FTC reportedly to sue three largest pharmacy benefit managers

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The Federal Trade Commission is preparing to sue the largest three pharmacy benefit managers over their negotiations over the prices for drugs including insulin, The Wall Street Journal reported on Wednesday. The FTC plans to file lawsuits related to rebates brokered with drug manufacturers, people familiar with the matter told the WSJ.

The three largest PBMs are UnitedHealth Group's OptumRx, Cigna's Express Scripts and CVS Health's CVS Caremark. These three account for an estimated 80% of prescriptions. 

The news of a lawsuit comes on the heels of an FTC report on pharmacy benefit managers. The FTC did a two-year investigation into their practices and released the FTC report, "Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies."

WHY THIS MATTERS: THE FINDINGS

The largest PBMs are vertically integrated with the large insurers: CVS with CVS Caremark, Cigna with Express Scripts, UnitedHealth Group with OptumRx, Humana with Humana Pharmacy Solutions, Medimpact Holdings with Medimpact and 19 Blue Cross Blue Shield plans with Prime Therapeutics.

The six largest control more than 90% of the market, according to the FTC report.

Because of a highly concentrated market, PBMs can exercise significant power over American's access to drugs and the prices they pay, the report said.

"Due to decades of mergers and acquisitions, the three largest PBMs now manage nearly 80% of all prescriptions filled in the United States. They are also vertically integrated, serving as health plans and pharmacists, and playing other roles in the drug supply chain as well. As a result, they wield enormous power and influence over patients' access to drugs and the prices they pay," the FTC said.

Findings: 

• PBMs have opaque contractual relationships. The rates in PBM contracts with independent pharmacies often do not clearly reflect the amount the pharmacy will ultimately be paid, the FTC said.
• PBMs yield power over independent pharmacies. About 10% in rural America have closed between 2013 and 2022, according to the FTC. 
• Vertically integrated PBMs may have the ability and incentive to prefer their own affiliated businesses, which in turn can disadvantage unaffiliated pharmacies and increase prescription drug costs.
• Vertical integration in PBM business structures, particularly with respect to integrated health insurers and specialty and mail order pharmacies, likely creates the ability and incentive for PBMs to increase utilization of certain drug products at affiliated pharmacies to generate the greatest revenue and profits for their respective conglomerates. 
• As a result of vertical integration, PBM-affiliated pharmacies now compete with the unaffiliated pharmacies to distribute medications to patients. Initial analyses suggest that certain PBMs may be steering patients to their affiliated pharmacies and away from unaffiliated pharmacies. 
• Analyses also highlights examples of affiliated pharmacies receiving significantly higher reimbursement rates than those paid to unaffiliated pharmacies for two case study drugs.
• These practices have allowed pharmacies affiliated with the three largest PBMs to retain levels of dispensing revenue well above estimated drug acquisition costs, resulting in nearly $1.6 billion of additional revenue on just two cancer drugs in under three years.
• PBMs and brand drug manufacturers sometimes negotiate prescription drug rebates that are expressly conditioned on limiting access to potentially lower cost generic alternatives. 

In conclusion, the FTC said, "While this Interim Report principally focuses on the impact of these changing market dynamics on the operation and vitality of the nation's pharmacies, we also share initial evidence about PBM and brand pharmaceutical rebating practices that urgently warrant further scrutiny and potential regulation."

THE LARGER TREND

The FTC issued orders to the six largest PBMs: Caremark Rx, Express Scripts, OptumRx, Humana Pharmacy Solutions, Prime Therapeutics and MedImpact Healthcare Systems requesting data and documents regarding their businesses and business practices. The FTC said not all have filed the completed information requested.

REACTION 

"The veil continues to lift exposing the ugly truth that PBMs put profits before patients at every turn." said Alex Schriver, PhRMA's senior vice president for Public Affairs. "The FTC report makes it clear: PBMs have outsized control over what medicines people can get and the price they pay at the pharmacy counter. They are using their market dominance to drive up costs and drive independent pharmacies out of business. The evidence against PBMs is overwhelming and voters across the country want policymakers to pass reforms that hold middlemen accountable, fix the broken system and lower their costs."

Senate Finance Committee Chair Ron Wyden, D-Ore., said, "The FTC's comprehensive findings show how PBMs use their market power to drive up costs for families and restrict access to preferred pharmacies at the expense of independent pharmacies. The Finance Committee overwhelmingly passed legislation to hold PBMs accountable, and I am going to the mat to deliver that bill to the president's desk this year."

Merith Basey, executive director of Patients for Affordable Drugs Now said, "It will come as no surprise that the FTC's report confirms what patients have long suspected: the largest PBMs wield significant control over which drugs are available for patients and at what price. While PBMs were designed to benefit patients, in reality, they exploit their power to inflate drug costs."

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Email the writer: SMorse@himss.org