The Federal Trade Commission issued an interim staff report on Pharmacy Benefit Managers (PBMs) as it prepares a lawsuit against the three largest PBMs. The report characterizes PBMs as inflating drug costs and hurting small pharmacies. The vertical integration of PBMs has led to the three largest PBMs managing nearly 80% of prescriptions in the United States.
The report identifies PBMs as a leading reason for high drug prices. The vertical integration of PBMs, which act as both health plans and pharmacies, is concerning, especially considering that 3 in 10 Americans ration or skip doses of medication due to high costs. Despite the importance and size of PBMs, there is little public data on them and their business practices, which is why the FTC issued this report.
The report had five key findings:
- The market for PBM services has become highly concentrated, and the largest PBMs are now also vertically integrated with the nation’s largest health insurers and specialty/retail pharmacies. As a result, PBMs now have substantial control over drug accessibility and pricing.
- The leading PBMs exercise significant power over Americans’ access to drugs and the prices consumers pay. This power allows PBMs to dictate which drugs are available, how they are priced, and determine which pharmacies patients can use, ultimately impacting individuals’ health care choices and creating significant financial burdens on patients.
- Vertically integrated PBMs often have the ability and incentive to prefer their own affiliated businesses, which is a disadvantage to independent pharmacies.
- Leading PBMs use increased concentration to enter “complex and opaque” contractual relationships that may disadvantage smaller, unaffiliated pharmacies and the patients they serve. This leads to uncertainties in reimbursement as well as operational hurdles for independent pharmacies.
- PBMs and brand drug manufacturers negotiate prescription drug rebates that are conditional on limiting access to cheaper generic alternatives. Negotiations between PBMs and drug manufacturers regarding rebates, which restrict access to more affordable generic drugs, raise concerns about the affordability and availability of cost-effective medications for patients while limiting market competition.
While an FTC lawsuit against the leading PBMs has yet to be filed, the report heavily hints that it will be coming soon along with possible regulation. The FTC warns that it will use its full authority wherever it finds evidence of unlawful practices and states that the initial evidence shared warrants further scrutiny and potential regulation.
Additionally, PBMs are facing increased scrutiny from Congress. The House Oversight and Accountability Committee held a hearing with the CEOs of the three largest PBMs on July 23. During the hearing, the CEOs of the three largest PBMs denied raising prices for consumers and alleged that their mission is to provide more affordable and higher quality benefits for their members, presenting an alternative narrative contrary to the FTC’s findings.
At the end of the hearing, Oversight Chairman James Comer (R-KY-1) suggested that he would support “busting up” PBMs. Comer believes that PBMs should not be owned by health insurance companies or be allowed to own pharmacies. Republicans and Democrats are very engaged in the issue, and they hope to hold more hearings soon. There is a bipartisan push to crack down on abuses by PBMs, and an FTC lawsuit against the leading PBMs would likely be welcomed by the Oversight Committee. Educating decision-makers about PBMs has been one of the highest priorities of the Advocacy Council’s Strike Force.
We’ll continue to monitor and bring you the latest updates on PBMs.
The Advocacy Council – ADVOCATING FOR ALLERGISTS AND THEIR PATIENTS
