The Wall Street Journal had a great article last week about how Spotify and others were able to loosen the grip of Apple’s App Store. Per the article, these companies used multiple strategies over a ~10-year period to bring about real change.
Coincidentally, I’ve been reflecting on the tremendous market power that health plans and pharmacy benefit managers (PBMs) have these days.1 Just a few months ago, CVS Caremark made the decision to exclude Zepbound (Eli Lilly) as a weight management treatment from its standard commercial formularies, instead preferring Wegovy (Novo Nordisk). Caremark was not shy about this being a financial decision, likely driven by rebate arrangements with Novo. From Caremark:
CVS Caremark® is committed to helping to lower out-of-pocket drug prices and drive better health outcomes for consumers by going head-to-head with drug manufacturers to negotiate discounts […]
That's why we recently partnered with Novo Nordisk to significantly increase access to Wegovy for our members at a more affordable price. On July 1, 2025, we will take a formulary action to prefer Wegovy and remove Zepbound.
Now that’s a lot of power to exclude an FDA-approved drug, especially as the PBM for ~90 million Americans. Formulary exclusions are now standard practice, first making headlines a decade ago when Express Scripts blocked Gilead’s hepatitis C drugs in favor of AbbVie’s Viekira Pak. The GLP-1 category is the latest - and most visible - example of this power being exercised across a broad treatment class.
As long as vertical integration continues across US insurers, PBMs, and other entities, it is hard to imagine a world where these challenges go away for pharma. On the contrary, getting a drug favorably positioned with payers and PBMs seems to be more challenging each year.
Given these dynamics, one wonders how manufacturers can strengthen their hand. As this WSJ article highlights, the App Store may offer some lessons.
But first, some background
The App Store was first launched in 2008 and led to an explosion in the mobile app market. Over the next two decades the iPhone became the dominant mobile platform in the US, beating out competitors like BlackBerry and Nokia.
As the dominant mobile player, Apple also became a gatekeeper between iPhone owners and mobile apps. At first, Apple leveraged this position to charge a 30% fee on new app downloads. Apple extended this 30% fee when it rolled out new services for in-app purchases (2009) and in-app subscriptions (2011).2 Analysts estimate that App Store sales alone made up ~8% of Apple’s 2024 revenues (~$30B).
Tensions grew over time as app developers became more publicly opposed to the “Apple tax”. Ironically, the iPhone’s superior app experience was a big contributor to its success in the first place (I can’t be the only one who remembers trying to use Facebook on a BlackBerry…). But this symbiotic relationship eventually became lopsided as Apple concentrated its market position.
Turning back to pharma…
Of course, the App Store analogy only goes so far in pharma. Consumers can easily switch from iPhone to Android, but can’t easily switch PBMs. And unlike Apple, PBMs/GPOs negotiate on behalf of plan sponsors with finite budgets.
But, with that disclaimer out of the way, we can see real similarities between the App Store and PBMs:
Gatekeeper marketplaces: Apple controls app access via the App Store; PBMs control drug access via formularies
Rent extraction: Apple takes a 30% cut of app purchases; PBMs profit on drug sales via fees, rebate retention, and spread pricing
Rule-based leverage: Apple enforces App Store rules; PBMs impose tiers, exclusions, and utilization management
Competition with suppliers: Apple sells its own apps (e.g., Apple Music); PBMs now market private-label biosimilars
Profit incentives: Apple gains from apps with bigger in-app spending; PBMs gain from drugs with bigger rebates
Like the App Store, PBMs and pharma manufacturers began with a more symbiotic relationship fueled by the expansion of drug coverage in the United States, but rising drug costs and vertical integration shifted the balance of power over time. PBMs remain the gatekeepers today, but now operate in a system designed to minimize drug spend, making access harder for manufacturers.
So what can be learned from the App Store?
From the WSJ article, Spotify, Epic Games, and others used multiple tactics to chip away at the App Store’s dominance. These spanned legal and regulatory challenges, platform workarounds, innovative data generation, and broad stakeholder engagement - and it took nearly a decade to see real change.
