Feds target drug benefit managers as prescription drug prices soar
The Federal Trade Commission says PBMs use “very complicated” contracts to wield “enormous influence.”
Pharmacy benefit managers (PBMs) and high prescription drug prices are on the radar of the US Federal Trade Commission (FTC).
The Commission announced a new investigation into the business practices of the six largest vertically integrated PBMs – CVS Caremark, Express Scripts Inc., OptumRx Inc., Humana Inc., Prime Therapeutics LLC and MedImpact Healthcare Systems Inc.
“Although many people have never heard of pharmacy benefit managers, these powerful intermediaries have enormous influence over the American prescription drug system,” FTC Chairman Lina M. Khan said in a statement. Press release. “This study will shed light on the practices of these companies and their impact on pharmacies, payers, physicians and patients.”
The survey will examine the role of PBMs at the center of the U.S. pharmaceutical system “as middlemen hired to negotiate discounts and fees with drug manufacturers, create drug formularies and related policies, and reimburse pharmacies for patient prescriptions.
“The largest pharmaceutical benefit managers are now vertically integrated with the largest health insurance companies and wholly-owned mail-order and specialty pharmacies,” the FTC’s press release on the investigation said. “In these roles, pharmacy benefit managers often have enormous influence over what drugs patients are prescribed, which pharmacies patients can use, and how much patients ultimately pay at the pharmacy counter. Many of these functions depend on very complicated and opaque contractual relationships that are difficult or impossible for patients and independent companies in the prescription drug system to understand.
Review of PBMs
FTC commissioners said the investigation aims to shed light on several practices such as:
- Fees and Recoveries Billed to Unaffiliated Pharmacies
- Methods for Referring Patients to Pharmacies Owned by Pharmacy Benefit Managers
- Potentially unfair audits of independent pharmacies
- Complicated and opaque methods to determine pharmacy reimbursement
- The prevalence of prior authorizations and other administrative restrictions
- Use of Specialty Drug Lists and Related Specialty Drug Policies
- The impact of drug manufacturer rebates and fees on formulary design and prescription drug costs for payers and patients
PBMs have 90 days to respond to FTC orders to turn over information and records regarding their business practices. The FTC is authorized to release the information to the public and the commission should do so, Commissioner Rebecca Kelly Slaughter said in her released statement.
The trade group PBM Pharmaceutical Care Management Association (PCMA) has argued in recent years that public outrage over high drug prices has grown so that “brand name pharmaceutical manufacturers have embarked on a massive campaign to divert blame for their pricing decisions.
Although it appears the FTC executives aren’t buying it, the PCMA released a statement in May supporting Iowa Republican Senator Chuck Grassley’s proposed legislation to order the FTC to review the system of prescription drug pricing.
“We believe that decision makers need information that provides a guide to lower prescription drug costs for consumers, not increased revenue for drugmakers or pharmacies. A prescription drug pricing review that includes the entire prescription drug supply and payment chain will provide the information needed to determine the factors driving up drug costs for consumers,” said the President. and CEO of PCMA, JC Scott, in a press release.
PCMA cited a 2017 from the University of Southern California that found that for every $100 spent in the prescription drug supply and payment chain for brand name drugs, PBMs keep about $5 for their services, compared to $15 captured by pharmacies and $58 by drug manufacturers. A study by pharmacy consultant Visante, commissioned by PCMA, reported that for every dollar spent on PBM services, PBMs save consumers and payers $10.
Although Khan said many people have never heard of PBMs, thousands have heard of them. In February, the FTC opened a two-month PBM information request and received more than 24,000 public comments.
The current business and health care environment with PBMs, prescription drug prices, patients and physicians is in critical condition, FTC commissioners said in their published statements.
For patients with diabetes, the cost of insulin has become “crushing” with “serious consequences,” particularly because diabetes disproportionately affects low-income communities and communities of color, Slaughter said.
Commissioner Alvaro M. Bedoya described a PBM initially denying a pharmacist authority to dispense a needed cancer drug to a child in West Virginia, potentially creating a two-week wait for the drug. PBM’s business practices have led to the closure of independent pharmacies in rural areas of the country, as well as “revealing conduct, as well as overt fraud,” in Delaware and Ohio, Bedoya said.
In February, Commissioners Noah Joshua Phillips and Christine S. Wilson voted against an FTC study of PBMs. This proposal was not comprehensive and did not examine the competitive price impact of PBM contracts, but the latest “is a study we can support,” they said.
Grassley released a statement praising the FTC’s vote and calling for federal action to examine PBMs and their role in drug pricing, particularly for insulin.