The rising price of drugs such as Mylan's EpiPen has resulted in a firestorm of scrutiny from legislators and PBM customers.
Humira and Enbrel, popular anti inflammatories that represent a significant portion of the drug spend, saw double digit increases, even after rebates, between 2014 and 2015, Moody's said.
Because of the growing public attention, manufacturers are expected to moderate drug price increases over the coming year, a factor confirmed by large drug distributors and some drug manufacturers.
However, specialty drugs will account for a larger portion of the nation's drug spend, due in part to innovation and higher pricing.
The current PBM model could be altered or undermined by changes proposed by employers, customer groups and legislation that is aimed at drug companies, or even a slowing of brand drug price inflation, Moody's said.
Earnings guidance is down because branded drug inflation will moderate between 7-9 percent, from around 10 percent.
Pharmacy benefit managers feeling the heat include Express Scripts, CVS Health and Optum RX, which is part of UnitedHealth Group.
Both Express Scripts and CVS Caremark will continue to exclude certain drugs from their formularies to help clients cut drug spending, Moody's said.
The number of drugs on the PBM formulary exclusion lists for both CVS health and Express Scripts has risen from 76 and 48 respectively, in 2014, to 154 and 85 for 2017.
The problem is, Moody's says, that with limited transparency on actual pricing and discounts and rebates, it's not easy to determine if PBMs are making formulary decisions that are best for their clients or for themselves.
PBMs have disclosed little about the profits gained from placing certain drugs on their formularies, Moody's said.
PBMs have said they pass on the lion's share of the rebates they receive to their clients.
"We estimate that Express Scripts keeps about 15 percent of the rebates," Moody's said.
But none disclose this information.
A Health Transformation Alliance has highlighted employer concerns regarding rising drug costs. The coalition of more than 20 high-profile employers focuses on making the healthcare benefit market most cost-effective by changing how PMBs purchase and pay for prescription drugs.
They will do this by renegotiating contracts with PBMs, Moody's said. Branded drug price inflation will slow, but the impact on PBMs depends on contract terms.
The coalition has yet to release firm proposals, but are considering fee for service payment models, in which the PBM client would pay for the cost of the drug, plus an agreed upon fee.
Legislative proposals include allowing the federal government to negotiate drug prices for seniors covered under Medicare Part D, and modifying the reimbursement structure for dual-eligible patients.
In January 2015, a bipartisan bill introduced in the House would help pharmacies receive appropriate levels of reimbursement from PBMs. Independent pharmacies had argued they were losing money because they were being reimbursed by PBMs for less than it cost them to buy the drugs.