1) Encourage legal and regulatory changes: The first tactic was relentless legal pressure and sharper messaging that cast Apple as a modern-day “robber baron” that raised costs for consumers. Over time, that consistency, combined with global regulatory pressure, led to more favorable rulings for app developers.
We can see echoes of this strategy in biopharma today. Industry trade groups like PhRMA, BIO, and NPC have sharpened their message that PBM “middlemen” drive up drug costs and threaten innovation - a theme now repeated by CEOs and lawmakers. New coalitions like the IRA Watchdog (Merck, AstraZeneca, BMS, Lilly) are coordinating to amplify the industry’s stance. Lawsuits have already been filed over Caremark’s decision to exclude Zepbound, and similar legal challenges are likely in the future. The impact of these efforts remains to be seen, but the trend points toward more collective action and legal pressure on PBMs.
2) Work around the platform: Because Apple’s 30% fee applied only within its ecosystem, companies like Epic Games tried steering users to non-App Store purchases. Apple resisted, but courts eventually forced it to allow some workarounds.
Drug makers are experimenting with similar strategies. For example, LillyDirect connects patients to independent telehealth prescribers and fulfillment through partners like Amazon Pharmacy and Truepill. These models may be most successful in treatment areas where payer coverage is inconsistent and patients are willing to pay out-of-pocket (e.g., weight loss, migraine), but are unlikely to gain traction in higher-cost areas like oncology. Interest in direct employer contracting is also resurfacing, though adoption remains limited by logistical and scalability challenges.
3) Prove that gatekeepers are impacting outcomes: Spotify generated its own data through A/B testing (via Google Play) to show how App Store-like rules impacted purchase behavior - evidence that eventually supported legal and regulatory arguments.
In biopharma, demonstrating the patient impact from formulary restrictions is a nontrivial exercise. “Non-medical switching” is often cited, but connecting restrictions to worse adherence and outcomes can be complicated by data limitations and the need for complex analyses to isolate effects. It’s possible that new sources of evidence, such as real-world data from patient support programs (PSPs), direct-to-consumer platforms, companion apps, ambient scribes, and wearables could better capture access-, adherence-, and outcome-related data to quantify these impacts.
4) Be so good they can’t ignore you: Spotify and Epic Games were successful businesses because customers loved their products. This consumer backing made it harder for governments and lawmakers to dismiss their challenges.
For manufacturers, the best leverage comes from developing drugs so effective they can’t be excluded or substituted. This leverage can be strengthened by enhancing the overall value of those therapies: targeting rare and underserved conditions, generating robust evidence of benefit, bundling with diagnostics and support services, and offering innovative payment models.
Increasingly, manufacturers are also engaging a diverse set of stakeholders beyond insurers - including governments, advocacy groups, employers, and providers - to widely communicate the value of their drugs and broaden the constituency for access.
The App Store example shows that even the most entrenched gatekeepers can be challenged once enough stakeholders are compelled to act. The same may prove true for PBMs. But just as it took Spotify and Epic Games nearly a decade to bring about change to the App Store, manufacturers may need to prepare themselves for the long haul – and one where multiple strategies are pursued at the same time.
Throughout this piece, I use “PBMs” as shorthand for PBM + affiliated group purchasing organizations (GPOs). Today, most rebate contracting is handled by GPOs (e.g., Ascent, Emisar, Zinc), while PBMs themselves still control formularies and utilization management
For example, if I subscribe to The Wall Street Journal inside the iPhone app or buy a bundle of gold bars in Candy Crush, Apple would process the payment, keep 30%, and send the rest to the developer. There are a few exceptions: since 2016, fees on subscriptions drop to 15% after the first year, and since 2021 small developers earning < $1M in App Store revenue can apply for Apple’s Small Business Program to pay only 15%
If you want to learn more, you should run (not walk) and subscribe to Stratechery by Ben Thompson. He is a pioneer of tech journalism and has spent the better part of 15 years writing about Apple and the App Store