Large PBMs control 70% of the market, report finds

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Newly published data suggests low competition among middling players in the pharmaceutical supply chain, with numbers showing that the four largest pharmacy benefit managers in the country control roughly 70% of the national market.

The American Medical Association 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%).

At the local level, the average PBM market is highly concentrated when measured against federal antitrust guidelines. Eight-two percent of PDP region-level PBM markets are highly concentrated, the report found.

This indicates that only a few PBMs supplied insurers with PBM services and suggests low competition among PBMs, authors said.

WHAT'S THE IMPACT?

The analysis also found significant vertical integration between insurers and PBMs.

Nationally, insurers that are vertically integrated with a PBM covered 72% of people with a commercial or Medicare Part D PDP. The share of people covered by an insurer that is vertically integrated with a PBM is higher in the Medicare Part D market (77%) than the commercial PDP market (69%).

At the PDP region level, an average of 70% of people are covered by an insurer that is vertically integrated with a PBM. There's wide variation across PDP regions, with some having little vertical integration between insurers and PBMs, while others see them almost entirely vertically integrated.

The analysis also lists national-level shares of the 10 largest PDP insurers, and ranks each according to the commercial, Medicare Advantage PDP, and standalone PDP markets, as these are the PDP benefits managed by the PBMs.

UnitedHealth Group is the largest commercial PDP and Medicare Advantage PDP insurer, as well as the third largest in standalone PDP with 13.0%, 28.2% and 17.6% shares, respectively.

Close behind in the commercial market is Kaiser, with an 11.4% share. However, Kaiser is fourth, with a 6.9% share, in the Medicare Advantage PDP market and nonexistent in standalone PDP.

CVS Health is the biggest insurer in the standalone PDP market with 25.6% share, while Centene follows it with a 17.8% share.

THE LARGER TREND

In July, the Federal Trade Commission said it was preparing to sue the largest three pharmacy benefit managers over their negotiations regarding drug prices, including those for insulin.

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."

Meanwhile, the heads of three large pharmacy benefit managers have until tomorrow to respond to a House Committee or face perjury charges that could result in fines or even prison time, according to the letters sent by House Committee on Oversight and Accountability Chairman James Comer (R-Ky.)

On August 28, Comer sent letters to the CEO and presidents of three major pharmacy benefit managers – CVS Caremark, Express Scripts and Optum Rx – asking them to correct the record on statements they made during their appearances before the committee at the July 23 hearing, "The Role of Pharmacy Benefit Managers in Prescription Drug Markets Part III: Transparency and Accountability."

Specifically, Comer wants the PBM executives to correct statements they made saying their companies do not steer patients to their PBM-owned pharmacies.

Comer gave a deadline of Wednesday, September 11, for the executives to respond.

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