricing, and pharmacy access, PBMs operate without the transparency or oversight that govern other health care actors. This paper applies the AAAQ framework articulated in General Comment 14 to evaluate four core PBM practices: prior authorization, step therapy, rebate structures, and pharmacy reimbursement models, arguing that these practices constitute systematic violations of the right to health, with disproportionate consequences for Black, Hispanic, uninsured, and rural populations. It develops a sub-framework that adapts AAAQ criteria to PBM market practices, allowing PBMs to be evaluated against the same human rights standards that govern public health systems. The paper concludes that legislative and regulatory reforms, while meaningful, remain framed as market corrections rather than responses to human rights violations. It therefore offers recommendations, including transparency mandates, rebate model reform, equitable pharmacy access protections, and rights-based oversight, to align PBM practices with obligations arising from the right to health.

Introduction

In the United States, access to prescription medicines is determined largely by private intermediaries whose decisions govern treatment availability and affordability, as well as the timeliness of care. Among these private intermediaries, pharmacy benefit managers (PBMs) are the key force in determining drug access. PBMs started in the 1960s as third-party organizations aimed at managing prescription drug benefits for insurance companies, but within a 10-year span they took on more responsibilities, such as the processing of drug claims and the delivery of pharmacy services.[1] PBMs are now known as the “middlemen”; through direct contracting with pharmacies and the management of insurance plan networks, they shape availability for prescription drugs before they reach the US pharmaceutical market. The functions of PBMs include managing tiered formularies to design prescription access, determining patient affordability through insurance plans, and administering utilization management tools such as prior authorization and step therapy. PBMs’ most concentrated source of profit comes from rebate structures negotiated with drug manufacturers that offer PBMs a percentage of a drug’s initial list price to get a preferred status on formularies.[2] As of 2023, 275 million Americans received prescription drug benefits from PBMs.[3] For employer-sponsored and self-insured plans, PBMs manage prescription benefits for approximately 90 million Americans, giving PBMs substantial control over access to medication.[4]

Pricing contracts between PBMs, pharmaceutical companies, and insurance companies are typically confidential and inaccessible to the public.[5] This lack of transparency raises significant concerns regarding accountability, fairness, and patient access, particularly for marginalized and underserved populations. This paper argues that PBM market practices constitute systematic violations of the human right to health under the AAAQ (availability, accessibility, acceptability, and quality) framework. Adequately addressing these violations requires a rights-based regulatory standard that moves beyond market correction toward human rights accountability.

The 1948 Universal Declaration of Human Rights first established the right to the conditions necessary for health, asserting under article 25 that “everyone has the right to a standard of living adequate for the health and well-being of himself and of his family.”[6] This right was later formalized in article 12 of the International Covenant on Economic, Social and Cultural Rights, which recognizes “the right of everyone to the enjoyment of the highest attainable standard of physical and mental health.”[7] General Comment 14 of the United Nations Committee on Economic, Social and Cultural Rights further interprets this right through a structured framework for evaluating whether health systems provide appropriate access to care. The framework comprises four components: availability, accessibility, acceptability, and quality.[8] This paper adapts these four components, collectively known as the AAAQ framework, to evaluate PBMs, with a particular focus on their market practices and their impact on access to essential medicines.

Application to US health care

This paper applies the AAAQ framework to PBM practices in the United States, including formulary design, utilization management, market structure, and medication delivery, to examine whether access to essential medications in these requirements is being provided in accordance with international human rights law. In doing so, it develops a sub-framework that adapts the AAAQ criteria to PBMs and assesses how their decision-making affects the availability, accessibility, acceptability, and quality of medications. Within this sub-framework, availability refers to the sufficient presence of medications within the US health care drug supply chain system, accessibility refers to equal and affordable access to medication, acceptability refers to whether medications and treatment options align with individual needs (including cultural and socioeconomic contexts), and quality refers to whether distributed medications are safe and effective for use.[9]

