HQ Team
July 10, 2024: Pharmacy benefit managers, who handle about 95% of US prescriptions, are inflating drug costs and squeezing independent pharmacies, according to a report.
The Federal Trade Commission’s interim report on the prescription drug middleman industry underscored the impact pharmacy benefit managers (PBMs) have on the accessibility and affordability of prescription drugs.
In the United States, a pharmacy benefit manager is a third-party administrator of prescription drug programs for commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program, and state government employee plans.
The report finds that PBMs wield “enormous power” over patients’ ability to access and afford their prescription drugs, allowing PBMs to significantly influence what drugs are available and at what price.
About 30% of Americans surveyed reported rationing or even skipping doses of their prescribed medicines due to high costs.
Unfair contractual terms
The report found that 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 six largest PBMs in the US are Caremark Rx, LLC, Express Scripts, Inc., OptumRx, Inc., Humana Pharmacy Solutions, Inc., Prime Therapeutics LLC, and MedImpact Healthcare Systems, Inc.
The Commission’s interim report stems from special orders the FTC issued in 2022, under Section 6(b) of the FTC Act to these six companies.
In 2023, the FTC issued additional orders to Zinc Health Services, LLC, Ascent Health Services, LLC, and Emisar Pharma Services LLC, which are each rebate aggregating entities, also known as “group purchasing organizations,” that negotiate drug rebates on behalf of PBMs.
The PBMs are part of “complex vertically integrated health care conglomerates, and the PBM industry is highly concentrated,” according to the report.
Overpricing cancer drugs
“This concentration and integration gives them significant power over the pharmaceutical supply chain,” and has allowed PBMs to profit at the expense of patients and independent pharmacists.
“The FTC’s interim report lays out how dominant pharmacy benefit managers can hike the cost of drugs—including overcharging patients for cancer drugs,” said FTC Chair Lina M. Khan.
“The report also details how PBMs can squeeze independent pharmacies that many Americans—especially those in rural communities—depend on for essential care.
“The FTC will continue to use all our tools and authorities to scrutinize dominant players across healthcare markets and ensure that Americans can access affordable healthcare.”
The top three PBMs processed nearly 80%of the approximately 6.6 billion prescriptions dispensed by US pharmacies in 2023, while the top six PBMs processed more than 90%.
No accountability
Pharmacies affiliated with the three largest PBMs now account for nearly 70% of all specialty drug revenue. PBMs oversee critical decisions about access to and affordability of life-saving medications, without transparency or accountability to the public.
Vertically integrated PBMs appear to have the ability and incentive to prefer their affiliated businesses, creating conflicts of interest that can disadvantage unaffiliated pharmacies and increase prescription drug costs, according to the report.
Several PBMs were issued orders and they have not been forthcoming and timely in their responses, and still have not completed their required submissions, which has hindered the Commission’s ability to perform its statutory mission, according to the report.
The FTC staff have demanded that the companies finalize their productions promptly. If, however, any of the companies fail to fully comply with the orders or engage in further delay tactics, the FTC can take them to district court to compel compliance.
The Commission voted 4-1 to allow staff to issue the interim report, with Commissioner Melissa Holyoak voting no.
