After Donald Trump signed an executive order slashing drug prices last week, experts have highlighted how pharmacy benefit managers (PBMs) could be hit the hardest despite pharmaceutical companies facing the potential of compressed margins amid poor pricing power.

What Happened: According to Thomas Shipp, the head of equity research at LPL Financial, the pressure that the pharmaceutical manufacturers are facing to lower prices domestically, “has the potential to compress margins by eroding pricing power and would provide a significant headwind to drug manufacturer share prices.”

However, he explains that the “middlemen” or PBMs that facilitate drug distribution and negotiate with pharmaceutical drug manufacturers to lower prescription costs have come under scrutiny for opaque pricing practices, like retaining rebates from drug manufacturers and "spread pricing."

“PBMs pay pharmacies less than what they charge health plan participants for drugs,” he said.

Another April 15 executive order signed by Trump called for increased transparency into PBM fees and requested that the role of these middlemen be reevaluated.

Shipp also underscored that PBM savings are expected, but direct price controls pose a longer-term risk for U.S.-heavy drugmakers. Transparency will reveal if PBM margin erosion can prevent deeper manufacturer cuts, he highlights.

“While many questions remain about how these executive orders will be implemented, after the initial news flow is digested, the net effect appears less detrimental to pharmaceutical drug manufacturers than to PBMs,” said Shipp.

“That said, reworking the way Americans buy their medicine is going to take a long time. Along the way, efforts to support direct-to-consumer sales will support both the manufacturers leading the charge and those they partner with for distribution,” he added.

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Why It Matters: Meanwhile, the billionaire investor and Shark Tank fame, Mark Cuban, called PBMs a “racket” in an X post by explaining that they negotiate rebates and not prices.

“They negotiate rebates. Not prices. In fact, the big PBMs control more than 95pct of the rebate negotiations. Big brand Pharma companies can’t negotiate with anyone else. IMO, it’s a racket,” he said.

While the April 15 order calls for transparency in pricing, Cuban highlights that 30% of the $4.9 trillion in healthcare spending is attributed to the overhead insurance companies and pricing distortions big PBMs create.

Here are the aforementioned PBMs operating companies that have performed in 2025.

Here are a few pharma-linked ETFs for investors to consider.

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