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New FTC Report Finds PBMs Increased Prices for Specialty Cancer, HIV Generic Drugs to Generate Billions in Revenue
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Key Takeaways
- The FTC report highlights significant price inflation by the top three PBMs, generating $7.3 billion in revenue over six years.
- PBMs have steered patients to affiliated pharmacies by marking up specialty generics and reimbursing them at higher rates than unaffiliated pharmacies.
Building on a previous report that revealed corrupt business practices among the big 3 PBMs, a second interim report finds that PBMs heightened prices for important specialty generic drugs to increase their profit margins.
The Federal Trade Commission released a second interim staff report on the practices of pharmacy benefit managers (PBMs), finding that the “big 3” PBMs—OptumRX, Express Scripts, and Caremark Rx (CVS)—have consistently marked up the prices of dozens of specialty generic drugs dispensed at their affiliated pharmacies by hundreds and thousands of percent, allowing them to create over $7.3 billion in revenue over 6 years.1,2
One of the entrances to the Federal Trade Commission Building in Washington, DC, that serves as the headquarters of the Federal Trade Commission (FTC) | Image Credit: © Tada Images | stock.adobe.com
The new report comes months after the first interim staff report was released in July 2024, which found that PBMs had an outsized impact on the pharmaceutical industry and negatively impacted the accessibility and affordability of prescription drugs. Shortly after the release of the first interim report, the FTC announced their intention to sue the big 3 PBMs for their unfair negotiating tactics that have driven up the prices of drugs like insulin.3,4
“The FTC staff’s second interim report finds that the 3 major pharmacy benefit managers hiked costs for a wide range of lifesaving drugs, including medications to treat heart disease and cancer,” Lina M Khan, chair of the FTC, said upon the release of the report. “The FTC should keep using its tools to investigate practices that may inflate drug costs, squeeze independent pharmacies, and deprive Americans of affordable, accessible health care—and should act swiftly to stop any illegal conduct.”1
Part of the FTC’s ongoing study of the PBM industry, the new report highlights the profit-increasing methods that the big 3 PBMs used for years to generate profit. Compared with unaffiliated pharmacies, the report found a disproportionate share of commercial prescriptions for specialty generics marked up over $1000 per prescription. The FTC notes that these practices have steered patients to their own affiliated pharmacies compared with many independent, locally owned pharmacies.1
Furthermore, on nearly every specialty drug that the FTC examined, the big 3 PBMs reimbursed their own affiliated pharmacies at a significantly higher rate than they paid pharmacies unaffiliated with them. This contributed to the billions in revenue the corporations collected, more than the estimated acquisition cost determined by the National Average Drug Acquisition Cost (NADAC) measurement. Dispensing revenue that was more than the NADAC standard was found to increase at a dramatic compound annual growth rate of 42% from 2017 to 2021, according to the FTC’s findings.1
Through spread pricing, the big 3 PBMs separately generated an estimated $1.4 billion in income on the analyzed specialty drugs over the course of the FTC’s study. The practice of spread pricing involves billing their plan sponsor clients more than they reimburse pharmacies for drugs and can keep independent pharmacies out of competition with the larger, PBM-affiliated pharmacies.1
“FTC staff have found that the big 3 PBMs are charging enormous markups on dozens of lifesaving drugs,” Hannah Garden-Monheit, director of the FTC’s Office of Policy Planning, said in the news release. “We also found that this problem is growing at an alarming rate, which means there is an urgent need for policymakers to address it.”1
The Commission voted unanimously, 5 to 0, to allow the FTC to publicly issue the second interim staff report.1
It is unknown whether the report will push legislators in Washington to pass meaningful reform to PBMs and their practices. In December 2024, a package of reforms, including changes to PBM industry payments to community health centers and a rollback of physician payment cuts, was set to be included in a government spending bill. However, the reforms were moved at the last-minute amid disagreements over the content of the package.5
REFERENCES
1. Federal Trade Commission. FTC releases second interim staff report on prescription drug middlemen. News Release. Released January 14, 2025. Accessed January 15, 2025. https://www.ftc.gov/news-events/news/press-releases/2025/01/ftc-releases-second-interim-staff-report-prescription-drug-middlemen
2. Aboulenein A, Niasse A. US FTC finds major pharmacy benefit managers inflated drug prices for $7.3 billion gain. Reuters. Published January 14, 2025. Accessed January 15, 2025. https://www.reuters.com/business/healthcare-pharmaceuticals/us-ftc-finds-major-pharmacy-benefit-managers-inflated-drug-prices-73-billion-2025-01-14/
3. Halpern L. FTC report acknowledges impact pharmacy benefit managers have on cost, accessibility of prescription drugs. Pharmacy Times. Published July 9, 2024. Accessed January 15, 2025. https://www.pharmacytimes.com/view/ftc-report-details-impact-pharmacy-benefit-managers-have-on-cost-accessibility-of-prescription-drugs
4. Halpern L. FTC intends to sue biggest pharmacy benefit managers for unfair negotiating tactics. Pharmacy Times. Published July 11, 2024. Accessed January 15, 2025. https://www.pharmacytimes.com/view/ftc-intends-to-sue-biggest-pharmacy-benefit-managers-for-unfair-negotiating-tactics
5. Weixel N, Choi J. Health Care Newsletter – Congress missed a chance at PBM reforms. Will they get another? The Hill. Released January 2, 2025. Accessed January 15, 2025. https://thehill.com/newsletters/health-care/5064513-will-congress-get-another-shot-at-pbm-reform/
