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Perspectives

| 5 minute read

PBMs Under Siege: How the Current Administration’s 2025 Executive Order and FTC Enforcement Campaign Are Shaping the Future of Drug Pricing

The prescription drug pricing system in the United States is undergoing one of the most aggressive federal shake-ups in modern healthcare history. On May 12, 2025, the current administration issued Executive Order 14297, titled “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients.” While headlines emphasized the order’s intent to benchmark U.S. drug prices against those in peer nations, a closer look reveals an even more consequential—and immediate—target: Pharmacy Benefit Managers (PBMs).

These corporate intermediaries, once seen as mere claims processors, have evolved into vertically integrated conglomerates that dictate drug access, manipulate pricing, and siphon billions in undisclosed rebates. Now, the federal government is placing PBMs under sustained legal and regulatory scrutiny—not just through aspirational policy goals, but through enforceable mandates and parallel enforcement by the Federal Trade Commission (FTC). This coordinated federal crackdown may finally dismantle long-standing PBM business practices that have distorted the marketplace for years.

From Quiet Influence to National Reckoning

PBMs such as CVS Caremark, Express Scripts, and OptumRx have long operated behind the scenes. Although they claim to negotiate discounts for insurers and employers, these organizations rarely disclose the full extent of their rebate agreements with manufacturers or the methodologies used to reimburse pharmacies. This opacity has enabled a rebate-driven system in which PBMs profit from the spread between what manufacturers pay and what patients, pharmacies, and plans ultimately absorb.

While criticism of PBMs is nothing new, the 2025 Executive Order marks a turning point. It explicitly calls for dismantling the rebate ecosystem and demands transparency across all levels of PBM operations. Unlike prior efforts that focused narrowly on Medicare Part D, this Executive Order casts a wide net, directing federal agencies to enforce pricing reforms across all federal health programs, including Medicaid managed care and the Federal Employees Health Benefits Program.

The administration's directive emphasizes the importance of full rebate pass-throughs from drug manufacturers to payors and patients. It requires PBMs to publicly disclose their administrative and performance-based fee arrangements and prohibits the practice of spread pricing, whereby PBMs reimburse pharmacies at lower rates while charging plan sponsors significantly more. These practices have contributed to distorted pricing and have placed unsustainable financial pressure on community pharmacies.

Perhaps most significantly, the order takes aim at vertical integration by mandating that PBMs sever their ownership and affiliation with retail, mail-order, and specialty pharmacies in any contract involving federal healthcare programs. This provision, if enforced, could dismantle the model that has allowed PBMs to route prescriptions through their own affiliated pharmacies while marginalizing independent competitors.

The FTC Steps Off the Sidelines

Even as the Executive Order introduces sweeping policy changes, it is the FTC’s simultaneous enforcement surge that may have the greatest practical effect. On May 15, 2025, FTC Chair Andrew Ferguson testified before the House Appropriations Subcommittee on Financial Services and General Government that PBM investigations and enforcement efforts are among the commission’s highest priorities. He affirmed that, despite budget constraints and staff reductions, the FTC remains fully committed to completing its market study and pursuing law enforcement actions under existing antitrust authority.

This isn’t just posturing. The FTC has already launched a high-profile administrative lawsuit targeting insulin contracting practices by Express Scripts, CVS Caremark, and OptumRx, alleging that their affiliated group purchasing organizations (GPOs) or rebate aggregators engaged in anticompetitive behavior. While the proceedings were temporarily stayed due to commissioner recusals, the current FTC leadership has resolved that conflict and vowed to proceed. Ferguson himself has lifted his own recusal to ensure the case moves forward, and a third Republican commissioner has been appointed to break the deadlock.

Beyond litigation, the FTC continues to process vast quantities of contract and pricing data collected during its ongoing Section 6(b) investigation. The agency has released two interim reports under prior leadership, but Ferguson has stated that the final report must be comprehensive and methodologically sound. He acknowledged prior shortcomings and committed to publishing a document that federal and state lawmakers can use to guide future policy decisions and enforcement priorities.

