FTC Report Acknowledges Impact Pharmacy Benefit Managers Have on Cost, Accessibility of Prescription Drugs

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In a new report, the FTC says pharmacy benefit managers act as middlemen in the pharmaceutical industry, leading to the squeezing of independent pharmacies and increases in prices for patients.

The Federal Trade Commission (FTC) has released an interim report analyzing the prescription drug middleman industry, emphasizing the outsized impact pharmacy benefit managers (PBMs) have on the pharmaceutical industry, negatively affecting patient affordability and accessibility of prescription drugs.1

Prescription pills in plastic medicine bottles.

Image credit: Rob Byron | stock.adobe.com

PBMs are at the center of the pharmaceutical distribution chain, serving as vertically integrated middlemen that wield substantial influence over patients’ access to drugs and how much they cost. PBMs serve as both health plans and pharmacists, in addition to playing other significant roles that has led to them accruing massive power.2

The report scrutinized the top PBMs in the industry for wielding their enormous influence to exercise control over the availability of drugs at certain prices, preference their own affiliated businesses that disadvantages smaller pharmacies and increases costs, create unfair contract terms with pharmacies, and limit access to lower-cost competitors.1

“The FTC’s interim report lays out how dominant pharmacy benefit managers can hike the cost of drugs—including overcharging patients for cancer drugs,” Lina M. Khan, chair of the FTC, said in a news release. “The report also details how PBMs can squeeze independent pharmacies that many Americans—especially those in rural communities—depend on for essential care.”1

According to the report, the 3 largest PBMs account for nearly 80% of all prescriptions filled in the United States, with the 6 largest processing over 90%.2 Additionally, 5 of the top 6 PBMs are members of corporate health care conglomerates that operate some of the largest health insurance companies in the country. This consolidation of power has led to PBMs having “significant control over which drugs are available, at what price, and which pharmacies patients can use” to get these medications.2

The consequences of this control are alarming; nearly 30% of Americans have reported rationing or skipping doses due to the high cost of drugs, according to the report authors.2

By way of self-preference of their own businesses, PBMs can steer patients away from unaffiliated pharmacies. Affiliated pharmacies were also found to receive much higher reimbursement rates than those of unaffiliated pharmacies. Pharmacies affiliated with the 3 largest PBMs have retained levels of revenue significantly above estimated drug acquisition costs, leading to nearly $1.6 billion in added revenue on 2 cancer drugs within 3 years.2

PBMs use their increased leverage over patients and small pharmacies to enter confusing contracts that can further disadvantage them. Independent pharmacies have few meaningful alternatives to PBMs, resulting in them feeling compelled to agree to exploitative contract terms.

In 2022, the FTC ordered the 6 largest PBMs – Caremark Rx, Express Scripts, Optum Rx, Humana Pharmacy Solutions, Prime Therapeutics, and MedImpact Healthcare Systems – to produce documents and data regarding their business practices. In 2023, supplemental orders were issued to 3 other entities affiliated with PBMs.2

Some of these PBMs have deliberately delayed compliance with the FTC orders and have not yet completed their required submissions. The FTC has demanded that the companies finalize their submissions required by the order, but cautioned in the report that “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 court to compel compliance.”2

“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,” continued Khan.1

References
1. Federal Trade Commission. FTC releases interim staff report on prescription drug middlemen. News release. Published July 9, 2024. Accessed July 9, 2024. https://www.ftc.gov/news-events/news/press-releases/2024/07/ftc-releases-interim-staff-report-prescription-drug-middlemen
2. Federal Trade Commission Office of Policy Planning. Pharmacy benefit managers: the powerful middlemen inflating drug costs and squeezing main street pharmacies. Published July 9, 2024. Accessed July 9, 2024. https://www.ftc.gov/reports/pharmacy-benefit-managers-report
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