Earlier this week, the Federal Trade Commission released its second interim staff report on prescription drug middlemen. The report examines the impact of PBMs (specifically CVS Caremark, Express Scripts, and Optum Rx) on specialty generic drugs, highlighting substantial price markups by PBMs on medications for cancer, HIV, and other conditions.
The post Healthcare Leaders Support FTC’s Second Report On PBMs, While PBMs Criticize Findings appeared first on Above the Law.
The pressure against pharmacy benefit managers (PBMs) continues to build.
On Tuesday, the Federal Trade Commission (FTC) released its second interim staff report on prescription drug middlemen. The report examines the impact of PBMs (specifically CVS Caremark, Express Scripts and Optum Rx) on specialty generic drugs, highlighting substantial price markups by PBMs on medications for cancer, HIV and other conditions. The commission voted 5-0 to release the report.
“The FTC staff’s second interim report finds that the three major pharmacy benefit managers hiked costs for a wide range of lifesaving drugs, including medications to treat heart disease and cancer,” said FTC Chair Lina M. Khan in a statement. “The FTC should keep using its tools to investigate practices that may inflate drug costs, squeeze independent pharmacies, and deprive Americans of affordable, accessible healthcare — and should act swiftly to stop any illegal conduct.”
The new report is the latest development in a battle that has been brewing between the FTC and the PBMs. The agency released its first interim staff report on PBMs in July, which detailed how concentrated the PBM market has become. In addition, the FTC sued CVS Caremark, Express Scripts and Optum Rx over insulin prices in September, prompting the Big Three PBMs to countersue the agency in November, claiming the agency’s lawsuit is unconstitutional.
While several healthcare executives are coming out in support of the report, the PBMs named in the report are unsurprisingly decrying its findings.
What the FTC found
In the second interim report, the FTC examined specialty generic drugs dispensed between 2017 and 2022 for members of commercial health plans and Medicare Part D prescription drug plans managed by the Big Three PBMs. This differs from the previous report, which analyzed two specialty generic drugs.
The FTC found that the top three PBMs applied markups ranging from hundreds to thousands of percent on various specialty generic drugs dispensed through their affiliated pharmacies, including medications for cancer and HIV. The PBMs also reimbursed their affiliated pharmacies at higher rates than they paid to unaffiliated pharmacies for nearly every specialty generic drug reviewed.
During the study period, the affiliated pharmacies of the Big Three PBMs earned more than $7.3 billion in dispensing revenue above their estimated acquisition cost, as determined by the National Average Drug Acquisition Cost (NADAC), on specialty generic drugs, the FTC also reported.
In addition, the three PBMs earned about $1.4 billion of income from spread pricing on the specialty generic drugs analyzed in the report during the study period. Spread pricing is when PBMs bill their plan sponsor clients more than what they reimburse pharmacies for prescription drugs.
“These results illustrate the increasing financial importance of specialty generic drugs to the Big 3 PBMs, as well as to plan sponsors and patients,” the FTC stated in the report. “The results also reveal that the two case study drugs analyzed in our First Interim Staff Report were not isolated examples. This report confirms that the Big 3 PBMs impose significant markups on a wide array of specialty generic drugs.”
The response
The Big Three PBMs have largely criticized the FTC report.
A spokesperson for CVS Health argued that the FTC has drawn broad conclusions from “cherry-picked” specialty generic outliers in both of its interim reports.
“Between 2017-2022, specialty generic products have represented less than 1.5% of our clients’ total drug spend and only 51 out of thousands of drugs,” said David Whitrap, vice president of external affairs at CVS Health, in an email. “In contrast, branded specialty products represent more than 50% of our clients’ total drug spend and are entirely ignored by the FTC.”
Express Scripts, meanwhile, declared in a statement that “nothing in the FTC’s report addresses the underlying cause of increasing drug prices, or helps employers, unions, and municipalities keep prescription benefits affordable for their members.”
An Optum spokesperson told MedCity News that the company is still reviewing the report, but pointed to work it is doing to decrease drug prices.
“Optum is lowering the cost of specialty medications, which comprises half of all drug expenditures, and providing clinical expertise, programs and support for patients with complex and rare conditions,” the spokesperson said. “In 2024, we helped eligible patients save $1.3 billion and the median out-of-pocket payment for these patients was $5.”
While the PBMs are strongly criticizing the findings of the report, one industry expert — Antonio Ciaccia, CEO of 46booklyn — said he’s glad not to be the only one working to expose PBM practices. He said he launched 46brooklyn in 2018 with an exposé on how Medicaid programs were being overcharged for generic Gleevec, one of the drugs mentioned in the report.
“We were told by PBMs that our focus on this drug was an exercise in cherry picking. Since then, we have identified a litany of other examples of these exorbitant markups on generic specialty drugs and how PBM conflicts of interest in the specialty pharmacy market have resulted in excessive charges to employers, Medicare, and patients,” he said. “I’d love to say I’m surprised by the findings, but I’m not. I’m just happy to no longer feel like I’m alone in identifying these unfortunate realities.”
Ellen Rudolph, CEO of autoimmune digital health company WellTheory, noted that the FTC’s findings “underscore a critical issue in our healthcare system: the significant markups on specialty drugs not only strain patients but also create substantial financial burdens for employers.”
Another healthcare executive called on policymakers to step up based on the findings of the report.
“Patients would be well served if these so-called specialty drugs were able to be dispensed by their preferred community pharmacy,” said Douglas Hoey, CEO of the National Community Pharmacists Association. “Instead, however, for the PBMs’ financial gain, patients’ choice is oftentimes limited to PBM-owned mail-order pharmacies and their care is unfortunately disrupted. This is just the latest obvious signal to policymakers that they must pass PBM reform that would include paying for prescriptions based on the cost of the drug plus a transparent pharmacist professional dispensing fee.”
Photo: z_wei, Getty Images
