Industrial Evolution

Over the last decade, pharmacy benefit managers (PBMs) have become highly consolidated and vertically integrated, playing a central role in negotiating drug rebates on behalf of health plans. In recent years, however, PBMs have increasingly shifted this function to newly created entities known as rebate aggregators. Launched by the three largest PBMs, these aggregators now negotiate billions of dollars in rebates directly with drug manufacturers, adding a new layer to the pharmaceutical pricing system and further concentrating negotiating power across plans and PBMs.

While PBMs argue that rebate aggregators increase leverage and help secure larger rebates, the issue brief documents growing concerns from health plans, regulators, and policymakers. Evidence from audits, settlements, and litigation suggests that rebate aggregators may reduce transparency, improperly withhold funds owed to plans, and complicate oversight by inserting complex contractual layers between plans and manufacturers. To date, PBMs have paid tens of millions of dollars to settle claims related to underpayment and rebate practices tied to these entities, and multiple state and federal investigations are ongoing.

The rise of rebate aggregators has significant implications for drug affordability and policy reform. As these entities now serve as the primary conduit for rebates intended to lower patient costs, the brief concludes that existing PBM reform proposals—largely based on older business models—may no longer reflect how the market operates today. Policymakers will need to account for rebate aggregators explicitly if they hope to improve transparency, accountability, and ensure savings flow to patients.