FTC Launches Inquiry Into PBM Industry

Lina M. Kan

The Federal Trade Commission (FTC) announced an inquiry into the pharmacy benefits management (PBM) industry today that will require the six largest PBMs to provide information and records regarding their business practices.

The commission said that the companies it is targeted with compulsory orders under its investigative powers are CVS Caremark, Express Scripts, OptumRx, Humana, Prime Therapeutics and MedImpact Healthcare Systems.

“Although many people have never heard of pharmacy benefit managers, these powerful middlemen have enormous influence over the U.S. prescription drug system,” said FTC Chair Lina M. Khan, a Biden appointee, said in a prepared statement posted on the commission’s website. “This study will shine a light on these companies’ practices and their impact on pharmacies, payers, doctors, and patients.”

The FTC announcement triggered reactions from the industry and its critics.

JC Scott, the president and CEO of the Pharmaceutical Care Management Association, the trade and lobbying group for the industry, issued a statement that the group was confident that any investigation will show that the “PBMs are the only member of the prescription drug supply and payment working to lower costs.”

Meanwhile, B. Douglas Hoey, the CEO of the National Community Pharmacists Association, a trade group for independent pharmacists that is critical of the industry, said in a prepared statement that PBMs have “escaped serious scrutiny for far too long but this study will bring their dirty laundry out into the open.”

The 5-0 vote for the inquiry came after the commission deadlocked on whether to investigate the industry in February. This time, Trump appointees Noah Joshua Phillips and Christine Wilson voted for going ahead with the inquiry, although they issued a separate statement in which they defended their opposition in February and explained why they switched to being supportive. The current study, they wrote, was prepared with input from PBM experts at the commission and will look at the “competitive impact of PBM practices including — critically — how those practices might impact the out-of-pocket costs for consumer.”

The commission statement announcing the vote and the launching of the inquiry listed seven practices that it will “shed light on”:

• 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 the costs of prescription drugs to payers and patients

The inquiry that the commission is launching is referred to as a 6(b) inquiry in reference to the section of FTC Act that authorizes such studies. According to a synopsis on the commission’s website, the 6(b) section authorizes the commission to require answers in writing to specific questions about an entity’s “organization, business, conduct, practices, management, and relation to other corporations, partnerships, and individuals.” As with a subpoena, the entity receiving the request can file a petition to limit or quash the 6 (b) order.

The commission website says the 6(b) authority “enables it to conduct wide-ranging studies that do not have a specific law enforcement purpose.” A different section of the FTC law authorizes the commission to “make public from time to time” portions of the information that it obtains, where disclosure would serve the public interest.

In her statement about the 6(b) study, FTC Commissioner Rebecca Kelly Slaughter said the information that the FTC uncovers in an 6(b) inquiry “can — and should — be presented to the public in a final report” and that a “public-facing work product” can inform policy makers and other government agencies But she also said the commission should pursue enforcement actions where it finds violations of law.