PBMs as gatekeepers of access

PBMs’ control over medication access has been further reinforced through their evolution into vertically integrated entities. Through waves of market consolidation from the 1970s through the 1990s, the PBM industry evolved into an oligopoly of three major actors: CVS Caremark, Express Scripts, and OptumRx.[10] Each is embedded within a larger health care conglomerate with ownership stakes across health insurance, retail pharmacy, and drug distribution. This vertical integration also allows PBMs to steer patients toward their affiliated pharmacies through a structure of preferred networks and management practices, effectively subjecting pharmacies to PBM-imposed terms even when a pharmacy is not directly owned by the PBM. The corporate dominance of these three PBMs is stark; in 2023, nearly four out of every five of the 6.6 billion prescriptions dispensed in the United States were processed by these three corporations alone.[11] This inherently anticompetitive market structure allows a single corporate entity to simultaneously control insurance coverage, pharmacy benefits, and drug dispensing, leaving Americans with virtually no neutral actor in their health care.

The concentration of PBMs in the industry is not only structural but actively leveraged through aggressive control over formularies, rebate negotiations, utilization management, and pharmacy reimbursement. This authority extends beyond their affiliated entities to independent pharmacies, manufacturers, and insurers with no corporate connection to the Big Three, subjecting the entire market to the terms and conditions they mandate.

PBMs operate opaquely, using contracts and rebate flows that remain proprietary and inaccessible to the public. This opacity has enabled practices such as spread pricing, a process through which PBMs bill health plans more than they reimburse pharmacies, pocketing the difference. Spread pricing alone has resulted in over US$415 million in overcharges to state Medicaid programs in Ohio, Kentucky, Illinois, and Arkansas.[12] Absolved of transparency requirements, PBMs operate beyond the reach of oversight, prioritizing profit at the expense of patients, public insurance programs, and the broader public.

Prior authorization

PBMs assert this influence most directly through utilization management, a set of administrative tools that operate across the different phases of a patient’s clinical care.[13] Prior authorization requires a contracted health care provider to approve a prescription before a patient can access the prescribed medication.[14] Fundamentally, this practice is meant to serve as a patient-centered tool, ensuring that the medications patients receive are aligned with their diagnosis and treatment needs.[15] However, PBMs’ use of prior authorization has deviated from patient-centered care and has instead become a mechanism to control costs at the expense of timely and appropriate treatment. According to a 2024 nationwide survey of 1,000 practicing physicians, nearly one in three respondents reported that prior authorization criteria are rarely or never grounded in clinical evidence.[16] As a result, prior authorization demands have driven providers to override their own clinical judgment, abandoning the most appropriate treatments or altering patient diagnoses simply to secure approval.[17]

Prior authorization requirements have also expanded across commercial and government insurance plans, subjecting a growing share of generic and specialty medications to administratively complex approval processes and creating significant obstacles for physicians and patients.[18] The same survey found that 93% of physicians reported that prior authorization delays access to necessary care, with 42% reporting that this occurs often and 15% reporting that it occurs always. Of those surveyed, 94% perceived the prior authorization process as having a negative impact on patient clinical outcomes.[19]

Although prior authorization was initially implemented as a clinical tool, the survey findings reveal widespread physician frustration and distrust of the process, which can compel providers to alter their clinical practices in response to the barriers and care delays it creates. These disruptions in care are felt directly by patients. Prior authorization has consistently demonstrated a detrimental impact on patient treatment plans, with the consequences falling most heavily on patients with chronic conditions. A study published in the Journal of Clinical Oncology found that the introduction of prior authorization for an established drug regimen increased the odds of treatment discontinuation more than sevenfold and delayed prescription refills by an average of nearly 10 days. For patients managing chronic or advanced conditions, such interruptions carry significant clinical consequences, as unplanned gaps in treatment can exhaust available therapeutic options and accelerate disease progression.[20]

Applied to prior authorization practices, the AAAQ framework reveals violations across multiple dimensions. The most direct violation occurs within the accessibility criterion, which requires that medications be obtainable in a timely and unobstructed manner. The evidence demonstrates that prior authorization delays treatment, increases prescription abandonment, and, in some cases, prevents patients from accessing medications altogether. These delays are not simply operational inefficiencies; they are associated with negative clinical outcomes, particularly when treatment is time-sensitive or involves specialty medications.

