Home Economy FTC criticizes ‘enormous power’ of pharmacy benefit managers in scathing report

FTC criticizes ‘enormous power’ of pharmacy benefit managers in scathing report

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PBN Staff

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07/11/2024

THE FEDERAL TRADE COMMISSION said in its report “Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies” 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.” / AP FILE PHOTO/CHRIS CARLSON

PROVIDENCE – Drug middlemen are hurting small, independent pharmacies while reaping huge profits by inflating drug prices, according to a Federal Trade Commission staff report. In its report, “Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies,” found that pharmacy benefit managers – or PBMs – “wield enormous power over

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PROVIDENCE – Drug middlemen are hurting small, independent pharmacies while reaping huge profits by inflating drug prices, according to a Federal Trade Commission staff report. In its report, “Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies,” found that pharmacy benefit managers – or 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.” PBMs exert substantial influence over independent pharmacies, which struggle to navigate contractual terms imposed by PBMs that they find confusing, unfair, arbitrary and harmful to their businesses, according to the report. “Between 2013 and 2022, about 10% of independent retail pharmacies in rural America closed,” the FTC said. “Closures of local pharmacies affect not only small-business owners and their employees but also their patients. In some rural and medically underserved areas, local community pharmacies are the main health care option for Americans, who depend on them to get a flu shot, an EpiPen or other lifesaving medicines.” The FTC, which launched its probe into pharmacy benefit management services in 2022, found that the market for PBM services has become highly concentrated, with the largest PBMs owned by or connected to health insurers and affiliated with pharmacies. The largest top three PBMs, CVS Health Corp.-owned Caremark, Express Scripts and Optum RX, manage 79% of prescription drug claims for approximately 270 million people, according to the report. Combined with the next three largest PBMs – Humana Pharmacy Solutions, MedImpact, and Prime – the six largest PBMs manage 94% of prescription drug claims in the United States. "Given these relationships, PBMs and their affiliated entities may have the incentive and ability to engage in steering a growing share of prescription revenues to their own pharmacies through specialty drug classification, self-preferential pricing and pharmacy contracting procedures to target and control the business operations of pharmacies,” the FTC said. In addition, the FTC said, these health care conglomerates also operate some of the largest retail, mail order, and specialty pharmacies in the country, which compete with local independent pharmacies. “As a result, they wield enormous power and influence over patients’ access to drugs and the prices they pay,” the FTC said. “This can have dire consequences for Americans, with nearly 3 in 10 surveyed Americans reporting rationing or even skipping doses of their prescribed medicines due to high costs.” PBMs have also expanded into negotiating with pharmaceutical manufacturers on behalf of those plan clients, developing reimbursement terms and conditions for pharmacies, and developing formularies, the FTC found. “The leading PBMs are each part of massive health care conglomerates that are often comprised of a health insurer, pharmacies, and the PBM negotiator between health insurers and pharmacies – all rolled into one,” the FTC found. “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 FTC also found evidence that PBMs and brand pharmaceutical manufacturers sometimes enter agreements to exclude generic drugs and biosimilars from certain formularies in exchange for higher rebates from the manufacturer. "These exclusionary rebates may cut off patient access to lower-cost medicines and warrant further scrutiny by the commission, policymakers, and industry stakeholders,” the FTC said. The full report can be found here.