Pharmacy benefit managers (PBMs) are a crucial part of the high drug costs in the United States, according to a recent report from the Federal Trade Commission (FTC). The report highlights how PBMs wield significant power in the healthcare system, engaging in opaque business practices that may be inflating drug costs and squeezing out competition from Main Street pharmacies.
PBMs were originally tasked with managing prescription drug benefits for various payors, such as employers and health insurance companies. However, over the years, PBMs have expanded their roles to include negotiating rebates from drugmakers, setting reimbursements for pharmacies, and developing drug formularies. The top three PBMs in the US – CVS Caremark, Express Scripts, and Optum Rx – processed the majority of prescriptions in 2023, consolidating their power within the industry.
The FTC’s investigation revealed that PBMs are directing patients towards their own affiliated pharmacies, disadvantaging smaller independent pharmacies. Affiliated pharmacies have been found to generate significantly more revenue compared to non-affiliated pharmacies, with a difference of $1.6 billion for two generic cancer drugs over two years. Additionally, the report found that PBMs engage in agreements with brand pharmaceutical companies to exclude cheaper drugs from their formularies in exchange for pricing and rebates.
FTC Chair Lina Khan emphasized the detrimental impact of PBMs on drug costs and independent pharmacies, especially in rural communities. The commission plans to use its authority to scrutinize dominant players in healthcare markets and ensure affordable healthcare access for Americans. The report was released in a 4-1 vote, with some commissioners expressing concerns about the limited data used. PBMs that do not comply with the FTC’s orders may face legal action from the commission.
In response to the FTC report, a spokesperson for Express Scripts disputed the findings, attributing rising prescription drug prices to the pharmaceutical industry. The FTC’s efforts to address inflated drug costs and anti-competitive practices in the industry are ongoing, with a focus on promoting transparency and affordability for consumers.
