The Hidden ESG Risks of Pharmacy Benefit Managers

📊 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

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✅ 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.

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