Consolidating with health insurers, pharmacies and other medical businesses lets them favor affiliated businesses under their own corporate parents, the agency said.
Today the six largest PBMs – which include units of CVS Health Corp., Cigna Group and UnitedHealth Group Inc. – account for 95% of US prescriptions, the agency found.
Pressure on industry
Pharmacy benefit managers have attracted growing attention in Washington, and the FTC’s study adds to pressure on the industry. Drugmakers have long accused PBMs of pushing up medication costs. Both employer groups that fund prescription benefits and independent pharmacies that get paid by PBMs have criticized them. Lawmakers are weighing new restrictions on PBMs, and some states have enacted reforms.
The FTC described how PBMs “steer” patients to their own dispensaries including mail-order and specialty businesses, to “advantage their own pharmacies while excluding rivals.” It cited internal emails where executives at top pharmacy benefit managers noted client “concerns” about the pricing discrepancy on common drugs and strategized about how to manage the “optics.”
In one internal communication cited by the FTC, an unidentified executive noted that patients could get a commonly prescribed treatment for leukemia, a generic version of Novartis AG’s Gleevec, for $97 at Costco Wholesale Corp., while the company’s own mail-order pharmacy charged $19,200. The agency didn’t identify which company that message was from.
Optics ‘not good’
“We’ve created plan designs to aggressively steer customers to home delivery where the drug cost is ~200 higher,” the executive wrote. “The optics are not good and must be addressed.”
The FTC estimated that those increased reimbursement rates for two drugs led to $1.6 billion in excess revenue for pharmacies affiliated with the three largest PBMs between 2020 and 2022.
The agency also flagged concerns over how PBMs have restructured their entities that negotiate rebates with drugmakers, creating new corporate units for that job and moving some of them overseas. These entities, known as group purchasing organizations, can generate new fees and rebates from drugmakers that aren’t passed on to the PBM’s ultimate client.
The FTC opened the study into the market in 2022, seeking a wide swath of information on what is widely considered one of healthcare’s most opaque sectors. As part of the study, the FTC sought information from the six largest companies including CVS, Cigna’s Express Scripts, UnitedHealth’s Optum, Humana Inc., Prime Therapeutics LLC and MedImpact Healthcare Systems Inc.
‘Root cause’
Critics say the PBMs operate in obscure ways, making money from health plan clients, rebates and fees collected from drugmakers. The PBM industry says it lowers drug prices and has blamed drugmakers as the “root cause” of prescription drug costs.
The FTC said in its interim report that it would continue to investigate as several of the companies it subpoenaed had yet to fully turn over documents.
The agency’s commissioners voted 4-1 to issue the interim report, with Republican Commissioner Melissa Holyoak dissenting. In a separate statement, Holyoak faulted the FTC for a lack of empirical analysis on how PBM behavior has affected the prices that patients pay for drugs.
“Relying upon two examples, without any evidence (empirical or otherwise) that demonstrates they are representative, is not a substitute for rigorous analysis,” she wrote.
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