FTC is scrutinizing the practices of the six largest pharmacy benefit managers

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The Federal Trade Commission is requiring the six largest pharmacy benefit managers to provide information and records regarding their business practices. The agency is launching an inquiry into what it called the prescription drug middleman industry to scrutinize the impact of vertically integrated pharmacy benefit managers on the access and affordability of prescription drugs.

The FTC is sending compulsory orders to CVS Caremark, Express Scripts, OptumRx, Humana, Prime Therapeutics and MedImpact Healthcare Systems. The companies will have 90 days from the date they receive the order to respond.

Most of these large PBMs are owned or connected with insurers for vertical integration. 

CVS Caremark is owned by CVS Health, which also owns Aetna. Express Scripts is owned by Cigna. OptumRx is part of UnitedHealth Group, which also owns UnitedHealthcare. Humana Pharmacy Solutions is owned by Humana, and Prime Therapeutics is collectively owned by 19 Blue Cross and Blue Shield plans. MedImpact does not have ties to a major insurer. Its 7% market share is less than the double-digit market shares of CVS Caremark, Express Scripts and OptumRx.

"Although many people have never heard of pharmacy benefit managers, these powerful middlemen have enormous influence over the U.S. prescription drug system," said Federal Trade Commission Chair Lina M. Khan. "This study will shine a light on these companies' practices and their impact on pharmacies, payers, doctors, and patients."

WHY THIS MATTERS

The FTC will examine pharmacy benefit managers' role in which drugs are prescribed, the pharmacies patients can use and what consumers pay at the pharmacy counter. As middlemen, pharmacy benefit managers negotiate rebates and fees with drug manufacturers, create drug formularies and policies, and reimburse pharmacies for patients' prescriptions. 

"In these roles, pharmacy benefit managers often have enormous influence on which drugs are prescribed to patients, which pharmacies patients can use, and how much patients ultimately pay at the pharmacy counter," the FTC said. "Many of these functions depend on highly complicated, opaque contractual relationships that are difficult or impossible to understand for patients and independent businesses across the prescription drug system."

The FTC said its inquiry will review practices that have drawn scrutiny including:

• fees and clawbacks charged to unaffiliated pharmacies.
• methods to steer patients towards pharmacy benefit manager-owned pharmacies.
• potentially unfair audits of independent pharmacies.
• complicated and opaque methods to determine pharmacy reimbursement.
• the prevalence of prior authorizations and other administrative restrictions.
• the use of specialty drug lists and surrounding specialty drug policies.
• the impact of rebates and fees from drug manufacturers on formulary design and on the costs of prescription drugs to payers and patients.

THE LARGER TREND

In February the Federal Trade Commission announced it was soliciting public input on the ways that practices by large, vertically integrated pharmacy benefit managers' affect drug affordability and access. More than 24,000 public comments have been received in a request for Information.

In November 2020, the Department of Health and Human Services issued a final rule ending the practice of pharmacy benefit managers issuing drug rebates to insurers. The rule stipulated that drug rebates had to be passed directly to consumers at the pharmacy counter.

Opponents of the rule said insurers used the rebates to reduce premiums for all beneficiaries. But others have said there is a lack of transparency to the PBM process.

ON THE RECORD

Former FTC policy director and antitrust attorney David Balto said in a statement: "Pharmacy benefit managers are able to inflate drug costs and deny consumers the drugs they need because they exist behind a cloak of secrecy. Hopefully, the FTC study will put a spotlight on these egregious practices and enable patients to get the vital drugs and services they need."

Twitter: @SusanJMorse
Email the writer: SMorse@himss.org