Lawmakers rip PBMs after new report by Federal Trade Commission

The Federal Trade Commission published this chart as part of “Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies," a 73-page report that analyzed the business practices of PBMs.
_{© Federal Trade Commission}

Federal lawmakers panned pharmacy benefit managers (PBMs) in the wake of a new report that analyzed their business practices.

But critics said the report was unusual, not well-sourced, and will contribute nothing to public debate about sky-high drug prices that force patients to delay medical care.

The Federal Trade Commission (FTC) this week released the report, “Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies.” The 73-page document is an interim report in the midst of FTC’s ongoing study of PBMs, which negotiate terms and conditions for access to prescription drugs.

The three largest PBMs now manage nearly 80% of all prescriptions in the nation. With vertical integration to control health plans and pharmacists, “they wield enormous power and influence over patients’ access to drugs and the prices they pay,” according to FTC.

But their business practices and effects “remain extraordinarily opaque,” the report said.

“The FTC’s interim report lays out how dominant pharmacy benefit managers can hike the cost of drugs – including overcharging patients for cancer drugs,” FTC Chair Lina M. Khan said in a news release. “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 health care markets and ensure that Americans can access affordable health care.”

After the publication of the report, lawmakers said the time is right for legislative action. But critics ripped the document for shoddy research that did not include details from PBMs themselves.

‘Shady operations’

A PBM critic for years, Sen. Chuck Grassley (R-Iowa) called the report a direct result of his request for an FTC review, known as a 6(b) study, on anti-competitive business practices in the prescription drug and pharmaceutical industry.

"This interim report from the FTC is a step towards improving PBM transparency and accountability, which Congress and consumers alike are calling for,” Grassley said in a statement. “The data FTC has collected so far appear to confirm my concerns about concentration and possible anti-competition in the PBM industry – both of which harm independent pharmacies and hike prices patients have to pay for medications they need.

“That said, I’m not lifting my foot off the gas,” Grassley added. "The FTC says it’s committed to completing this review in a timely manner, and you can bet I’ll be holding the commission to its promise.”

Grassley also called on Senate Majority Leader Sen. Chuck Schumer (D-New York) to act on bills that Grassley and their fellows have proposed “to shine light on shady PBM operations.”

‘High prices and red tape’

Some of that legislation has been approved by the Senate Finance Committee, said Chair Sen. Ron Wyden (D-Oregon).

“Middlemen are right at the heart of Americans’ frustration with the health care system: High prices and red tape preventing them from getting the care they need,” Wyden said in a statement. “The FTC’s comprehensive findings show how PBMs use their market power to drive up costs for families and restrict access to preferred pharmacies at the expense of independent pharmacies. The Finance Committee overwhelmingly passed legislation to hold PBMs accountable, and I am going to the mat to deliver that bill to the president’s desk this year.”

‘Bust up the PBM monopoly’

The Senate is not the only place where legislation is percolating. Rep. Earl L. “Buddy” Carter (R-Georgia), a pharmacist, has been an outspoken critic of PBMs for their business practices, not least squeezing independent pharmacies out of the market.

“Since day one in Congress, I’ve been calling on the FTC to investigate PBMs, which use deceptive and anti-competitive practices to line their own pockets while reducing patients’ access to affordable, quality health care,” Carter said in a statement. “I’m proud that the FTC launched a bipartisan investigation into these shadowy middlemen, and its preliminary findings prove yet again that it’s time to bust up the PBM monopoly.

“We are losing more than one pharmacy per day in this country, causing pharmacy deserts and taking the most accessible health care professionals in America out of people’s communities,” he said. “I am calling on the FTC to promptly complete its investigation and begin enforcement actions if – and when – it uncovers illegal and anti-competitive PBM practices.”

PBMs respond

Pharmaceutical Care Management Association President and CEO J.C. Scott issued a statement that the FTC report “completely overlooks the volumes of data that demonstrate the value that PBMs provide to America’s health care system by reducing prescription drug costs and increasing access to medications.”

“Throughout this process, FTC leadership has shown that they have pre-determined conclusions that they want to advance irrespective of the facts or the data, and this report demonstrates an intention to follow through on their agenda regardless of the evidence,” Scott said.

“Nothing can change the fact that PBMs are operating in an extremely competitive market and have a proven track record of reducing prescription drug costs, notably by promoting lower cost generics and biosimilars,” Scott’s statement said. “In addition, PBMs recognize the vital role pharmacies play in creating access to prescription drugs for patients. In support of that critical role, PBMs support rural pharmacies through innovative programs that increase reimbursements on prescription drugs. And independent data has shown that chain pharmacies are not being reimbursed at a higher level than independent pharmacies.”

Dissent on the Commission

PCMA also published a compilation of critical statements about the report, starting with Federal Trade Commissioner Melissa Holyoak’s dissenting statement. She said the report failed to meet the FTC’s own rigorous standard of research.

“Rather than generate public engagement and fruitful policy discussion, the Report will only exacerbate ideological schisms and further degrade the legitimacy of the Commission,” she said in her official statement. “And most importantly, the Report leaves us without a better understanding of the competition concerns surrounding PBMs or how consumers are impacted by PBM practices.”

Khan and Commissioners Rebecca Kelly Slaughter and Alvaro Bedoya said the issue of drug pricing is urgent and noted Congress members have urged the FTC to act more quickly, not less quickly. The report includes case studies about PBMs overcharging for two cancer drugs (generic Gleevec and Zytiga) that affect thousands of patients, and the public should know that, they said.

Commissioner Andrew N. Ferguson concurred with the release. But he noted interim reports are rare and the most recent one relies heavily on public comments and public information, including anonymous comments, and not on data supplied by PBMs themselves.