(The Hill) — Pharmacy benefit managers (PBMs) wield enormous power on the accessibility and affordability of prescription drugs, and a scathing new report from the Federal Trade Commission (FTC) found “these powerful middlemen may be profiting by inflating drug costs and squeezing Main Street pharmacies.”
The report signals a significant intensification of scrutiny into the business practice of PBMs, the opaque intermediaries in the center of the pharmaceutical distribution system.
The interim staff report, which is part of an ongoing inquiry launched in 2022 by the FTC, details how increasing vertical integration and concentration has enabled the three largest PBMs — CVS Caremark Rx, Express Scripts and OptumRx — to manage nearly 80% of the approximately 6.6 billion prescriptions filled in the United States.
Six of the largest PBMs control nearly 95% of all prescriptions, according to the report.
PBMs negotiate the terms and conditions for access to prescription drugs for hundreds of millions of Americans. They are responsible for negotiating prices with drug companies, paying pharmacies and determining which drugs patients can access and how much they cost.
As the industry has grown more consolidated, critics say PBMs have exerted greater control over patients’ access to medicine. PBMs are vertically integrated, serving as health plans and pharmacists. The largest PBMs are owned by insurers, which own specialty, mail order or retail pharmacies.
The report also found pharmacies affiliated with the three largest PBMs took in nearly $1.6 billion in excess revenue on just two cancer drugs in under three years by reimbursing their own pharmacies at much higher rates than unaffiliated ones.
PBMs “hold substantial influence over independent pharmacies by imposing unfair, arbitrary, and harmful contractual terms that can impact independent pharmacies’ ability to stay in business and serve their communities,” the report found.
FTC Chair Lina Khan in a statement said the report shows “how dominant pharmacy benefit managers can hike the cost of drugs — including overcharging patients for cancer drugs.”
Khan added that FTC found evidence of how “PBMs can squeeze independent pharmacies that many Americans — especially those in rural communities — depend on for essential care.”
The interim report also examined how the intermediaries enter into deals intended to block competition in favor of one manufacturer’s product.
PBMs and brand drug manufacturers negotiate rebates — volume-based discounts for plans and pharmacies — which the PBM then passes on to employers, in exchange for restrictions that limit access to less expensive competitors and pushes the manufacturer’s drug to patients instead.
“The result is that the dominant PBMs can often exercise significant control over which drugs are available, at what price, and which pharmacies patients can use to access their prescribed medications,” the report stated.
The agency has not brought any lawsuits or enforcement actions against any individual benefit manager, but lawmakers have been highly critical of industry business practices and the report could fuel congressional action as lawmakers look to find parties to blame for the high cost of prescription drugs.
“I’m proud that the FTC launched a bipartisan investigation into these shadowy middlemen, and its preliminary findings prove yet again that it’s time to bust up the PBM monopoly,” Rep. Buddy Carter, R-Ga., who is a pharmacist, said. “I am calling on the FTC to promptly complete its investigation and begin enforcement actions if — and when — it uncovers illegal and anti-competitive PBM practices.”
Drug companies and PBMs each blame the other for rising drug costs. Manufacturers say they need to raise list prices because of high PBM rebates, but the intermediaries argue that those rebates are passed on to health plan sponsors.
In a statement, the PBM trade group Pharmaceutical Care Management Association slammed the FTC for what it said was a biased report “based on anecdotes and comments from anonymous sources and self-interested parties” as well as just two “cherry-picked case studies.”
PCMA president and CEO JC Scott said agency leadership “has shown that they have pre-determined conclusions that they want to advance irrespective of the facts or the data, and this report demonstrates an intention to follow through on their agenda regardless of the evidence.”