Prior authorization also implicates the quality component of the AAAQ framework, which requires medications to be safe, effective, and appropriate. The administrative demands of the prior authorization process have driven providers to abandon evidence-based treatments, modify patient diagnoses, and substitute clinically superior medications for those more easily approved. When patients are denied the most optimal treatments for their conditions, the quality standard is directly violated. Taken together, these violations reveal that prior authorization, as practiced by PBMs, has become a structural impediment to the right to health rather than a tool in service of it.

Step therapy

PBMs also employ step therapy, a utilization management protocol that requires patients to fail preferred lower-cost medications before accessing their physician-prescribed treatment.[21] This process, while intended to reduce patient costs, exposes patients to adverse side effects from ineffective medications, prolonged periods of inadequate treatment, and critical delays in recovery that in more severe instances can result in irreversible disease progression. For physicians, step therapy creates a conflict in which the cost-driven protocols of PBMs constrain their ability to prescribe the treatments they determine to be most clinically appropriate for their patients.[22]

PBMs’ encouragement of step therapy is not simply a patient cost-saving method but a strategic technique motivated by financial incentives to favor certain medications on their formularies, with step therapy requirements often driven by rebate arrangements between PBMs and drug manufacturers instead of clinical evidence. The consequences of these cost-driven protocols are felt directly by patients. A 2020 retrospective study of nearly 4,000 rheumatoid arthritis patients and 1,700 psoriatic arthritis patients found that those subject to step therapy restrictions had significantly lower odds of treatment effectiveness and medication adherence. Rheumatoid arthritis patients experienced 19% lower odds across both measures, and psoriatic arthritis patients experienced 27% lower odds of treatment effectiveness and 29% lower odds of medication adherence.[23] A similar pattern emerges in dermatology, where mandated step therapy for atopic dermatitis caused an average treatment delay of over four months before patients could access their prescribed medication.[24] Across multiple conditions, the evidence reveals a consistent pattern in which step therapy functions as a systematic barrier to optimal patient care. As a utilization management tool, step therapy introduces delays in accessing necessary treatment and through the burden of repeated treatment failures drives many patients to abandon care altogether.

Step therapy, when evaluated against the AAAQ framework, implicates the acceptability and quality dimensions of the right to health. Acceptability is most critically violated, as step therapy overrides the clinical judgment of physicians and the dignity of patients by requiring patients to trial medications that are not properly suited to their condition.

Step therapy also violates the quality component, which requires that the medications patients receive be safe and effective, because its protocols expose patients to medications that are less safe and effective than those their physicians determine to be most appropriate. These violations demonstrate that step therapy as practiced by PBMs prioritizes financial interests over the clinical and human rights standards patients are entitled to.

PBM rebate structures and pricing opacity

PBMs have extracted profit from every point of the pharmaceutical supply chain, generating revenue through spread pricing, administrative fees, the steering of patients toward affiliated mail-order pharmacies, and, most central to their profit model, manufacturer rebates. Through closed-door negotiations, PBMs leverage their formulary placement power to create competition among manufacturers, who, without knowledge of competing offers, are incentivized to list higher prices, generating larger rebates for PBM profit at the expense of clinical need.

