Blog Post

When Insurers Acquire Pharmacy Benefit Managers, Medicare Members Could Pay More

Health Insurer Acquisition of PBMs — the Prescription Drug Middlemen — Raised Premiums for Some Part D Beneficiaries

March 10, 2026

By:

Chris Tachibana, PhD, MS

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About 10 packs of prescription medicine laying in a pile in varying colors.

As legislators craft reforms for the pharmacy benefit managers (PBMs) who determine insurance coverage for prescription drugs, a new study by LDI Senior Fellow Abby Alpert and colleagues provides strong evidence to inform those proposals.

PBMs negotiate with drug manufacturers for rebates and discounts in return for including drugs on an insurer’s formulary of covered medications. Insurers that acquire PBMs work exclusively with those PBMs. However, acquired PBMs can serve other insurers.

“That’s a conflict of interest,” Alpert said. “The PBM has an incentive to potentially disadvantage the rival insurers, which could involve passing through a smaller share of rebates or charging them higher administrative fees.”

Indeed, Medicare Part D insurers that continued to work with rival insurers’ PBMs had double-digit hikes in their premiums — implying higher costs, the researchers found. In addition, Alpert said, “We did not find that any cost savings for insurers that integrated with a PBM were passed through to enrollees as lower premiums.”

The study first documents the dramatic growth in market share among Part D insurers that own PBMs and examines the overall impact on premiums. It then provides a close analysis of the consumer impact when UnitedHealth bought the last major independent PBM in the Part D market in 2015.

Rise in Insurer-PBM Mergers…and Plan Premiums

Alpert, Neeraj Sood of the University of Southern California (USC), and former LDI Associate Fellow Charles Gray created a unique database of data from 2010 to 2018 on insurer-PBM contracts and Medicare data on standalone Part D prescription drug plans. In 2026, Medicare is projected to spend $140 billion on Part D, and standalone plans cover 48% of enrollees.

The researchers demonstrated the growth in insurer-PBM integration by measuring the proportion of enrollees insured by companies with an integrated PBM versus insurers using a rival-owned PBM or a standalone PBM (Figure 1). In 2010, 30% of Part D beneficiaries used an insurer that owned a PBM. By 2018, that proportion was 80% — “a huge shift,” Alpert said.

The drop from 20% of beneficiaries covered by an insurer using an independent PBM in 2015 to 0% in 2016 ”was a turning point for the Medicare Part D market,” Alpert said, because UnitedHealth bought Catamaran, the last major standalone PBM. The acquisition forced all insurers without their own PBM to contract with a PBM incentivized to favor its owner—a rival insurer—or go without a PBM, a nonviable option for most insurers.

The researchers asked: Did nonintegrated insurers experience cost increases that were passed on to consumers as premium hikes?

“The answer is yes,” Alpert said. The sharp increase in premiums for nonintegrated plans after the UnitedHealth-Catamaran merger, is “consistent with integrated plans disadvantaging rivals without their own PBMs” (Figure 2).

PBM finances are proprietary, so the researchers can only infer that PBMs charged rival insurers high fees and gave their parent insurer larger shares of rebates and discounts. However, the increase in premiums while plan characteristics were held constant suggests rising costs.

Insurers that acquired a PBM might lower premiums if their administrative costs shrank or they received higher rebates. However, over the study period, integrated insurers reduced premiums by only 5%. The study showed that even this small overall reduction was unlikely to be an effect of the UnitedHealth-Catamaran merger.

**Figure 1. Growth in Part D Market Share of Insurers That Own a PBM Measured as Proportion of Total Enrollees**.Dark blue, share of enrollees covered by an insurer that owned a PBM. Red, share for insurers using a rival’s PBM. Light blue, share for insurers using a standalone PBM. From Gray et al. 2025.

**Figure 2. Part D Premiums for Beneficiaries With Plans Using an Integrated vs. a Rival’s PBM.** Blue, premiums for plans with an integrated PBM. Red, premiums for plans using a PBM owned by a rival company. From Gray et al. 2025.

Case Study: UnitedHealth Buys the Last Independent Part D PBM

The researchers’ analysis of the specific impact of the 2015 UnitedHealth-Catamaran merger supported the overall trend results. As nonintegrated insurers scrambled to adjust to a post-merger Part D market with no independent PBMs, enrollees in nonintegrated plans saw monthly premiums rise by $22 — a 42% increase over the the overall mean $53 premium.

Acquiring Catamaran may have enhanced UnitedHealth’s bargaining power in negotiations with drug manufacturers or created other efficiencies. In any case, consumers did not benefit.

“We don’t find evidence in this particular case about efficiencies from the acquisition, at least not that were passed to consumers as lower premiums,” Alpert said, “because premiums for UnitedHealth plans remained flat.”

Action Needed — Antitrust Monitoring and PBM Reform

Antitrust regulators must monitor the concentration of PBMs and insurers, Alpert said. “Consumer costs rise when they don’t have choices. If costs go up for non-integrated insurers, they may exit the market. A concentrated market is generally not good for consumers and could raise insurance prices overall.”

Legislators are taking note. PBM reforms to increase cost transparency and reduce incentives to advantage their owners are in the Consolidated Appropriations Act passed in February 2026 and in proposed Department of Labor regulations. Senators Elizabeth Warren, D-Mass., and Josh Hawley, R-Mo., introduced a bill to break up conglomerates of insurers, PBMs, providers, and health care managers.

The Appropriations Act represents the first federal legislation on PBMs. However, Alpert said, the law’s reforms do not affect insurers that own a PBM, which in the study accounted for 80% of the Part D market.

More Integrations to Scrutinize

The study results apply only to Part D plans.

Nonetheless, the commercial market, which includes people insured through their employers, also experienced major insurer-PBM integrations. Around 2018, Cigna acquired the Express Scripts PBM, and Aetna acquired the CVS PBM, with possible similar consequences for premiums, Alpert said. She is following up by studying integration in another part of the prescription drug supply chain: the merger of PBMs with pharmacies.

The study, “Disadvantaging Rivals: Vertical Integration in the Pharmaceutical Market,” was published in January 2026 in American Economic Journal: Applied Economics. Authors include Charles Gray, Abby Alpert, and Neeraj Sood.