FTC launches probe into pharmacy benefit management sector

Longstanding claims that one of the reasons for high drug prices in the US is the actions of pharmacy benefit management (PBM) companies – the middlemen in the supply chain – are being formally investigated by the Federal Trade Commission (FTC).

The FTC has asked the six largest PBMs operating in the US market – CVS Caremark, Express Scripts, OptumRx, Humana, Prime Therapeutics and MedImpact Healthcare Systems – to hand over detailed records about their business practices over the last five years to assist the probe.

It has given the PBMs 90 days to supply the requested data, which will delve into the fees and rebates they negotiate with pharma manufacturers, the formation of formularies of medicines that can be used, and the reimbursement paid to pharmacies for patient prescriptions.

"These powerful middlemen have enormous influence over the US prescription drug system," said FTC chair Lina Khan. "This study will shine a light on these companies' practices and their impact on pharmacies, payers, doctors, and patients."

The investigation will play into the ongoing debate about the factors behind high medicine prices in the US, with pharma manufacturers and the PBMs pointing fingers at each other.

Drugmakers blame PBMs for pocketing the discounts they negotiate instead of passing them onto patients, while PBMs insist that high list prices, pay-for-delay deals to keep generics off the market, and evergreening tactics to extend the patent life of medicines lie at the heart of the problem.

The FTC hopes to gain the insight needed to deliver its own verdict on the role of PBMs, which it says use "highly complicated, opaque contractual relationships that are difficult or impossible to understand for patients and independent businesses across the prescription drug system."

The FTC is particularly interested in fees and clawbacks charged to unaffiliated pharmacies, methods to steer patients towards PBM-owned pharmacies, potentially unfair audits of independent pharmacies, methods to determine pharmacy reimbursement, the use of specialty drug lists, and more.

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The probe comes shortly after a report from Berkeley Research Group (BRG) – funded by the pharma industry trade group PhRMA – found that over half of total spending on brand medicines went to the supply chain, middlemen and other stakeholders in 2020, overtaking the amount going to drug manufacturers for the first time.

It has been welcomed by the National Community Pharmacists Association (NCPA), whose CEO Douglas Hoey said: "PBMs behave like monopolies. Their secretive, anticompetitive practices increase prescription drug prices, limit consumer choice, and stymie competition. They've escaped serious scrutiny for far too long, but this study will bring their dirty laundry out into the open."

Lawmakers are also getting involved. Last week, Senators Chuck Grassley (R-Iowa) and Maria Cantwell (D-Wash.) introduced legislation that aims to empower the FTC to increase drug pricing transparency and "hold PBMs accountable for unfair and deceptive practices that drive up the costs of prescription drugs at the expense of consumers."

The Pharmacy Benefit Manager Transparency Act of 2022 would ban deceptive unfair pricing schemes and prohibit arbitrary clawbacks of payments made to pharmacies.

It would also require PBMs to report to the FTC how much money they make through spread pricing – when a PBM reimburses pharmacies one price for a medicine but charges a health plan another – as well as from pharmacy fees.