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Pharmaceutical executives and lobbyists I’ve been looking for it for a long time Shifting responsibility for America’s drug costs onto industry middlemen who negotiate prices. FTC Report Drug companies may find some justification on that point this week, as they pointed out the “enormous power and influence” these pharmacy benefit managers have in the health care system.
An ongoing FTC investigation launched in 2022 found that three of the largest PBMs — CVS Caremark, Express Scripts, and OptumRx — control nearly 80% of prescriptions in the U.S. The consolidation of these and three other PBMs accounts for more than 90% of prescriptions, driving local pharmacies out of business. These practices, along with vertical integration across the healthcare market, are driving up drug costs, the FTC report concluded.
Executives like Eli Lilly CEO David Ricks have spoken out in the past about the impact PBMs have on drug costs. Last year’s Senate committeeRicks said Lilly hasn’t raised the net price of its insulin product Humalog since 1996, but that any increases in costs to consumers, adjusted for inflation, can be attributed to PBMs.
“Last year, roughly 80 percent of the list price of insulin went toward paying fees and kickbacks to companies that don’t invent, develop, manufacture or research medicines,” Ricks said at a May 2023 hearing.
in Another Senate committee Earlier this year, Bristol-Myers Squibb CEO Christopher Boehner also accused PBMs of being the true driver of Americans’ drug spending.
“Pharmaceutical companies give huge kickbacks, discounts and payments to middlemen who sit between us and patients in the drug supply chain,” Boehner said, noting that BMS paid out more than $96 billion to middlemen over a five-year period, “but patients don’t get the economic benefit of those large discounts because the middlemen don’t have to pass those discounts on to patients when they pick up their prescriptions at the pharmacy counter.”
Following the FTC report, other stakeholders, such as the National Association of Community Pharmacists, have also spoken out, arguing that PBMs have gained power under the current system and need to be further regulated.
“There has been significant relocation in the pharmacy benefits sector in recent years,” NCPA CEO B. Douglas Hoey said in an emailed statement.
The practices PBMs are adopting are leading to consolidation, Hoey added.
“As the interim report makes clear, the market has undoubtedly exploded, driven by a myriad of mergers and acquisitions, as well as tactics such as patient steering and ‘take it or leave it’ deals,” Hoey said.
Hoey argued that the current PBM system is bad for consumers and stifles competition, and that lawmakers should enact reforms to ensure a “level playing field.” And lawmakers have been exploring such reforms.
One of the FTC’s criticisms is that “greater concentration could give large PBMs the power to enter into complex and opaque contractual relationships, to the detriment of smaller unaffiliated pharmacies and their patients.”
Senate Finance Committee Chairman Ron Wyden (D-Oregon) and Sen. Mike Crapo (R-Idaho) Bipartisan Reform The senators’ letter calls for new reforms to the PBM system “by advancing a comprehensive, consensus-based package of legislation designed to modernize and improve the prescription drug benefit.” These reforms include encouraging competition to reduce costs, better aligning incentives, and increasing transparency, among other things.
PBMs fight back
The Pharmaceutical Care Management Association, a PBM lobbying group, criticized the FTC report as flawed and unfair.
“Throughout this process, FTC leadership has demonstrated that it has predetermined the conclusion it wants to proceed with, regardless of facts or data,” PCMA said in an emailed statement. “Nothing can change the fact that PBMs operate in an extremely competitive marketplace and have a proven track record of lowering prescription drug costs, particularly by promoting lower-cost generics and biosimilars.”
PCMA also supported FTC Commissioner Melissa Holyoak’s Objection He criticised the interim report for citing “procedural irregularities and concerns about the substance of the original order, or lack thereof”. He said the report was politicised and designed to stoke ideological rifts.
“Most importantly, the report fails to provide a deeper understanding of the competitive concerns surrounding PBMs and how their practices affect consumers,” Holyoak wrote in dissent.
