4 Ways States Are Taking on Health Care Monopolies

Red and blue states agree it’s time to rein in Big Medicine

Photo credit: Jasleen_kaur

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Editor’s note: This piece was co-written by Emma Freer, senior policy analyst for health care at the American Economic Liberties Project.

The United States pays more for health care per capita than almost any other country in the world, and yet in return, famously receives rather middling results. One of the drivers of that overspending and underserving is corporate power, be it the ability of pharmaceutical middlemen to drive up the costs of prescription drugs, large hospital monopolies to corner the market and charge sky-high rates, private equity firms to gobble up providers and jack up prices while gutting essential services, or vertically-integrated conglomerates such as United Health Group to accomplish all of the above.

The Affordable Care Act, signed into law by President Barack Obama in 2010, did little to address these power imbalances, and in the years since, the federal government has failed to take meaningful new steps to reduce corporate consolidation in the health care sector. And costs are still rising: According to the latest available data, the median annual price for new drugs increased 35 percent from 2022 to 2023, hospital prices increased 6.9 percent from 2023 to 2024, and employer-sponsored health plan costs are expected to grow 9 percent from 2024 to 2025.

In the absence of federal action, many state legislators from both parties and in states running the ideological spectrum from left to right have attempted to take matters into their own hands, often successfully. These ideas are getting more popular with each passing legislative session, with similar bills advancing in ideologically diverse states.

Below, we detail four ways state legislators are grappling with corporate power in the health care sector.

Reforming PBMs

Pharmacy benefit managers — or PBMs — negotiate prescription drug benefits with manufacturers and pharmacies on behalf of insurers. The “Big Three” — CVS Caremark, Cigna Group’s Express Scripts, and UnitedHealth Group’s OptumRx — control nearly 80 percent of U.S. drug claims. Each is also vertically integrated with an insurer that also owns a pharmacy.

This business model, coupled with their market power, enables these middlemen to drive prices up and pharmacy reimbursement rates down. As a result, patients pay more and independent pharmacies are squeezed out of business.

Recognizing these harms, all 50 states have passed laws to regulate PBMs since 2017, with several seeking to do so during their 2025 legislative sessions. 

For instance, the Indiana Senate is considering two bills. One would require PBMs to pay a minimum dispensing fee, shielding independent pharmacies from the Big Three’s abuses. The second would initiate the creation of an independent PBM to serve the state employee health plan and Medicaid program following a recent audit that suggested the Big Three and other insurer-owned PBMs overcharged the state $1.6 billion over five years. 

The Virginia Senate is weighing the bipartisan Save Local Pharmacies Act, which would similarly require the state Medicaid program to use an independent PBM, following in the footsteps of its neighbor, Kentucky, which successfully saved hundreds of millions of dollars by contracting with a single PBM. If enacted, the Virginia bill is expected to save $39 million annually while standardizing independent pharmacy reimbursement.

Arkansas, meanwhile, is considering a measure that would prevent PBMs from owning pharmacies, ending the conflicts of interest that allow PBMs to preference their own pharmacies over independents.

Regulating private equity ownership

Like PBMs, private equity firms fuel health care’s consolidation crisis. Since the mid-2000s, these firms have aggressively invested in hospitals, nursing homes, and physician practices, “rolling up” similar acquisitions into larger conglomerates and then stripping them of their resources (including staff and equipment) before flipping them for a profit. This business model is extremely lucrative but comes at huge costs, including price gouging, chronic understaffing, patient deaths, mass layoffs, bankruptcies, and facility closures. 

State legislatures are increasingly scrutinizing private equity ownership, with at least 35 passing laws regulating healthcare transactions involving these firms. This session, lawmakers in several states are hoping to add to these regulations.

Back in Indiana, for example, House members are considering a bipartisan bill that would authorize the state attorney general to block private-equity acquisitions that “will result in adverse financial impacts of health outcomes for Indiana [healthcare] consumers.” Republican State Rep. Julie McGuire, lead sponsor of the bill, recently told The Wall Street Journal, “We know that when private equity gets involved — and there are plenty of studies — costs go up and patient care declines.” Connecticut is considering a similar measure.

Across the country, the Oregon Senate is considering a bipartisan bill that revives last session’s failed attempt to strengthen the state’s corporate practice of medicine ban. Such bans are intended to prevent non-physicians from owning or controlling medical practices But they are riddled with loopholes that render them ineffective.

For example, private equity firms often invest in management services organizations, which provide “management services” to a practice owned by a “friendly physician.” If enacted, the Oregon bill would close that loophole and also void noncompete agreements in physician employment contracts with corporate entities. A similar measure is under consideration in Vermont.

Banning noncompete agreements

Speaking of, several state legislatures are looking to ban physicians from being bound by non-compete agreements, which prevent them from taking a job with a new employer, usually for a set period of time and within a certain geographic range.

35 to 45 percent of physicians are bound by non-competes, as are many nurses, lab techs, dentists, and other health care facility staff. Extensive research shows those contracts prevent new medical facilities from opening and drive medical providers out of the local area, ultimately harming the very patients the health care system is supposed to serve. The Federal Trade Commission has estimated that eliminating non-competes would save the U.S. $148 billion in health care costs annually, “because of its relationship to consolidation and unnecessary costs in the industry.”

In addition to the Oregon bill, legislation to free health care workers from noncompetes is under consideration in New Hampshire, Indiana, Nebraska, Mississippi, Vermont, and Maryland. Ohio, Arizona, Wyoming, and Michigan are also considering complete bans on non-competes, which would, of course, encompass health care workers.

Establishing merger review processes

Consolidation has touched every corner of the health care industry, from hospitals to dentists offices to anesthesiologists. And not just human health care either: Veterinary practices are being rolled up.

This results in higher prices and worse outcomes for patients. For example, one study of hospital mergers found that they result in prices rising by more than 6 percent. And in consolidated areas, those prices stay high: Prices at hospitals that have monopolized an area are 12 percent higher than those in markets with at least four competitors.

Vermont this year is considering a bill to enhance the merger review process for health care-related transactions, giving the attorney general greater latitude to reject mergers that would adversely affect health care costs or access. New Mexico is considering similar legislation.

We’re sure we missed some things, so if you know of anything else that should be on our radar, leave a comment below.

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SIMPLY STATED: Here are links to a few stories that caught my eye this week.

• Uber and Lyft are facing an antitrust probe from the Federal Trade Commission after they allegedly colluded to lower the wages of New York City drivers.

• New York State legislators are making a renewed push to update state antitrust law.

• Arizona is working to protect groundwater supplies from out-of-state corporations.

• Kansas legislators want to allow their state pension fund to invest in Bitcoin.

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