State governments are moving faster than federal regulators to impose new regulations on pharmacy benefit managers (PBMs), creating a complex web of state-specific rules that exceed what the federal government has proposed. The Consolidated Appropriations Act 2026, the first major federal legislation in two decades to address pharmacy benefits, introduces requirements for greater transparency in drug pricing, rebate structures, and reimbursement methods. The Department of Labor has also proposed similar reporting obligations for ERISA plans. Yet the most immediate pressure stems from state legislatures, where lawmakers are advancing stricter oversight of prior authorization processes, formulary decisions, biosimilar substitution policies, and pharmacy reimbursement rates.
These state-level initiatives seek to enhance transparency and improve patient access to medications, but they also force PBMs to adjust to a regulatory environment that lacks uniformity. Compliance now demands that PBMs manage data across disparate systems—rebate records in one database, claims data in another—while meeting deadlines that differ from state to state. Robyn Crosson, vice president of government relations at Navitus Health Solutions, noted that regulations will soon dictate how reporting must be structured. “PBMs have to know where their data is and how to pull it because your rebate data are not in the same place as your claims data,” she said.
States Tighten Prior Authorization Rules
One of the most debated issues involves prior authorization requirements. States are increasingly scrutinizing how PBMs process these requests, particularly for medications used to treat mental health conditions, Alzheimer’s disease, and cancer. Currently, 45 states have established rules governing prior authorization, and 39 states impose restrictions on utilization reviews. Some legislative proposals aim to eliminate prior authorization entirely for specific conditions—such as a recent bill in Pennsylvania that would require PBMs to cover all FDA-approved Alzheimer’s treatments without subjecting patients to step therapy.
Crosson anticipates that more states will adopt similar measures, especially following last year’s legislative efforts to reform prior authorization processes. “Prior authorization is a hot target,” she said. “We’re seeing bills that are saying mental health medications should not have any prior authorization. And a bill in Pennsylvania just was dropped the 18th of August that says PBMs have to pay for all FDA-approved Alzheimer’s medications or treatments, with no step therapy. Cancer is another area where states are considering exempting medications from prior authorization.”
Another emerging trend involves formulary freezes, which would prohibit PBMs from making mid-year changes to their drug lists. Such restrictions could disrupt cost-saving strategies, including transitions from brand-name drugs to biosimilars. For example, Navitus reported saving clients $120 million by shifting patients from Stelara to a biosimilar alternative. Freezing formularies could prevent these adjustments, even when they reduce costs for both plan sponsors and patients.
Grant Wallace, who oversees benefits administration for the state of Arkansas, cautioned that rigid, one-size-fits-all policies could overlook individual patient needs. “Every instance is very unique. Every drug interaction is very unique. Every patient is very unique, and I think that gets missed when you try to engage in public policy,” he said. Wallace, director of Arkansas’s Employee Benefits Division, argued that inflexible state mandates might compromise personalized care—a balance PBMs already struggle to maintain while controlling overall costs.
Federal Legislation Risks Hidden Costs
Meanwhile, federal efforts are also advancing. The Patients Deserve Price Tags Act, proposed in Congress, would require PBMs to disclose drug prices at the point of sale. Two versions of the legislation exist, but both focus on providing consumers with clearer pricing information. However, the proposal includes a hold harmless provision, which could introduce financial risks. Under this rule, if a patient sees a listed price of $15 for a medication at Walmart but the actual cost rises to $18, the patient would still pay $15, while the employer absorbs the additional $3.
Crosson described this as a significant concern, noting that even minor price variations, such as a $50 difference in a GLP-1 drug, could accumulate quickly for plan sponsors. “The hold harmless would say that if patients were shown a price of $15 at Walmart, but when they get to Walmart now it’s $18, the patient would pay $15, and the employer would pay $3,” she said. “But we could be dealing with a GLP-1 drug or a drug that has a $50 difference. That will add it up. That’s the biggest and scariest issue.”
Sharon Faust, Pharm.D., senior vice president and chief pharmacy officer at Navitus, noted that the bill might push pharmacies toward a consumer-driven model where lower prices attract customers. Faust also warned that restrictions, such as prohibiting the removal of a brand-name drug when a biosimilar enters the market, could lead to higher costs for plan sponsors. “It’s really an unintended consequence. It really comes down to our ability to use utilization management and how that utilization management drives outcomes and creates sustainable trend,” she said.
PBMs now face the dual challenge of complying with state-level transparency demands while preserving the flexibility needed to design sustainable benefit programs. The difficulty lies not only in meeting regulatory requirements but also in ensuring that new policies do not weaken the cost controls that make pharmacy benefits viable. With federal and state initiatives progressing simultaneously, the industry is entering a phase of rapid transformation, where each policy adjustment could redefine how drugs are priced, accessed, and managed.
Crosson emphasized that the lack of coordination between state and federal actions creates operational headaches for PBMs. “We’re dealing with a patchwork of rules that change frequently,” she said. “Companies must continuously update their systems to stay compliant, which diverts resources from other priorities.” Faust agreed, stating that the industry’s ability to innovate in pharmacy management could be limited by overly rigid regulations. “The goal should be balance,” she said. “Patients need access, sponsors need cost controls, and providers need the flexibility to make necessary adjustments.”
Arkansas Tests Collaborative Policy Approach
Wallace highlighted that Arkansas has taken a cautious approach, working with PBMs to align state requirements with practical implementation. “We’re focused on outcomes rather than rigid mandates,” he noted. “The key is ensuring that any new rules improve patient care without creating unnecessary barriers.” His team has engaged in direct discussions with Navitus and other PBMs to refine proposals before finalizing legislation, aiming to avoid unintended consequences for both providers and beneficiaries.
As debates continue over the Patients Deserve Price Tags Act, industry stakeholders warn that the hold harmless provision could distort market incentives. If enacted, pharmacies might prioritize drugs with the lowest visible prices, even if they lack clinical equivalence. Faust pointed to potential disruptions in specialty drug markets, where complex pricing structures often require negotiation. “The act could force PBMs to adopt a one-size-fits-all pricing model,” she said, “which may not align with the subtle needs of different patient populations.”
The Arkansas experience suggests that collaborative policymaking may offer a middle ground. Wallace’s office has prioritized pilot programs to test the impact of prior authorization reforms before expanding them statewide. Initial data from these trials will inform broader legislative decisions, ensuring that any changes are evidence-based rather than imposed arbitrarily. “We want to learn from real-world applications before scaling up,” he said.
Crosson stressed that the industry’s top concern remains avoiding regulatory fragmentation. “When states move at different speeds, PBMs must build redundant systems to comply,” she explained. “This increases administrative burdens without necessarily improving patient outcomes.” She urged federal regulators to harmonize state-level requirements where possible, creating a more predictable operating environment. Without such coordination, she warned, the industry could face rising operational costs that ultimately translate to higher premiums for consumers.
The debate over PBM regulations will likely intensify in the coming months, as state legislatures finalize their proposals and Congress considers the Patients Deserve Price Tags Act. Industry observers predict that the most contentious issues, prior authorization, formulary flexibility, and price disclosure, will shape the next phase of healthcare policy. With both federal and state actions advancing in parallel, the outcome will determine whether the pharmaceutical benefit system becomes more transparent, more patient-centered, or simply more complex.
