An FTC report says PBMs have ‘outsized influence’ over drug prices

The Federal Trade Commission (FTC) frequently sets its sights on healthcare, which has previously included efforts to crack down on data privacy and ban noncompetes in contracts. Lately, the agency has turned its attention to pharmacy benefit managers (PBMs)—the groups that negotiate drug prices between insurers and pharmaceutical manufacturers—to shed light on how they impact the healthcare industry.

On Tuesday, the FTC published an interim report as part of an ongoing investigation, which began in 2022, into drug affordability and access, raising concerns that PBMs have “significant influence” over which drugs are made available to patients and that the companies are setting increasingly higher prices. The Wall Street Journal reported Wednesday that the antitrust agency is preparing a lawsuit against the three largest PBMs regarding “business practices related to rebates brokered with drug manufacturers.”

The report coincides with increased public concern over drug prices, according to KFF research published last year, with about 30% of adults in the US reportedly not taking prescribed medications due to cost.

PBMs are vertically integrated with huge health insurance companies as well as mail order and specialty pharmacies, and this business structure incentivizes these companies to increase the use and reimbursement rates of certain drugs at affiliated pharmacies to maximize revenue and profits, according to the FTC. In some cases, according to the report, contracts have included payments between drug manufacturers and health plans for “favorable formulary placement and treatment” of a specific drug.

The agency reported the three largest PBMs made about $1.6 billion in excess revenue on two cancer drugs—generic Zytiga and generic Gleevec—from 2020 to 2022.

“PBMs oversee these critical decisions about access to and affordability of life-saving medications, without transparency or accountability to the public,” the report read.

Meanwhile, the report found PBM practices can also hurt local pharmacies, as they steer patients toward affiliated chain pharmacies. Because of these complications—in addition to a recent Centers for Medicare and Medicaid Services rule that could lower prescription reimbursements for smaller pharmacies—nearly one-third of independent pharmacies are at risk of going out of business, Healthcare Brew previously reported.

“PBMs can squeeze independent pharmacies that many Americans—especially those in rural communities—depend on for essential care,” FTC Chair Lina Khan said in a press release earlier this week.

But according to a Tuesday statement from JC Scott, president and CEO of the Pharmaceutical Care Management Association, the report was not a “fact-based assessment” of PBMs or the prescription drug market. He added that it left out “volumes of data” showing how PBMs make drugs cheaper and more accessible.

“Throughout this process, FTC leadership has shown that they have predetermined 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 said.