Document Type
Paper
Publication Date
11-2025
Abstract
Medicaid programs are currently under significant pressure from the passage of H.R. 1 (the “One Big Beautiful Bill”), which cuts federal Medicaid spending by an estimated $911 billion over 10 years — billions of dollars per state — and is projected to increase the number of uninsured by 10 million. H.R. 1 also imposes significant administrative burdens on both American families and states, by creating new work and reporting requirements. Faced with these challenges, cash-strapped states are scrambling to reduce costs.
One way certain states can realize cost savings is by removing Pharmacy Benefit Managers — middlemen known as “PBMs” — from their Medicaid pharmacy benefit programs. Examining just 46 drugs known to have significant PBM markups, we find that 13 states could save at least $100,000 to $29 million annually by shifting these drugs to fee-for-service payments — savings that come from reducing corporate markups, not from cutting benefits or pharmacy reimbursements. More comprehensive estimates indicate potential savings from removing PBMs from Medicaid could be substantially larger — in the tens of millions to billions of dollars per state annually.
Disciplines
Health Law and Policy | Law
Recommended Citation
Hannah Garden-Monheit & Tyler Haydell,
Cutting Out the Middleman: How States Can Save Medicaid Dollars by Firing Pharmacy Benefit Managers,
(2025).
Available at:
https://scholarship.law.columbia.edu/law_economy/6
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