The Hidden ESG Risks of Pharmacy Benefit Managers

Governance
:   
ESG Disclosure & Reporting
July 15, 2025

📊 1. IFRS Sustainability Disclosure Standards (S1 & S2)

Developed by the ISSB under the IFRS Foundation

🔹 IFRS S1 – General Sustainability-related Disclosures

  • Requires companies to disclose material sustainability-related risks and opportunities that could affect their enterprise value.
  • PBM practices represent a social and reputational risk for insurers, pharmaceutical companies, and healthcare providers.
  • Companies that profit from PBM opacity may face:
    • Regulatory pressure
    • Litigation
    • Public backlash over drug affordability

✅ Relevant topics:

  • Business model and value chain impacts
  • Fair access to products and services
  • Reputational risk related to healthcare cost burden

📘 2. SASB Standards

Now under IFRS, SASB offers industry-specific ESG metrics

🔹 Relevant SASB Industries:

  • Managed Care (HC0302)
  • Biotechnology & Pharmaceuticals (HC0101 & HC0102)
  • Drug Retailers (HC0701)

🔍 Examples of Applicable SASB Topics and Metrics:

HC0302-11: Pricing & Billing Transparency (Managed Care)

“Discussion of how pricing information for services is made publicly available”
  • PBMs contribute to price opacity; companies that rely on them must disclose how they handle this.
  • Lack of transparency creates ESG governance risks for insurers and PBMs.

HC0701-02: Drug Safety and Side Effects (Drug Retailers)

This includes disclosure on access and affordability issues.
  • Independent pharmacy closures due to PBM abuses reduce drug access and adherence, harming public health — a material social issue.

HC0101-09: Access to Medicine (Biotech & Pharma)

“Number of patients receiving assistance” or affordability programs
  • If manufacturers rely on PBMs that restrict access or inflate prices, that’s a social impact disclosure risk under SASB.

🌍 3. GRI Standards (Global Reporting Initiative)

GRI takes a stakeholder impact perspective rather than investor-centric (like IFRS/SASB), making it well-suited to reporting on PBM impacts.

🔹 Key Relevant GRI Topics:

GRI 203: Indirect Economic Impacts

“Impacts on availability of services in underserved areas”
Independent pharmacy closures linked to PBM abuses fit here.

GRI 207: Tax

If PBMs help shift profits through opaque rebate structures, tax fairness issues arise — reportable under GRI 207.

GRI 416: Customer Health and Safety

“Ensuring product/service safety, accessibility, and effectiveness”
Steering patients or denying coverage via formulary exclusion could be relevant.

GRI 419: Socioeconomic Compliance

Noncompliance with laws, lawsuits, or regulatory probes into PBM practices are disclosable under GRI 419.

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🧭 ESG Risk & Opportunity Framing for PBMs

‍

Category Risk/Issue ESG Pillar Framework
Price opacity Spread pricing, rebate capture, formulary manipulation Governance SASB, IFRS S1
Access Independent pharmacy closures, medication nonadherence Social SASB, GRI 203/416
Fairness Anti-competitive behavior (steering, self-dealing) Governance GRI 419
Public health Reduced access in rural/low-income communities Social GRI 203, SASB
Regulatory Lawsuits, state bans on spread pricing or DIR clawbacks Governance IFRS, GRI
Business model Overreliance on rebates may pose systemic business continuity risk Governance IFRS S1

‍

✅ Summary

The role of PBMs is highly material to ESG disclosures, particularly for:

  • Health insurers
  • Pharmaceutical companies
  • Drug retailers
  • PBMs themselves

Companies involved in the healthcare supply chain should evaluate PBM practices as a governance and social sustainability issue and disclose accordingly under IFRS S1, SASB, and GRI.

‍

Managed Care - Sustainability Accounting Standard

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