Op-Ed: FTC Adds Fuel to the Fire for PBMs. Will Congress Deliver Real Reform?

Michael N. Abrams, Managing Partner of Numerof & Associates

The Federal Trade Commission’s (FTC’s) latest report on pharmacy benefit managers (PBMs) is the third salvo in its campaign against the PBM industry. The FTC’s first interim staff report came out in July 2024 and focused on the harms resulting from the business practices of the 6 largest PBMs. That report documented ways in which the big PBMs have used their position in the pharmaceutical distribution chain to profit by inflating drug costs, restricting access to medicines, and squeezing Main Street pharmacies.¹

The second salvo came in September 2024, when the FTC brought legal action against the 3 largest PBMs—Caremark Rx, Express Scripts (ESI), and OptumRx—and their affiliated group purchasing organizations (GPOs) for engaging in anticompetitive and unfair practices that have artificially inflated the price of insulin drugs, impaired patients’ access to lower list price products, and shifted the cost of high insulin list prices to vulnerable patients.²

Around the same time as the legal action, ESI countersued the FTC, charging that the first staff report was based on anecdotes and not on hard, representative data, and decrying both the tone and substance of the findings.³

The most recent salvo is the FTC’s second interim staff report on the PBM business, which was released in January 2025. The report focused on specialty generic drugs and found that the 3 biggest PBMs have profited handsomely by adding significant markups to the cost of critical specialty generic drugs for cancer, HIV, and other conditions that were dispensed at their affiliated pharmacies. In addition to inflating the cost of these essential prescriptions, the report said that these PBMs were likely steering the most profitable sales to their affiliated pharmacies, enabling them to increase their dispensing revenue by a whopping 42% compounding annual growth rate (CAGR) over the 5-year study period. These practices contributed to increases in plan sponsors’ costs and patient payments at a CAGR of 21% for commercial claims, and 14% to 15% for Medicare Part D claims over the 5-year study period.⁴

At this point, both sides appear to have dug in. Despite the PBM countersuit, it appears that the FTC is succeeding at putting the spotlight on PBM practices that, until now, have been hidden from view. Congress is definitely feeling the pressure to do something, which was reflected in the recent effort to insert reform legislation into the Continuing Resolution (CR) that failed to pass.⁵

As written, this so-called “reform” legislation would have legitimized some of the self-dealing business practices the FTC criticized in its report. For example, manufacturers would continue to pay rebates that are proportional to the price of a product in exchange for preferred positions on the plan formulary. That means that incentives to choose higher-priced drugs over lower-priced alternatives would remain. The primary difference in the proposed legislation is that the rebates would go entirely to the plan sponsor, not split with the PBM.⁵ But the problem of rebates remains a significant one.

Industry insiders say that employers like rebates. After all, who wouldn’t want a big check at the end of the year? Not only does this disadvantage smaller businesses who don’t get a check, but those rebates aren’t typically used to reduce costs for employees. The proposed legislation did not address these legitimate concerns and was silent on the harm experienced by patients due to existing PBM business practices. But it would have allowed legislators to say they did something about PBMs.

Laws typically come with associated funding, and this bill is no exception. In fact, over $130 million was made available for the Secretary of Health and Human Services and Office of the Inspector General to administer the act in 2025, in addition to other available funds, despite the fact that it wouldn’t take effect until 2028. The legislation didn’t mention future budgets, but they’re not likely to be smaller.

The time is right for PBM reform, but the American people might be better served if Congress goes back to the drawing board for a different approach, one that starts with a clear statement about what needs to change and that spells out transparency requirements, oversight, and control mechanisms to rein in self-dealing and encourage market forces. We need real reform—not just checking a box. Let’s hope Congress can get it right next time.

REFERENCES

1. Halpern L. FTC Report Acknowledges Impact Pharmacy Benefit Managers Have on Cost, Accessibility of Prescription Drugs. Pharmacy Times. July 9, 2024. Accessed January 31, 2025. https://www.pharmacytimes.com/view/ftc-report-details-impact-pharmacy-benefit-managers-have-on-cost-accessibility-of-prescription-drugs

2. Halpern L. FTC Sues Major Pharmacy Benefit Managers Over Price of Insulin. Pharmacy Times. September 20, 2024. Accessed January 31, 2025. https://www.pharmacytimes.com/view/ftc-sues-major-pharmacy-benefit-managers-over-price-of-insulin

3. Express Scripts Sues FTC, Demands Withdrawal of PBM Report. News release. Express Scripts. September 17, 2024. Accessed January 31, 2025. https://www.prnewswire.com/news-releases/express-scripts-sues-ftc-demands-withdrawal-of-pbm-report-302250181.html

4. Halpern L. New FTC Report Finds PBMs Increased Prices for Specialty Cancer, HIV Generic Drugs to Generate Billions in Revenue. Pharmacy Times. January 15, 2025. Accessed January 31, 2025. https://www.pharmacytimes.com/view/new-ftc-report-finds-pbms-increased-prices-for-specialty-cancer-hiv-generic-drugs-to-generate-billions-in-revenue

5. Numerof R. The PBM Bill Failed: Implications for PBM Reform. Forbes. January 2, 2025. Accessed January 31, 2025. https://www.forbes.com/sites/ritanumerof/2025/01/02/the-pbm-bill-failed-americans-dodged-a-bullet/