While rebates were originally intended to support lower drug prices and reduce costs for patients and insurers, PBMs have inverted this purpose by retaining a portion as profit rather than passing the savings on, leaving patients to pay artificially inflated prices for medications their plans were supposed to make affordable.[25] The confidentiality of these arrangements ensures that patients and policy makers have no visibility into the true costs of medications or the rebates negotiated on their behalf, leaving the system free to operate without public accountability or scrutiny. A study analyzing prescription drug rebates across 444 branded patented medications and over 38,000 patients found that increased rebate sizes were directly associated with increased patient out-of-pocket costs across Medicare, commercial insurance, and uninsured populations, with higher rebates linked to simultaneous increases in list prices.[26] Each year, as list prices have risen, PBMs and insurers have collected increasingly larger rebates without passing those savings on to patients. Not only has this practice failed to serve its intended purpose, but its consequences are not shared equally. Black and Hispanic patients spend a disproportionately higher share of their income on out-of-pocket prescription costs and are more than twice as likely as white patients to accrue medical debt, while uninsured patients bear the full extent of inflated list prices with no protection against the rebate structure. The impacts of these financial models extend beyond cost alone, as medication nonadherence due to price is highest among uninsured adults and disproportionately affects Black and Hispanic patients, turning inflated drug prices into direct failures of care.[27]

Evaluated through the AAAQ framework, PBM rebate structures and pricing opacity reveal violations of accessibility, specifically its requirements of equal and affordable access to medication. Within this criterion, the economic dimension is most directly implicated; the requirement that medications be equally and affordably obtainable for all is a standard the current rebate system systematically fails to meet. The evidence demonstrates that rebate structures artificially inflate drug list prices, increase patient out-of-pocket costs, and in some cases prevent patients from accessing medications altogether. These are not simply market inefficiencies; they are financial structures that transfer the burden of inflated prices onto patients while PBMs retain the savings. The inequitable distribution of this burden further implicates the equity dimension, disproportionately harming Black, Hispanic, and uninsured patients who lack the financial protection that negotiated rebates provide to covered populations. Together, these violations demonstrate that PBM rebate structures, as currently designed, prioritize profit over the equitable access to medication that the right to health demands.

Effects on pharmacies and geographic access

PBM reimbursement models and spread pricing practices have a direct structural consequence on the pharmacy landscape, driving independent pharmacies out of business and perpetuating pharmacy deserts that limit access to medications. Unlike large pharmacy chains, independent pharmacies are locally owned and operated entities with no corporate affiliation with PBMs, frequently serving rural and low-income communities. Despite this critical role, their ability to serve patients depends entirely on their capacity to contract with PBMs to participate in insurance networks. The contracts that independent pharmacies are required to accept were designed within a system that favors large, PBM-affiliated chains, with terms that independent pharmacies have little power to negotiate, leaving them subject to conditions that threaten their financial viability. These conditions include opaque reimbursement structures where pharmacies cannot determine what they will be paid until after dispensing a prescription, retroactive clawbacks that reduce payments months after a sale, and unilateral contract changes that take effect automatically without pharmacist consent.

A 2024 Federal Trade Commission (FTC) report found that approximately 10% of independent retail pharmacies in rural United States closed between 2013 and 2022.[28] Within these rural areas, the loss of independent pharmacies has contributed to the emergence of pharmacy deserts, areas where a significant portion of the population lives beyond 10 miles from a pharmacy. A national geospatial study found that 15.8 million Americans live in pharmacy deserts.[29] For patients who are uninsured or underinsured and rely on community pharmacies as their primary point of health care access, the closure of these pharmacies does not simply reduce convenience; it cuts off their pathway to medication entirely. Pharmacy desert communities have a disproportionately higher proportion of Black, Hispanic, American Indian, and Alaskan Native residents, leaving these populations more vulnerable to the consequences of limited pharmacy access.[30] The FTC report further found that PBMs simultaneously reimburse their own affiliated pharmacies at significantly higher rates than independent pharmacies for the same specialty drugs.[31] This represents a calculated financial choice: PBMs systematically underpay the independent pharmacies that serve the underserved communities and minority populations their affiliated chains do not.

Evaluated through the AAAQ framework, the closure of independent pharmacies and emergence of pharmacy deserts constitute a structural violation of accessibility, as the physical infrastructure through which patients obtain their medications is systematically dismantled. The availability dimension is equally implicated given that the sufficient presence of medications within the health care supply chain is compromised when the pharmacies responsible for dispensing them are driven out of business. These closures do not affect all communities equally, instead concentrating in rural areas and communities of color, thereby reinforcing the inequitable distribution of medication access along racial and socioeconomic lines. For the millions of Americans living in pharmacy deserts, the right to access essential medications is structurally denied. Ultimately, PBM reimbursement structures produce geographic barriers to essential medicines that fall disproportionately on those the right to health was designed to protect.

