The news: The FTC settled a lawsuit with Cigna’s Express Scripts over allegations that the pharmacy benefit manager (PBM) inflated insulin prices.

Catch up quick: In 2024, the FTC sued the three largest pharmacy benefit managers (PBMs)—Express Scripts, UnitedHealth’s Optum Rx, and CVS Health’s Caremark—alleging they used a rebate system that favored higher-priced insulin to boost profits. The PBMs countersued, arguing that the case is unconstitutional. Together, the three PBMs administer about 80% of US prescriptions, and the lawsuits involving CVS and UnitedHealth remain ongoing.

Why it matters: PBMs have come under fire for business practices that critics say steer patients to PBM-owned pharmacies, reimburse independent pharmacies at lower rates, and drive up drug prices by demanding large rebates and fees in exchange for preferred formulary placement—pressuring manufacturers to set higher list prices.

Federal and state regulators are accelerating legislative efforts to curb PBMs’ influence over drug access and pricing, while forcing greater transparency into their opaque operations. The most notable effort is a bill just passed that would require PBMs to be paid flat fees for drugs covered under Medicare Part D, rather than a percentage of a medication’s list price—an approach intended to reduce incentives to favor higher-priced drugs.

Per the FTC settlement, Cigna has agreed to change even more of its business practices, including to:

• End rebate guarantees and spread pricing (when a PBM charges a health plan more for a prescription than it pays the pharmacy, keeping the difference) in favor of standard offering to all plan sponsors.
• Stop preferring high-list-price drugs on formularies.
• Ensure that members’ out-of-pocket costs will be based on the drug’s net cost, rather than its higher list price.
• Create a more transparent and fairer reimbursement model for retail community pharmacies.
• Have medication purchases made from drugmakers' direct-to-consumer websites via TrumpRx count toward a patient’s out-of-pocket maximum

According to the FTC, these changes will reduce patients’ out-of-pocket costs by up to $7 billion over 10 years and generate millions of dollars in new annual revenue for community pharmacies—but the agency did not detail how it arrived at these savings figures.

Implications for the pharma industry: PBMs were preparing for this moment. Each of the Big 3 recently adjusted parts of its business model to signal openness to change. Cigna, for instance, has already committed to scrapping its rebate system for many commercial health plan clients starting in 2027.

The FTC agreement and newly passed legislation stop short of requiring PBMs to fully decouple from vertically integrated pharmacies and health insurers. But it’s tangible progress toward a fairer business environment——progress that, over time, should give patients more choice at the pharmacy counter while giving drugmakers greater flexibility to sell medicines through alternative channels, including directly to employers and consumers, without remaining beholden to the influence of PBMs.

This content is part of EMARKETER’s subscription Briefings, where we pair daily updates with data and analysis from forecasts and research reports. Our Briefings prepare you to start your day informed, to provide critical insights in an important meeting, and to understand the context of what’s happening in your industry. Not a subscriber? Click here to get a demo of our full platform and coverage.