How New Law Impacts Healthcare Spend Forecasting

In April, Arkansas Governor Sarah Huckabee Sanders signed legislation making it illegal for Pharmacy Benefit Managers (PBMs) to own or operate pharmacies, effective Jan. 1, 2026. 

HB1150 is the first state law to impose this level of restriction, reflecting the growing scrutiny of pharmacy benefit practices. Even if your organization operates outside Arkansas, this PBM reform law signals a broader shift in pharmacy benefit regulation.

For finance teams, it’s an opportunity to reassess legacy cost structures and uncover hidden financial exposure in current PBM contracts.

Why PBM Reform Matters to Finance

Pharmacy benefits represent a significant and often unpredictable portion of employer healthcare spending – and those costs are rising significantly.

For example, in 2023, employers spent a median of 27% of healthcare dollars on pharmacy benefits, up from 21% just two years earlier, according to the Business Group on Health’s 2025 Employer Health Care Strategy Survey.

As pharmacy benefits consume a larger share of healthcare spend, finance teams face mounting pressure to control these costs. Yet, transparency gaps in PBM contracts often obscure accurate forecasting, liability management and rebate reconciliation.

At the same time, finance leaders face increasing expectations to demonstrate the ROI of benefits programs, navigate fiduciary responsibilities and maintain cost predictability.

PBM reform creates opportunities for finance teams to access more transparent pricing, better-aligned incentives and improved forecasting accuracy.

The Federal Trade Commission recently reported that the three largest PBMs – CVS Caremark, Express Scripts, and OptumRx – generated over $7.3 billion in excess revenue from specialty generics at their affiliated pharmacies between 2017 and 2022. For finance teams, this kind of vertical integration and margin stacking creates hidden costs that are difficult to model, audit or challenge without full visibility.

Key Financial Risks in Traditional PBM Contracts

Traditional PBM contracts carry hidden financial risks that can disrupt cost control and budgeting. Recognizing these risks helps finance teams manage pharmacy spend more effectively. Key financial risks embedded in traditional PBM contracts include:

• Spread Pricing: PBMs bill employers more than they reimburse pharmacies, pocketing the difference as undisclosed revenue — a practice that can significantly increase costs without transparency.
• Rebate Retention: PBMs negotiate rebates with drug manufacturers that may not be passed back to the employer, distorting true cost reporting and financial visibility.
• Opaque Fee Structures: PBMs often bundle administrative fees, burying line-item costs and making it difficult to see the true expenses involved.
• Compliance Exposure: PBM contracts lacking clear pricing and fiduciary terms make it difficult to prove ERISA compliance, raising legal and financial risks.

These risks are embedded in legacy pharmacy benefit contracts. PBM reform efforts like HB1150 are designed to address these issues.

Action Areas for Finance Teams

To address these risks amid ongoing PBM reform efforts, finance teams should take the lead in collaboration with HR and legal to evaluate current PBM arrangements. Focus areas include:

Contract Review and Rebate Flows

• Do contracts include clauses requiring full rebate pass-through to the employer?
• Are administrative fees itemized or bundled?
• Is there language establishing fiduciary responsibility and audit rights?

Key Performance Indicators to Monitor:

• Percentage of rebates fully passed through to the employer
• Ratio of itemized versus bundled administrative fees
• Number of audit findings related to contract compliance

Performance Benchmarking and Cost Modeling

• How does PMPM (per member per month) drug cost under the current PBM compare to national benchmarks?
• Can you isolate the cost impact of using PBM-owned pharmacies?
• Are rebate estimates reconciled to actual receipts and reflected in financial reporting?

Key Performance Indicators to Monitor:

• PMPM drug spend variance versus industry benchmarks
• Percentage of total drug spend attributed to PBM-owned pharmacies
• Accuracy of rebate reconciliation (estimated vs. actual)

Alternative Vendor Models

• Evaluate PBMs or pharmacy care models that separate prescribing from dispensing and de-emphasize rebate-based incentives
• Seek models with pharmacist-led care, transparent pricing and outcome-based metrics
• Consider how vendor structures affect budget predictability and accruals

Key Performance Indicators to Monitor:

• Budget variance before and after vendor model change
• Percentage of costs tied to transparent pricing components
• Frequency of accrual adjustments related to pharmacy spend

Access and Operational Risk

• PBM practices may contribute to pharmacy closures and reduced access, affecting employee productivity and increasing indirect costs
• Monitor absenteeism trends, refill delays, or complaints that could point to access gaps

Key Performance Indicators to Monitor:

• Employee absenteeism rates linked to pharmacy access issues
• Average refill turnaround time
• Number of access-related complaints or grievances

State and Federal PBM Reform Momentum

Alongside internal strategies, understanding evolving regulatory trends is critical. 

It’s important to understand that HB1150 is part of a broader PBM reform trend. In 2023 alone, 33 PBM reform bills were enacted across 24 states. Examples include:

And the PBM reform efforts are continuing this year. Here’s just one example of many: In New York, Assembly Bill A6546 is currently under review. If passed, it would ban PBMs from owning, operating or controlling pharmacies in the state. 

At the federal level, a bipartisan group of 39 state attorneys general recently urged Congress to enact legislation that would impose limits on PBM ownership and business models, signaling a growing national push for PBM reform.

What Finance Leaders Should Watch Next

Stay alert to developments that could impact multi-state employers and cost management, such as:

• Timing of additional state-level bans and their extraterritorial effects on multi-state employers
• How federal legislative proposals align with state models like HB1150
• Impact of new vendor models on benefit cost trendlines, forecast accuracy and rebate reconciliation processes

Key Takeaway

Pharmacy benefit strategy is increasingly relevant to budget planning and compliance oversight. PBM reform efforts like HB1150 underscore the financial exposure tied to opaque PBM relationships.

As regulatory scrutiny grows, finance leaders have a strategic opportunity to revisit vendor contracts, rebate structures and pharmacy access to strengthen cost predictability, mitigate compliance risk and improve benefit ROI.

Next Steps

• Audit all PBM contracts for rebate flow, pricing structure, and fiduciary language
• Model total drug spend under alternative vendor scenarios
• Work cross-functionally with HR and legal to evaluate options ahead of benefit renewals
• Develop a set of financial KPIs to track pharmacy plan performance quarterly

Pharmacy benefit design isn’t just an HR function. It’s a material financial lever that demands finance oversight amid ongoing PBM reform efforts.