Policy

The practices documented throughout this paper have not gone unaddressed, as growing recognition of their implications has prompted regulatory and legislative action at the federal and state levels. In 2022, the FTC launched a formal inquiry into PBM business practices, requiring the six largest PBMs to provide information about their operations. By 2024, the inquiry had produced a landmark staff report documenting how PBM practices inflated drug costs and harmed independent pharmacies. This resulted in an administrative action against the three largest PBMs alleging anticompetitive rebating practices that artificially inflated insulin prices and shifted costs onto patients.[32] At the congressional level, the passage of the Consolidated Appropriations Act of 2026 marked a significant legislative response to the practices documented in this paper by introducing rebate pass-through requirements for certain employer health plans, delinking PBM compensation from drug prices in Medicare Part D, and expanding transparency and reporting requirements.[33]

State legislatures have also increasingly moved to address harmful PBM practices. In 2025, at least 31 states enacted nearly 70 laws designed to reduce prescription drug costs, the majority of which targeted PBM practices specifically.[34] Among the most aggressive state actions, Arkansas became the first state to prohibit PBMs from owning pharmacies in April 2025, directly targeting the vertical integration practices documented throughout this paper; a federal judge has since blocked the law pending further review.[35]

These reforms collectively signal a growing recognition that PBM practices require structural intervention. However, the legislative and regulatory responses to date have largely been framed as market corrections focused on pricing transparency and rebate accountability, rather than as responses to violations of the right to health. These transparency initiatives and rebate mandates, while representing initial progress, do not obligate PBMs to realign with their original purpose as intermediaries designed to reduce the burden on pharmacies and insurers, thereby ensuring faster and more equitable access to medications.

Discussion

Taken together, the four PBM practices examined in this paper reveal a pattern that extends beyond isolated market behaviors. They operate as an interconnected system in which each practice reinforces and enables the next, creating cascading violations across each dimension of the AAAQ framework. Utilization management techniques, such as prior authorization and step therapy, obstruct access to medications and override clinical judgment, violating the accessibility, quality, and acceptability criteria. The rebate structures that incentivize these formulary decisions simultaneously inflate drug prices, making the medications that patients are permitted to access financially out of reach, compounding the accessibility violation with an economic one. The resulting financial pressures drive independent pharmacies out of business, eliminating the physical infrastructure through which patients access their medications. This compromises the availability of essential medicines, particularly in rural areas and communities of color. Each practice does not stand alone as a discrete harm; together, they constitute a system that structurally denies the right to health to those who are already most vulnerable.

The practices documented throughout this paper are enabled by a system of opacity that is not a byproduct of PBM operations but a core feature of their profit model. PBMs have a direct financial incentive to maintain opacity because transparency would expose the extent to which their profit model depends on information asymmetry and would weaken their ability to control pricing, access, and distribution without accountability. As of 2024, not a single PBM had fully complied with the compulsory disclosure orders that the FTC issued to six of the largest companies in the industry two years prior.[36] This is a clear demonstration of how deeply embedded resistance to transparency is within the industry. The absence of any financial penalty for noncompliance allowed PBMs to openly defy federal oversight when the financial stakes of transparency were sufficiently high, reflecting the unchecked power they hold within the US health care system. Without visibility into the true costs and arrangements driving these practices, neither patients nor policy makers can fully understand the scope of the violations they are attempting to address.

A fundamental aspect of the harm produced by PBM practices is its unequal distribution, as the burdens of delayed care, inflated drug prices, and pharmacy deserts fall disproportionately on populations already marginalized within the US health care system. Minority populations face higher out-of-pocket drug costs, greater rates of medication non-adherence, and a higher likelihood of living in pharmacy deserts, consequences that reflect and reinforce broader patterns of structural inequality. Under international human rights law, this pattern is not simply a policy concern but a moral one because the right to health operates from the premise that access to essential medicines is a right belonging to every person regardless of income, race, or geography. A system that consistently distributes its harms along existing lines of inequality is a human rights failure, one that demands a fundamental reorientation toward the right to health.

