Interim FTC Report Finds PBMs Squeeze Independent Pharmacies, Overcharge for Drugs


The PBM industry said the FTC has not been objective, and that efforts to limit PBM negotiating tools would put patients at the mercy of drug manufacturers.

A vertically integrated pharmacy benefit manager (PBM) industry where the six largest companies manage almost 95% of all prescriptions has allowed PBMs to profit at the expense of patients and independent pharmacists, according to an interim report released this morning by the Federal Trade Commission.

Lina M. Khan

Lina M. Khan

“The FTC’s interim report lays out how dominant pharmacy benefit managers can hike the cost of drugs — including overcharging patients for cancer drugs,” FTC Chair Lina M. Khan, said in a news release. “The report also details how PBMs can squeeze independent pharmacies that many Americans — especially those in rural communities — depend on for essential care.”

The FTC pointed out that PBMs are now part of large healthcare organizations, with retail and mail order pharmacies, health insurance companies, healthcare clinics, and now some have drug private labeling businesses. The agency cited data that four of the largest companies now account for 22% of all national healthcare expenditures, up from 14% eight years. Collectively, these four large healthcare companies have seen net revenue rise by 159% over the period from 2016 to 2023, driven by mergers and acquisitions.

This consolidation, the FTC said, has given the large PBMs significant power and influence, created incentives to prefer their own organizations, led to conflicts of interests, steered patients to their own pharmacies and developed unfair contracts with independent pharmacies.

The FTC’s investigation has found the impact of vertical integration of pharmacy benefits has had a significant impact on independent pharmacies. The agency in its report cites data showing that between 2013 and 2022, about 10% of independent retail pharmacies in rural America closed.

The report also finds that PBMs and drug companies enter into agreements that limit access to lower-cost medications and exclude lower cost competitors from formularies in exchange for rebates. The report also finds that PBMs’ group purchasing organizations serve as rebate aggregators that generate fees from pharmaceutical companies that are not passed on to clients. The FTC cites data showing these fees generated $7.6 billion in 2022, up from $3.8 billion in 2018.

JC Scott

JC Scott

JC Scott, president and CEO of the PBM trade association, the Pharmaceutical Care Management Association, issued a statement sharply critical of the report. “This report is based on anecdotes and comments from anonymous sources and self-interested parties, and supported only by two cherry-picked case studies that are implied to be representative of the entire market,” he said. “The report completely overlooks the volumes of data that demonstrate the value that PBMs provide to America’s health care system by reducing prescription drug costs and increasing access to medications.

“Throughout this process, FTC leadership has shown that they have pre-determined conclusions that they want to advance irrespective of the facts or the data, and this report demonstrates an intention to follow through on their agenda regardless of the evidence,” he continued.

Related: FTC Launches Investigation of PBMs

The FTC launched its inquiry into the impact of PBMs two years ago, asking six PBMs — CVS Caremark; Express Scripts; OptumRx; Humana; Prime Therapeutics; and MedImpact Healthcare Systems — for information and records about their business practices. In 2023, the FTC asked three group purchasing organizations — Zinc Health Services, Ascent Health Services, and Emisar Pharma Service — for similar information.

To date, the FTC has reviewed more than 1,200 public comments and initial submissions from PBMs. The agency has also conducted interviews with various experts and reviewed other public data.

The FTC indicated in its report that some of the PBMs have not fully complied with the agency’s request for documentation and information, and said it can take the companies to court to compel the information.

Specifically, the FTC has indicated that PBMs have not responded to all requests for information about pharmacy reimbursement rates and what has been provided include information that is vague and opaque.

What documents the FTC does have on pharmacy reimbursement indicate that PBMs have the ability and incentive to put downward pressure on independent pharmacy reimbursements. The agency also pointed out that clawbacks for pharmacy direct and indirect renumeration make pharmacy reimbursement unpredictable.

House Rep. Earl L. “Buddy” Carter (R. Ga.), who is a pharmacist, said in a statement that the it time to break up the PBM industry. “We are losing more than one pharmacy per day in this country, causing pharmacy deserts and taking the most accessible health care professionals in America out of people’s communities,” he said.

The report finds that PBMs significantly influence what drugs are available and at what price. This can have dire consequences, with nearly 30% of Americans surveyed reporting rationing or even skipping doses of their prescribed medicines due to high costs.

CVS Caremark, in its own statement about the FTC report, said PBMs act as a counterweight to pharmaceutical companies, and they have led the way in bringing down costs for consumers.

“Our efforts have resulted in members on average paying less than $8 per 30-day supply of medication. Independent analyses show net brand drug prices have declined six years in a row despite significant inflation across the U.S. economy and egregious list price increases from drug makers,” the Caremark statement said.

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