On July 9, 2024, the Federal Trade Commission ("FTC") released an interim report describing their ongoing study of pharmacy benefit managers ("PBMs") and their impact on access to and affordability of medicines.
According to the FTC, "PBMs are at the center of the complex pharmaceutical distribution chain that delivers a wide variety of medicines from manufacturers to patients," and "serve as middlemen, negotiating the terms and conditions for access to prescription drugs for hundreds of millions of Americans." The FTC asserts that "PBMs exert substantial influence over independent pharmacies" and "oversee critical decisions about access to and affordability of medications without transparency or accountability to the public."
In 2022 the FTC issued special orders pursuant to Section 6(b) of the Federal Trade Commission Act (the "6(b) Orders" or "Orders") to the six largest PBMs—Caremark Rx, LLC; Express Scripts, Inc.; OptumRx, Inc.; Humana Pharmacy Solutions, Inc.; Prime Therapeutics LLC; and MedImpact Healthcare Systems, Inc.—requesting data and documents regarding their business and business practices. In 2023, the FTC issued supplemental Orders to three additional PBM-affiliated entities. While some of the PBMs have not responded to the FTC's Orders, the FTC is sharing its preliminary findings in the interim report.
According to the report, the PBM industry is horizontally consolidated and vertically integrated. Specifically, according to the FTC, the top six PBMs processed more than 90% of the approximately 6.6 billion prescriptions dispensed by U.S. pharmacies in 2023, demonstrating this horizontal consolidation. All of the top six PBMs are vertically integrated, meaning PBMs are operating in a system that includes the drug private labeler all the way down to the pharmacy and health insurer. As a result, the report states, these PBMs have the ability and incentive to prefer their own affiliated businesses, for example, by increasing utilization of certain drug products, which may not be the lowest cost to the patient.
The interim report describes how rebate contracts between PBMs and drug manufacturers can, in the FTC's view, "block competition from new branded therapies, biosimilars, generics, and other innovative products." Specifically, the report discusses what it describes as higher brand manufacturer rebates premised on (1) preferred positioning over other products; (2) excluding competing manufacturers; and (3) implementing "brand step" requirements. As a result of such contract provisions, the report states, patients' out-of-pocket cost obligations may be higher and accessibility to less expensive generic products may be reduced in some instances. According to the report, these dynamics could in turn affect the generic market by deterring less expensive generic competitor drugs from entering the market.
The FTC concludes that "[w]hile this Interim Report principally focuses on the impact of these changing market dynamics on the operation and vitality of the nation's pharmacies, we also share initial evidence about PBM and brand pharmaceutical rebating practices that urgently warrant further scrutiny and potential regulation."
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