The Federal Trade Commission (FTC) released its second interim staff report “Specialty Generic Drugs a Growing Profit Center for Vertically Integrated Pharmacy Benefit Managers” as part of an ongoing study examining the practices of Pharmacy Benefit Managers (PBMs) within the U.S. healthcare system. This report highlights significant concerns about the pricing strategies of PBMs concerning specialty generic drugs, suggesting that these practices may have contributed to increased healthcare costs for consumers.
Key Findings from the FTC Report
The FTC’s comprehensive analysis of the data collected from 2017 through 2022 presents critical insights into how PBMs manage and markup specialty generic drugs. The report identifies three major PBMs — Caremark Rx, LLC, Express Scripts, Inc., and OptumRx, Inc. — and scrutinizes their pricing strategies. Key findings include:
Excessive Markups: The Big 3 PBMs have marked up prices of specialty generic drugs excessively. For example, drugs that cost pharmacies $27 to acquire were sold for over $2,000, representing a markup of more than 7,000%.
Impact on Dispensing: These PBMs often steered high-margin prescriptions to their affiliated pharmacies. Such practices were not just limited to independent actions but were integrated into the broader strategies of their parent healthcare conglomerates.
Financial Implications: The report estimated that PBMs and their affiliated pharmacies generated substantial revenues exceeding normal acquisition costs, with PBMs alone accumulating around $1.4 billion through spread pricing strategies.
Regulatory and Market Implications The FTC’s findings suggest a deeply concerning trend where PBMs use their leverage to manipulate the market, potentially at the expense of both patients and healthcare plan sponsors. By controlling which pharmacies dispense these drugs, PBMs can influence overall healthcare costs and insurance premiums, raising important questions about regulatory adequacy in the current healthcare system.
Legislative Responses
In response to these findings, several lawmakers have voiced their concerns and are calling for stricter regulations on PBMs. For instance, Representative Buddy Carter has cited the report as a basis for new legislative measures aimed at curbing these practices.
Market Reaction
The revelations have led to a significant uproar among healthcare providers, insurers, and patient advocacy groups. Many are demanding transparency and reforms to prevent such pricing practices in the future.
Conclusion
The FTC plans to continue its investigation into the PBM industry, with further reports expected. The underlying problem is that insurance companies and PBM’s all are paid on a percentage of the total price, so the incentive is to increase prices to support margins. As these discussions evolve, it is crucial for stakeholders across the healthcare spectrum to engage actively in shaping policies that ensure fair pricing practices that do not disadvantage consumers.