Recommendations

Addressing these violations demands reforms rooted in the obligations of the right to health, not market correction.

As an immediate measure, transparency must be mandated across all aspects of PBM operations, including rebate arrangements, pharmacy reimbursement models, and formulary decision criteria. Pharmacy and therapeutics committee negotiations must be open to the public so that the justifications behind formulary placement decisions are accessible to patients, providers, and policy makers. Making these processes visible would not only allow for public scrutiny but incentivize more clinically grounded and equitable decision-making, reducing the conditions under which profit-driven formulary decisions can persist unchallenged. These mandates must be accompanied by meaningful financial penalties to ensure compliance, given the documented history of PBM resistance to disclosure and the insufficiency of transparency requirements without consequences.

The percentage-based rebate model must be eliminated and replaced with a fixed-fee contract structure that decouples PBM compensation from drug pricing, removing the financial incentive to favor higher-priced medications on formularies. Competition among manufacturers for formulary placement should be preserved but grounded in transparent net pricing and clinical evidence rather than confidential rebate arrangements. This structural shift would subject list prices to genuine downward competitive pressure, producing affordability benefits that extend to all patients regardless of insurance status. Evidence from West Virginia’s mandatory rebate pass-through law demonstrates that when PBMs are prohibited from retaining rebates, patient premiums decrease or are meaningfully mitigated, supporting the case for a reformed compensation model.[37]

Independent pharmacies serving rural and underserved communities should be subject to separate contractual frameworks from large PBM-affiliated chains, with reimbursement rates calibrated to reflect the smaller operational scale of independent pharmacies and the communities they serve. In geographic areas where no PBM-affiliated pharmacy operates, including rural communities where the nearest pharmacy may be more than 10 miles away, independent pharmacies must be guaranteed network inclusion as a condition of PBM contracts. This ensures that patients can access their insurance benefits at the only pharmacy available to them without being penalized for the absence of affiliated alternatives.

PBMs control access to medications for hundreds of millions of Americans yet are not subject to the independent third-party audits and accreditation standards that routinely apply to hospitals, pharmacies, and pharmaceutical companies. PBMs should be required to undergo equivalent audit mechanisms that evaluate their practices against the right to health, with mandatory reform and enforcement authority vested in existing federal regulatory bodies.

Conclusion

By applying the AAAQ framework to PBM practices in the United States, this paper has demonstrated that the market practices examined constitute systematic violations of the right to health. Each practice operates as part of an interrelated system that collectively undermines the availability, accessibility, acceptability, and quality of care that the right to health demands. This paper’s core contribution lies in developing a sub-framework that adapts the AAAQ criteria specifically to evaluate PBM market practices. PBMs must be held accountable to the same human rights standards that govern public health systems, with particular attention to the disproportionate burden that these practices place on vulnerable and underserved populations.

The intermediaries who control access to essential medicines operate outside the accountability framework required to protect the right to health, leaving the populations most dependent on that access to bear the consequences. Addressing this requires a fundamental reorientation of how medication access is governed in the United States, with the human right to health at its center.

Acknowledgments

Sincere thanks are extended to Thomas E. Buckley for his guidance and thoughtful feedback during the development and revision of this manuscript.

Noor Abbasi holds a BS in analytics and information management and a BA in human rights from the University of Connecticut, Storrs, United States.

Please address correspondence to the author. Email: noor.abbasi@uconn.edu.

Competing interests: None declared.

Copyright © 2026 Abbasi. This is an open access article distributed under the terms of the Creative Commons Attribution-Noncommercial License (http://creativecommons.org/licenses/by-nc/4.0/), which permits unrestricted noncommercial use, distribution, and reproduction in any medium, provided the original author and source are credited.

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