On July 9, 2024, the Federal Trade Commission (FTC) released a critical interim staff report shedding light on the role of pharmacy benefit managers (PBMs) in driving up prescription drug costs. The report outlines how these PBMs profit at the expense of patients and independent pharmacies by inflating drug prices and imposing unfair practices. Just a day later, news broke that the FTC is preparing to sue the nation’s three largest PBMs—OptumRx, Express Scripts, and Caremark—over allegations of improper pricing that have significantly increased costs for consumers.
The interim report is part of an ongoing investigation started in 2022. It reveals that the six largest PBMs, including Caremark Rx, Express Scripts, OptumRx, Humana Pharmacy Solutions, Prime Therapeutics, and MedImpact Healthcare Systems, manage about 95% of all prescriptions in the U.S. The top three alone handled nearly 80% of the 6.6 billion prescriptions filled in 2023. These PBMs are integrated with major health insurers and pharmacies, giving them substantial control over the pharmaceutical supply chain.
This concentration of power allows PBMs to influence which drugs are available and at what price, impacting patients’ access to affordable medications. The report highlights that nearly 30% of Americans have had to ration or skip doses due to high drug costs. PBMs also steer patients to their affiliated pharmacies, disadvantaging independent ones that struggle under unfavorable contractual terms.
Vertically integrated PBMs often prioritize their own businesses, steering patients away from smaller, independent pharmacies. This self-preferencing has led to significant revenue for PBMs, including nearly $1.6 billion in excess revenue from two cancer drugs over three years. Contracts with independent pharmacies frequently contain unclear payment terms, making it difficult for these smaller entities to determine their compensation.
The FTC’s investigation has faced resistance, with some PBMs slow to comply with information requests. The FTC has demanded prompt compliance and may take legal action to enforce this if necessary. The interim report underscores the negative impact of PBM practices on patients and independent pharmacies, and the FTC is committed to using its authority to address these anti-competitive practices. In fact, on July 23, 2024, the heads of the three largest PBMs testified before the House Committee on Oversight and Accountability.
The imminent lawsuit against OptumRx, Express Scripts, and Caremark, based on evidence from the study, underscores the seriousness of the FTC’s findings. This legal action could bring significant changes to the regulation and oversight of PBMs, aiming for a fairer and more transparent market for prescription drugs.
As the FTC continues its investigation and prepares for this major lawsuit, there is hope for patients and independent pharmacies. The FTC’s actions could lead to more affordable healthcare and a more competitive market, ensuring that patients no longer must choose between their health and their finances, and that independent pharmacies can operate without the threat of PBM dominance.