You may have seen Pharmaceutical Benefit Managers (PBMs) in the news recently, but what are they? Essentially, they are negotiators in the pharmaceutical supply chain. They work on behalf of employers, health insurers, and government programs to secure discounts on the prices charged for prescriptions. Right now, some PBMs are compensated through performance-based arrangements tied to the list price of drugs, giving them a direct financial incentive to negotiate harder discounts for the plans and patients they serve.
PBMs are not without their critics, and some of that criticism is legitimate. Concerns about vertical integration, transparency, and the treatment of independent pharmacies deserve serious attention, and Louisiana has already taken meaningful steps toward greater PBM transparency. But the delinking legislation moving through the Louisiana Legislature addresses none of that. What it does is ban performance-based compensation structures and mandate a flat-fee model instead. Supporters frame this as patient protection. In reality, it is a government-imposed price control on how private parties may structure their own contracts, and that is a different matter entirely.
The Pelican Institute has written about this pattern before. Whether it is caps on credit card interest rates, mandated interchange fee structures, or now dictating how PBMs may be compensated, the mechanism is always the same: government substitutes its judgment for that of the market and then expresses surprise when outcomes get worse. As we have argued in this space, price controls do not eliminate the underlying economic pressures, they simply redirect them, usually in ways that hurt the very consumers they were meant to help.
Here, the evidence is particularly stark. When PBMs lose the financial incentive to negotiate aggressively, the competitive pressure they apply to drug pricing is weakened. Studies estimate that eliminating performance-based PBM compensation could result in more than $32 billion in additional drug costs nationally. Louisiana families would not be spared. This matters especially here: Louisiana household incomes rank 48th in the nation, meaning our families are already stretching further than almost anyone else in America to cover basic expenses. Health insurance premiums in Louisiana are already rising by roughly 24 percent in 2026. Policies that further inflate those costs—even modestly—land harder here than they would almost anywhere else.
It is also worth being clear about what this legislation does not do. Manufacturers set drug list prices. A law that bans PBMs from being compensated based on those list prices does nothing to compel manufacturers to lower them. There is no mechanism in these proposals that produces a lower price anywhere in the supply chain. It simply removes the incentive for PBMs to fight as hard for better deals, while the underlying price pressures remain untouched.
At the Pelican Institute, we believe in markets, competition, and the freedom of private parties to structure their contracts as they see fit. Informed consumers can then select what works best for them. Under the current system, employers and health plans can choose to reward their PBM for delivering better outcomes, just as any business might pay a performance bonus to someone who saves the company money. That is not a flaw in the system; it is a feature. It is competition working as it should. A government mandate forcing a one-size-fits-all flat-fee model removes that signal entirely. When government picks the compensation structure, it is no longer the market setting prices. It is Baton Rouge.
Price controls have never worked: not on credit cards, not on energy, not on rent, and not in the pharmaceutical supply chain. Be careful what they promise, even when wrapped in consumer protection.
