Prescription Drug Coverage and PBM Reform

During the 2025 Illinois legislative session, state lawmakers passed legislation (Public Act 104-0027 – the Prescription Drug Affordability Act) to reform the Pharmacy Benefit Manager (PBM) industry in Illinois. Signed in July 2025 by Governor Pritzker, this law provides requirements, limitations, and prohibitions on the PBM industry, improving access to and affordability for prescription drugs for Illinois consumers. 

Typically, an insurer partners with a pharmacy benefit manager (PBM) to set up a prescription formulary or preferred-drug list. These prescription formularies will list covered medications, denoting some medications as preferred and others as non-preferred. Medications that have been classified as preferred will often have lower cost-sharing for the consumer. Non-preferred medications are more expensive than preferred medications, and consumers may need to file an appeal to access non-preferred medications at a lower cost. Some non-preferred medications may also be more difficult for consumers to obtain and may only be available via a mail order or specialty pharmacy.

A Pharmacy Benefit Manager, or a PBM, is a person, business, or entity, including a wholly or partially owned or controlled subsidiary of a pharmacy benefit manager, that provides claims processing services or other drug or device services, or both, for health benefit plans. The original purpose of PBMs was to bring drug prices down by negotiating with drug manufacturers.

Rising in prominence in the past few decades, PBMs have had a significant impact on the costs and access to medications, particularly prescription medications. 

Without regulation, this industry has grown to dominate most components of the prescription drug supply chain, negotiating with drug manufacturers, charging fees, and steering consumers toward “in-house” pharmacy networks. In recent years, these actions have resulted in rising drug costs for Illinois consumers and limiting consumer access via prescription formulary control and utilization management.

This is a process used by insurance companies, and contracted out to PBMs, to determine medical necessity and appropriateness of prescription drugs and medical treatments. Examples of utilization management are:

• Prior Authorization
• Step Therapy
• Quantity Limits

These processes can be a burden for patients, often requiring excess paperwork and steps to get access to treatments and medications.

Legislative action has been taken in Illinois to ease the burden on Illinois consumers, including the Prior Authorization Reform Act of 2022, the Healthcare Protection Act of 2024 (which banned step therapy for Illinois-regulated plans), and the Prescription Drug Affordability Act of 2025.

PBM steering (215 ILCS 5/513b1.1(b)(3)) occurs when a consumer is required or incentivized to use a specific pharmacy (including mail-order and specialty pharmacies) in which the PBM or its affiliate maintains an ownership interest or control. Steering also occurs when a PBM reimburses a pharmacy or pharmacist less than what the PBM reimburses itself or its own affiliated pharmacy for the same drug or pharmacist service. Beginning in 2026, steering is banned for many private and public plans in Illinois.

P.A. 104 – 0027:

• Prohibits spread pricing and steering and allows covered individuals to request summary information from the PBM.
• Requires PBMs to pass through 100% of rebates and fees.
• Defines specialty drugs (Illinois definition is shared below) and protects consumers' access to specialty drugs.
• Allows insurers and plan sponsors to audit its PBM re: rebates & fees at least once per year.
• Protects consumers’ ability to use prescription coupon and discount programs.
• Creates the Prescription Drug Affordability Fund and creates a grant program for pharmacies.

The enacted legislation also includes measures that will protect local pharmacies and require greater transparency in PBM business deals.

Per the Prescription Drug Affordability Act (PDAA), a specialty drug is a medication that is:

• prescribed for a person with a complex or chronic or rare medical condition.
• has limited or exclusive distribution.
• and requires both:
  • specialized product handling by the dispensing pharmacy or administration by the dispensing pharmacy; and
  • specialized clinical care, including frequent dosing adjustments, intensive clinical monitoring, or expanded services for patients, including intensive patient counseling, education, or ongoing clinical support beyond traditional dispensing activities, such as individualized disease and therapy management to support improved health outcomes.

The PDAA adds two more pricing options to the statute, which state that a consumer must not pay more for a drug than the least costly option (215 ILCS 5/513b1 (e)). These options include:

• The cost-share amount
• The retail price of the drug in the absence of drug coverage
• The discounted price presented by the covered individual through a no-cost drug program or drug manufacturer voucher or
• The discounted price presented by the covered individual through a discounted health care services plan.

While some changes began in 2025, the entirety of the PDAA went into effect on 1/1/2026.

Consumers may be able to find lower cost drugs through websites that enable comparison shopping and through drug coupon programs. When generic versions of a medication are available, they will also tend to be lower cost.

Additionally, per 50 Ill. Adm. Code 2030, a health insurance issuer is required to provide a public website that includes the cost-sharing applicable to drugs on the issuer’s formulary.