WASHINGTON, D.C. — In a revealing new interim report, the Federal Trade Commission (FTC) has raised the alarm on the powerful influence Pharmacy Benefit Managers (PBMs) wield over the American pharmaceutical landscape. The report is the latest step in an ongoing investigation initiated in 2022 by the FTC into the impact of PBMs on the reach and affordability of prescription drugs.
The document paints a stark picture of a market where nearly 95% of U.S. prescription fulfillment is controlled by the six largest PBMs, revealing a landscape of increasing consolidation and vertical integration that has positioned these entities at the expense of patients and independent pharmacists.
FTC Chair Lina M. Khan expressed deep concern over dominant PBMs driving up the cost of crucial medications, even overcharging for cancer drugs, and pushing independent pharmacies – a lifeline for many Americans living in rural communities – into tight corners. Khan reiterated the commission’s commitment to scrutinize these powerhouse players to ensure affordable healthcare accessibility.
“The FTC’s interim report lays out how dominant pharmacy benefit managers can hike the cost of drugs—including overcharging patients for cancer drugs,” said FTC Chair Lina M. Khan. “The report also details how PBMs can squeeze independent pharmacies that many Americans—especially those in rural communities—depend on for essential care. The FTC will continue to use all our tools and authorities to scrutinize dominant players across healthcare markets and ensure that Americans can access affordable healthcare.”
The report raises concerns about PBMs’ significant influence on the availability and pricing of prescribed drugs, given their enormous power over patients’ ability to access and afford their treatments. This power dynamic is having devastating effects, with nearly 30% of surveyed Americans stating they cut back or missed medication doses due to excessive costs.
Further investigation shows PBMs maintaining a stronghold over independent pharmacies by enforcing detrimental and arbitrary contractual clauses, endangering the survival of these pharmacies within their communities.
This interim report’s basis lies in special orders issued by the FTC in 2022 under Section 6(b) of the FTC Act to the six largest PBMs, including Caremark Rx, LLC; Express Scripts, Inc.; and OptumRx, Inc. Subsequent orders in 2023 were issued to additional entities negotiating drug rebates on behalf of PBMs.
The report highlights how the concentration of the Pharmacy Benefit Management services market, along with vertical integration with the nation’s largest health insurers and specialty and retail pharmacies, has granted PBMs significant power over Americans’ access to prescription drugs.
Fundamental concerns have been raised about PBMs’ lack of transparency and accountability to the public as they control critical decisions about drug access and affordability. The report also uncovers PBMs’ potential conflict of interest where they may prioritize their affiliated businesses over smaller, independent pharmacies, possibly driving up drug prices.
As a result of such practices, pharmacies linked with the three largest PBMs have retained excessive dispensing revenue surpassing their drug acquisition costs, including nearly $1.6 billion in surplus revenue on just two cancer drugs within three years.
The report concludes with a stern observation: several PBMs issued orders have been slow and evasive in their responses, obstructing the Commission’s statutory duties. FTC staff have urged these companies to finalize their mandated productions soon or face potential court action to enforce compliance.
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