PBM Rebates in Maryland: Hidden Profits and Lack of Transparency in Workers’ Compensation

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PBM Rebates – Maryland – They Don’t Make Your Medicine — But They Make Billions

Pharmacy Benefit Managers (PBMs) don’t manufacture drugs. Yet they earn billions of dollars every year and often share those profits with large insurance companies. Unfortunately, patients rarely see those savings passed along at the pharmacy counter.

PBM Regulation in Maryland: A Closer Look

In Maryland, PBMs are regulated—but not fully transparent. The Maryland Insurance Administration has taken some steps. These include:

Requiring PBMs to register with the state
Conducting financial audits
Regulating contracts between PBMs and pharmacies

However, major gaps remain.

Workers’ Compensation and PBM Rebates: No Reporting Required

Here’s the problem:
Workers’ compensation insurance companies in Maryland are not required to report the amount of money they receive from PBM rebates.

Even though PBMs often share data about drug spending and rebates, there is no law that forces insurance companies to reveal how much they benefit from those rebates. That includes companies like Chesapeake Employers Insurance Company, Maryland’s largest workers’ comp provider.

The Hidden Relationship Between PBMs and Insurance Companies

The relationship between PBMs and plan sponsors—such as workers’ compensation insurers—is contractual. This means:

Reimbursement rates are set by private agreement
There’s no transparency on rebate sharing or pricing practices
Patients and employers don’t know how much money changes hands

What the GAO Report Reveals About PBMs

In March 2024, the U.S. Government Accountability Office (GAO) released a report on PBM regulation in five states:
Arkansas, California, Louisiana, Maine, and New York.

Maryland was not included. Why? Because PBMs in Maryland aren’t required to report how much they earn—or how much they share with insurance companies.

Why the GAO Investigated PBMs

Prescription drug spending continues to rise. In fact, private health plans spent nearly $152 billion in 2021, an 18% increase since 2016.

Health plans depend on PBMs to:

Process drug claims
Create pharmacy networks
Negotiate rebates from drug manufacturers

But critics argue that PBMs keep a large portion of those rebates—and don’t lower costs for patients. In response, every U.S. state passed at least one PBM-related law between 2017 and 2023.

What the GAO Found: Key Takeaways

Here are three key findings from the GAO report:

1. Strong Enforcement Is Essential

State regulators emphasized the need for:

Clear laws and definitions
Tough penalties for non-compliance
Ongoing monitoring of PBM practices

Some pharmacy groups supported this, while health plan associations stressed the need for better oversight.

2. Drug Pricing and Reimbursement Rules

States passed laws to:

Limit how PBMs use manufacturer rebates
Prevent “spread pricing”, where PBMs pay pharmacies less than they charge insurers

3. Transparency Through Licensure and Reporting

To improve accountability, states required PBMs to:

Get licensed or registered
Disclose data on drug pricing, rebates, and fees charged

Why This Matters for Maryland

Maryland has taken small steps, but there’s still no law requiring PBM rebate disclosure by workers’ compensation insurers. As a result, millions of dollars in savings may be going unreported—and not reaching the patients who need them most.

Until Maryland joins other states in stronger PBM oversight, transparency will remain limited, and drug costs may continue to rise unnecessarily.

Final Thought

The GAO report highlights how other states are tackling this issue. Maryland must do the same. Patients, employers, and taxpayers deserve to know where their healthcare dollars are going.

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