Pharmacy benefit managers (PBMs) are back in the crosshairs. PBMs negotiate drug prices down on behalf of consumers and insurers – to the ire of pharmaceutical companies. Mark Cuban recently went on CNBC to call them “middlemen” and accuse them of “ripping off” employers and “colluding” with insurers, claiming patients would pay less if PBMs disappeared. Cuban has misunderstood the issue.

To understand what drives high drug prices, we must start at the beginning of the chain. Manufacturers set the initial list price. It is them who raise it year after year. In 2024, drugmakers increased list prices on at least 775 brand-name medications. Newly-launched drugs carried a median price of around $300,000, roughly one-third higher than the previous year. Those price hikes occur long before a PBM or insurer ever negotiates a rebate.

The pattern continues. Between April and July 2025, there were 281 brand price changes across the market. Among them were 271 increases and only 10 reductions. In July alone, manufacturers hiked prices on 162 drugs. The average increase was about 4 percent, with high-spend therapies like Trikafta rising closer to 7 percent. These are the figures PBMs face when they sit across the table from drugmakers.

Cuban is right about one thing: the system can be opaque. Employers often feel they don’t know where the money goes. But removing PBMs from the process wouldn’t fix that problem. It would eliminate the only major player pushing prices down, rather than up. PBMs aggregate the purchasing power of millions of people to negotiate lower net prices, forcing drugmakers to compete within their therapeutic classes. That’s how the system keeps some discipline in a market where list prices keep climbing.

There’s solid evidence this model works. Studies show PBMs lower overall prescription drug spending by about 40 to 50 percent compared to an unmanaged market, saving plan sponsors and patients an average of roughly $1,154 per person each year. In short, PBMs make the market behave more competitively, not less.

That leverage translates to real savings. Major PBMs report steady declines in out-of-pocket costs and growing use of low-cost biosimilars, all signs that market pressure still works when scale buyers negotiate.

Generic drugs show the same trend. Medicaid data indicate from April through July 2025, generic spending declined month after month. That’s a sign market forces are working, because scale-buyers have room to negotiate. It’s easy to forget it was PBMs who built this generic engine in the first place. Before they existed, brand drugs dominated formularies. Generics were treated as second-tier options. Today, 9 out of 10 prescriptions in the U.S. are generic, a shift largely driven by PBMs using their leverage to promote low-cost alternatives.

Some analysts argue consumers still overpay for certain generics because of opaque pricing and “spread” contracts within the commercial market. They point to gaps in transparency between what pharmacies are reimbursed and what employers ultimately pay. But that criticism doesn’t indict the PBM model itself. It highlights how unevenly prescription benefits are purchased. Smaller employer plans and state programs lack the scale to capture the same discounts large buyers do. Remove PBMs and those disparities only grow.

Cuban’s claim that PBMs “collude” with insurers ignores the fact that their negotiating role is what disciplines the market in the first place. Manufacturers don’t lower list prices out of goodwill. They do it because PBMs can steer volume elsewhere. That’s why therapies compete fiercely for formulary placement. PBMs use rebate structures not to inflate prices but to extract deeper discounts from manufacturers whose drugs would otherwise face generic substitution.

For all the talk about opacity, PBMs operate in one of the few corners of the healthcare system where prices fall over time. Generic acquisition costs have been declining for months. Utilization remains near record highs. Meanwhile, manufacturer list prices for brand-name and specialty drugs continue to climb steadily. PBMs remain the counterweight keeping the system from tipping further toward monopoly pricing.

Cuban’s broader frustration that employers and patients can’t see the math is legitimate. Transparency matters. But clarity shouldn’t come at the expense of competition. Employers can already choose pass-through contracts which disclose every rebate and fee, or opt for traditional models which trade confidentiality for deeper discounts. Those are market choices, not evidence of abuse. Opacity reflects how hard-fought negotiations work in any competitive market where revealing every bid would only weaken that pressure.

Even Cuban’s own company, Cost Plus Drugs, demonstrates that point. It sells generics directly to consumers at thin margins, yet many of its prices are already matched or beaten by retail pharmacies contracting through PBMs. The reason is simple: scale. PBMs negotiate on behalf of millions, while Cost Plus negotiates on behalf of one website. A cash-only model might work for basic generics, but it breaks down with complex or specialty drugs which require benefit management, safety checks, and insurer oversight.

The flawed criticism of PBMs taps into a broader frustration with a system which feels too complicated and too costly. But tearing out the middleman would remove the one force keeping drugmakers in check. The problem starts upstream, with the companies that print the price tag, not the buyers trying to lower it.

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