FTC says top three PBMs made $7.3 billion from marked up drug prices

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The "Big 3" pharmacy benefit managers – CVS Caremark, Express Scripts and OptumRx – mark up specialty drugs at their affiliated pharmacies by hundreds or even thousands of percent, according to a new interim staff report from the Federal Trade Commission.

Such significant markups allowed the largest three PBMs and their affiliated specialty pharmacies to generate more than $7.3 billion in revenue from dispensing drugs in excess of the drugs' estimated acquisition costs from 2017-2022, the report found.

These PBMs netted significant revenue at a time when patient, employer and other healthcare plan sponsor payments for drugs steadily increased on an annual basis, the FTC said.

The findings build on a report issued by FTC staff in July 2024, which found that pharmacies affiliated with the Big 3 PBMs received 68% of the dispensing revenue generated by specialty drugs in 2023, up from 54% in 2016.

The latest report analyzes a broader set of specialty generic drugs compared to two specialty generic drugs analyzed in the July 2024 report and finds that the Big 3 PBMs impose significant markups on a wide array of specialty generic drugs.

It analyzed all specialty generic drugs dispensed from 2017 to 2022 for members of commercial health plans and Medicare Part D prescription drug plans managed by the Big 3 PBMs for which the FTC has relevant data. This includes an analysis of 51 specialty generic drugs comprising 882 National Drug Codes, which include the generic versions of Ampyra (used to treat multiple sclerosis); Gleevec (used to treat leukemia); Sensipar (used to treat renal disease); and Myfortic (used by transplant recipients).

WHAT'S THE IMPACT

In comparing affiliated and unaffiliated pharmacies, the FTC found that a larger, disproportionate share of commercial prescriptions for specialty generic drugs marked up more than $1,000 per prescription were dispensed by the Big 3 PBMs' affiliated pharmacies compared with unaffiliated pharmacies. Dispensing patterns suggest that the PBMs may be steering highly profitable prescriptions to their own affiliated pharmacies, and away from the unaffiliated ones.

Their affiliated pharmacies generated over $7.3 billion of dispensing revenue in excess of their estimated acquisition cost, as measured by the National Average Drug Acquisition Cost (NADAC), on specialty generic drugs over the study period. PBM-affiliated pharmacy dispensing revenue in excess of NADAC increased dramatically at a compound annual growth rate of 42 percent from 2017-2021.

In the aggregate, the top 10 specialty generic drugs generated $6.2 billion of dispensing revenue in excess of NADAC – 85% of the total.

The Big 3 PBMs also separately generated an estimated $1.4 billion of income from spread pricing – i.e., billing their plan sponsor clients more than they reimburse pharmacies for drugs – on the drugs that were analyzed.

In 2021, the last year for which the FTC received full-year data for the study, plan sponsors paid $4.8 billion for specialty generic drugs, while patient cost sharing totaled $297 million. Between 2017 and 2021 plan sponsors and patient payments both increased at compound annual growth rates of 21% for commercial claims, and 14%-15% for Medicare Part D claims.

THE LARGER TREND

The American Medical Association released data in September showing that the four largest pharmacy benefit managers in the country control roughly 70% of the national market.

The analysis, based on 2022 data on commercial and Medicare Part D prescription drug plan (PDP) enrollees, also found a high prevalence of vertical integration of PBMs with health insurance companies.

CVS Health is the largest PBM (with a 21.3% market share), followed by OptumRx (20.8%), Express Scripts (17.1%) and Prime Therapeutics (10.3%).
 

Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.