A Moment of Opportunity—and Caution—for Independent Pharmacies

Independent pharmacies, especially those serving rural and underserved communities, have long been casualties of PBM control. Through network exclusions, audit abuse, retroactive clawbacks, and reimbursement rates below acquisition cost, PBMs have systematically undermined the viability of non-affiliated pharmacies.

This Executive Order and the FTC’s enforcement campaign offer a potential inflection point. If the mandates are implemented and enforced with rigor, independent pharmacies could see real relief. The elimination of spread pricing and steering could finally restore competitive fairness in the marketplace. However, optimism must be tempered by the reality of entrenched corporate resistance.

PBMs have vast lobbying power and an established track record of circumventing policy changes through contractual fine print, state preemption arguments, or selective enforcement. Pharmacies must remain vigilant, assert their rights under state and federal law, and partner with legal counsel to challenge unjust audits, negotiate favorable contract terms, and, where necessary, pursue litigation.

Plan Sponsors: No More Plausible Deniability

The 2025 Executive Order also puts plan sponsors—especially self-funded employer health plans—on notice. In addition to policy reforms, the order directs the Department of Labor to issue new guidance clarifying ERISA fiduciary obligations as they relate to pharmacy benefit contracts. This development dovetails with a recent wave of lawsuits filed by employees against corporate plan fiduciaries for failing to oversee PBM pricing schemes.

No longer can plan sponsors rely on PBM assurances or canned transparency reports. Fiduciaries must engage in meaningful oversight, which includes auditing rebate flows, understanding the mechanics of spread pricing, and scrutinizing any arrangements that incentivize formulary placement based on financial—not clinical—criteria.

The FTC’s forthcoming PBM report, expected later this year, will likely offer a roadmap for plan sponsors to identify red flags. Those who fail to act may find themselves defending not just their pharmacy benefits, but their broader fiduciary integrity in federal court.

Congressional Drift, Executive Action

While Congress has introduced numerous bills to curb PBM abuse, few have advanced beyond committee markups. A recent reconciliation bill in the House included limited reforms such as banning spread pricing in Medicaid and delinking PBM compensation from drug list prices in Medicare Part D. However, comprehensive legislative action remains elusive.

Recognizing this gridlock, the administration has chosen to act decisively through executive power and regulatory enforcement. By leveraging HHS, the Department of Labor, and the FTC, the administration is using every available tool to break the PBM stronghold. Whether the courts ultimately uphold all provisions remains to be seen, but the clear message is that inaction is no longer acceptable.

What Comes Next: Enforcement, Litigation, and Market Realignment

The federal government’s dual-pronged strategy—policy reform through Executive Order and market correction through FTC enforcement—may lead to the most substantial transformation of the PBM sector in two decades. But implementation is only one part of the battle. PBMs are likely to challenge many of these mandates in court, arguing executive overreach, violations of contract rights, and preemption under ERISA and federal pharmacy laws. However, the weight of data being compiled by the FTC and the consistent public pressure for change may make such challenges more difficult to sustain.

In the meantime, stakeholders across the healthcare ecosystem must prepare. Pharmacies should audit their PBM agreements, document discriminatory pricing practices, and engage in proactive legal review. Plan sponsors must request full disclosures from their PBMs and prepare to renegotiate agreements that fail to reflect pass-through pricing, fee transparency, and fiduciary alignment.

Conclusion: A New Era of Accountability

The 2025 Executive Order and the FTC’s intensifying PBM investigation mark a long-overdue reckoning for a sector that has long profited from secrecy and consolidation. This time, federal action appears coordinated, data-driven, and enforcement-oriented. Whether through executive mandates, administrative lawsuits, or fiduciary litigation, the message to PBMs is clear: the days of unchecked power are over.  For pharmacies, plan sponsors, and patients alike, this is not a moment to wait and see—it is a moment to act.

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executiveorder, ftc, pharmacybenefitmanagers, pbms, erisa, fiduciaryduty, independentpharmacies, pharmacies, pharmacylaw, pharmacy benefit manager contract & audit defense services