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Why the FTC is looking at pharmacy benefit managers and their role in drug pricing

Kimberly Adams Jul 11, 2024
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The Federal Trade Commission says companies like CVS Caremark, Express Scripts and OptumRx are artificially driving up prices for medications. SDI Productions/Getty Images

Why the FTC is looking at pharmacy benefit managers and their role in drug pricing

Kimberly Adams Jul 11, 2024
Heard on:
The Federal Trade Commission says companies like CVS Caremark, Express Scripts and OptumRx are artificially driving up prices for medications. SDI Productions/Getty Images
HTML EMBED:
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One of President Joe Biden’s campaign talking points is what his administration has done to lower the cost of prescription drugs.

The Federal Trade Commission is tackling one slice of this issue, releasing a report this week on pharmacy benefit managers, or PBMs. These are companies you’ve probably heard of — CVS Caremark, Express Scripts, Optum RX — but you may not know what exactly they do.

Pharmacy benefit managers are kind of the middlemen of the pharmaceutical supply chain, according to John Dicken, a director in the health care team at the U.S. Government Accountability Office, which is another federal agency that’s looked into PBMs.

“It’s really these PBMs that are acting on behalf of the health plans that may be negotiating with the pharmacies in terms of participating in their health plan’s network, in terms of the prices that the pharmacies are reimbursed, setting rebates with drug manufacturers,” he said.

The Federal Trade Commission argues in its report there’s too much consolidation in the industry.

If you look at the top six companies in the space, “they are responsible for more than 94% of the 6 billion-plus prescriptions that are filled each year,” said the FTC’s Douglas Farrar.

And that — according to the FTC — is artificially and unfairly driving up prices for consumers, sometimes to the tune of tens of thousands of dollars. On top of that, Farrar said that PBMs sometimes own the same pharmacies or health insurance plans they work with.

“They are able to threaten the viability of independent pharmacies that serve a lot of rural and urban communities,” he said.

The Pharmaceutical Care Management Association, the main industry group for PBMs, strongly disputed the FTC’s report, pointing out anonymous sourcing and what the group referred to as “cherry-picked” case studies. Some current and former FTC officials concurred, along with some in academia.

“I do not believe the report has evidence showing PBMs harmed patients and plan sponsors,” said Ge Bai, a professor of accounting and health policy at Johns Hopkins.

Just because these companies are big doesn’t necessarily make them bad, she argued.

“PBMs have to be big in order to negotiate price concessions,” she said. “So I think just to focus on the size without looking at the consumer harm is a mistake.”

The FTC is asking for more data from PBMs to move forward with its final report, and several members of Congress and several states are working on legislation to increase oversight of the companies.

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