Pharmacy Benefit Managers are known to invest heavily in lobbying at the federal level.
But as local elections heat up along with the presidential race, PBMs – the insurance middlemen who process prescription claims – are also pouring hundreds of thousands of dollars in New York state senate and assembly races, where pending state legislation threatens their profit margins.
The three big PBMs – CVS Caremark, Express Scripts, and OptumRX – are all affiliated with major insurers and account for roughly 80% of prescriptions nationwide. PBMs say they reduce drug prices by negotiating with drug manufacturers. Critics say they pocket rebates and act like monopolies by vertically integrating the market.
Between campaign donations and lobbying spending, PBMs have a significant financial and strategic stake in the 2024 New York state elections, raising questions about their influence over lawmakers.
PBMs target New York candidates
PBMs have directly donated over $300,000 to New York state assembly and senate races since the beginning of 2023. While PBMs generally donate only a few thousand dollars per candidate, they target lawmakers on health and insurance committees and sponsors of PBM-related bills.
“It’s very strategic, and these companies pay attention to which way they think the political winds are blowing,” said Wendell Potter, a health insurance reform advocate and former communications executive at Cigna.
Based on lobbying records, PBMs get extensive face time with New York candidates and government agencies. The Pharmaceutical Care Management Association (PCMA), a PBM lobbying group, lobbied the New York Department of Financial Services every month in 2023 and 2024, according to bimonthly reports to New York State’s Commision on Ethics and Lobbying.
Potter said it’s common for PBMs to lobby during rulemaking, the policy-making process that comes after a law has been passed. Rulemaking can involve input from stakeholders and the public.
“Lobbyists pay as much attention, sometimes more attention, to the regulatory bodies than they do to the lawmaking bodies,” Potter said.
New York passed a bill in 2021 that proposed extensive transparency regulations on PBMS, but Danny Dang, the president of the Pharmacists Society of the State of New York, an advocacy group, says those rules were cut back during a negotiation process that ended in 2023.
Legislation on the state floor would further regulate PBMs by requiring more financial transparency, however many bills have stalled. Still, Dang said New York is relatively strict on regulation.
“We historically have been the leader in healthcare change and transparency, so I have more faith in state than the federal,” said Dang.
Why do PBMs care about state-level legislation?
The PBM spending battle plays out most loudly on the national level: In 2023, pro and anti-PBM regulation groups topped the list of pharmaceutical industry lobbying spending, according to a report by Reuters. The pro-regulation Pharmaceutical Research and Manufacturers of America (PhRMA) spent $27.6 million on lobbying in 2023. The PCMA spent $15.4 million.
While federal spending totals are often in the spotlight, a patchwork of state regulations can be disruptive to PBM operations, whose plans, members, and contracts span across the country, Carnegie said.
“That's pretty burdensome from an operational and a contracting perspective,” she said.
Professor Simon Weschle, a campaign finance expert at the University of North Carolina at Chapel Hill, said it makes sense that PBMs would donate to state-level candidates when regulatory legislation is on the table. The healthcare industry’s profits depend heavily on government policy, Weschle explained, which is why it is consistently among the top donating industries each election cycle.
“Companies that are more susceptible to government regulation are more likely to donate and are more likely to donate more generously,” Weschle said.
Lobbying and campaign finance are very different, Weschle said, but they’re connected. While buying a candidate outright is rare in the United States, Weschle said campaign contributions can help companies get access to candidates.
“We know empirically that companies or industries or organizations that lobby more, that make campaign contributions, are more likely to get meetings with people, to be able to lobby in the first place,” Weschle said.
PBMs facing elevated attention
Theresa Carnegie, a lawyer who specializes in the pharmaceutical supply chain and works with PBMs, contends PBMs operate just like any industry, within the legal confines of campaign finance and lobbying law. They’re just getting more scrutiny, Carnegie said, because the industry is “under the microscope.”
“PBMs have to be highly engaged right now, because there's a lot coming at them from a lot of different angles,” Carnegie said.
JC Scott, the President and CEO of the PCMA, the PBM lobbying group, called the focus on PBMs “narrow” and argued it hinders PBMs’ aim to lower drug prices.
“This focus on PBMs is intentionally designed to distract from the real driver of high drug prices, which is pharmaceutical companies, who have exclusive ability to set the prices of their products,” Scott said.
Some critics believe PBMs’ financial involvement in elections amounts to corruption.
“Things that are legal can also be corrupt and, in my view, unethical and immoral,” Potter said. “It's just that legislation hasn't caught up yet with their practices.”
Dang says the money PBMs use to lobby lawmakers is earned by ripping off pharmacists. Pharmacies often get shortchanged by PBMs, who reimburse them less than what the drug costs, causing pharmacists to lose money on prescriptions, Dang said.
Scott refuted that claim and the idea that PBMs seek to “buy” candidates and said lawmakers need lobbyists to understand how PBMs operate.
“It's important that we're up there telling our story and sharing our perspective, and so we're always seeking opportunity to do that,” Scott said.
Carnegie likewise said PBMs help policymakers understand how laws would fit into their existing operations.
“The pharmaceutical supply chain is so complicated that I think it requires stakeholders, PBMs and others, to help congressmen and women who don't live and breathe the pharmaceutical supply chain to understand how it works,” Carnegie said.
Potter said PBMs’ intent is not that simple.
He argues PBMs spend on lobbying and campaign donations to influence how policymakers vote. While most PBM regulation has bipartisan support, sometimes it only takes one or two legislators to stop passage of a bill, Potter said.
“I used to work with my peers across the industry to develop PR and public affairs strategies to kill legislation we didn't like,” Potter said.
What New York voters should know
Both sides of the debate agree most voters don’t have an understanding of PBMs’ role in the pharmaceutical industry. Scott says that role benefits consumers, where PBMs act as a counterweight to drug companies’ ability to set prices.
“Make sure you understand the critically important role PBMs play in the market on behalf of patients and plan sponsors,” Scott said. “Our companies are the only ones out there who are fighting to bring down costs.”
A 2019 New York Senate Committee investigation, led by Sen. James Skoufis (D), disagreed. It concluded PBMs “use practices, such as maximum allowable cost lists, spread pricing, and direct and indirect remuneration fees to generate profit, which leads to higher prices for clients and consumers.”
Beyond the prices they pay for medications, Potter said many voters have a personal stake in how PBMs spend on elections.
“The vast amount of money that's spent to influence public policy is our money,” Potter said. “It's money that we pay in premiums. It's money that we pay these big companies for access to medications.”
Dang said pharmacists are urging voters to be aware of which candidates take donations from PBMs.
“They should ask the question," he said, "What is this candidate going to do for me?”
(Photo credit: Alexandra Byrne)
About the author(s)
Alexandra Byrne
Alexandra Byrne is a part-time M.S. student at Columbia Journalism School covering health care and economic inequality. Her work has appeared in NBC News and Foreign Policy, among others.