Ever wondered how the Big Box Pharmacy chains determine what some drugs costs? Why are some higher and some lower? Why are some drugs covered under one plan and not another? And why are there differences in cost from company to company for the same prescription drug? Well, the government would also like to know.
The Federal Trade Commission (FTC) on June 7th announced that it will launch an inquiry into the prescription drug middleman industry. They have started with the six largest pharmacy benefit managers to provide information and records regarding their business practices. The FTC is targeting CVS Caremark, Express Scripts, OptumRX, Humana, Prime Therapeutics LLC and MedImpact Healthcare Systems. The agency’s inquiry will scrutinize the impact of vertically integrated pharmacy benefit managers (PBM) on the accessibility and affordability of prescription drugs.
The Commission’s inquiry will examine pharmacy benefit managers’ role at the center of the U.S. pharmaceutical system. Pharmacy benefit managers are the middlemen who are hired to negotiate with drug makers for rebates and lower fees on behalf of employers and other clients. They also create drug formularies and surrounding policies, and reimburse pharmacies for patients’ prescriptions. “Although many people have never heard of pharmacy benefit managers, these powerful middlemen have enormous influence over the U.S. prescription drug system,” said Federal Trade Commission Chair Lina M. Khan. “This study will shine a light on these companies’ practices and their impact on pharmacies, payers, doctors, and patients.”
The largest pharmacy benefits managers are now vertically integrated with the largest health insurance companies and wholly owned mail order and specialty pharmacies. In these roles, pharmacy benefit managers often have enormous influence on which drugs are prescribed to patients, which pharmacies patients can use, and how much patients ultimately pay at the pharmacy counter. Many of these functions depend on highly complicated, opaque contractual relationships that are difficult or impossible to understand for patients and independent businesses across the prescription drug system.
Some groups, like the American Hospital Association (AHA), urged the FTC to investigate certain practices by health plans and pharmacy benefit managers, commonly referred to as “white bagging,” which disallow health care providers from procuring and managing the drugs they administer to patients. The AHA told the federal agency “As large health plans engage in broad vertical integration efforts, including the acquisition of PBMs and specialty pharmacies, the practice of mandated white bagging has increased dramatically,” forcing hospitals and health systems “to navigate substantial supply chain and logistical challenges in order to continue to provide safe and effective care to the patients they treat”.
Specifically, the inquiry is aimed at shedding light on practices that have drawn scrutiny in recent years. Some of these include methods to steer patients toward pharmacy benefit manager-owned pharmacies and complicated and arbitrary methods to determine pharmacy reimbursement. Other questionable practices are potentially unfair audits of independent pharmacies and charges and fees charged to unaffiliated pharmacies. Other areas of interest revolve around the prevalence of prior authorizations and other administrative restrictions and the use of specialty drug lists and surrounding specialty drug policies. Lastly, the overall impact of rebates and fees from drug manufacturers on formulary design and the costs of prescription drugs to payer and patients will be examined.
FTC Commissioner Alvaro Bedoya said on Twitter that the practices of these intermediaries are “cloaked in secrecy and opacity,” adding that for most Americans, “pharmacy middlemen control what medicine you get, how you get it, when you get it, and how much you pay for it.” Officials from CVS and Prime Therapeutics said in statements that they intended to cooperate. Other companies did not respond to requests for comment. The PBM trade group, the Pharmaceutical Care Management Association (PCMA), defended the industry. “We are confident that any examination of pharmacy benefit managers will validate that PBMs are reducing prescription drug costs for consumers,” said PCMA President JC Scott in a statement. “Drug manufacturer price-setting is the root cause of high drug costs. The most effective study of issues around drug costs for consumers would examine the entire supply chain,” Scott added.
The FTC’s inquiry will build on the significant public record developed in response to the request for information about pharmacy benefits managers that the agency launched on Feb. 24, 2022. The agency has received more than 24,000 public comments to date. The federal agency is issuing the orders under Section 6(b) of the FTC Act, which authorizes the Commission to conduct studies without a specific law enforcement purpose. In a show of unanimity, The Federal Trade Commission voted 5-0 to issue the Section 6(b) orders and conduct the study of pharmacy benefits managers’ business practices. The companies will have 90 days from the date they receive the order to respond.
We will have to just wait and see what effect, if any, this will have on overall prescription drug prices. In this day and age of rampant inflation, any move to bring prices down will be highly anticipated.
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