Providers urge FTC to probe PBM practices

Providers want the Federal Trade Commission to investigate pharmacy benefit managers’ business practices, but PBMs and insurers say pharmaceutical manufacturers are to blame for sky-high drug prices.

The FTC published a notice in February asking for input on how PBM practices including rebates and fees, potentially anticompetitive contractsm, and attempts to steer patients towards certain pharmacies affect patients and payers. The commission received more than 23,700 submissions by the time the comment period expired Wednesday.

Providers wrote comment letters arguing that PBMs engage in practices that decrease quality and threaten providers’ finances.

The FTC requested public comments after a failed vote to initiate a study on the effects that PBMs have on independent pharmacies, which have long complained that the industry is harming them. FTC Chair Lina Khan called an investigation “vital” but two commissioners objected and maintained the panel should focus its attention on issues affecting patients, leading to a 2-2 tie.

In letters to the FTC, providers claim that integration between PBMs and health insurance companies is limiting competition in prescription drug coverage. Three PBMs control about 80% of the market, and insurers or their parent companies own each of them: UnitedHealth Group owns Optum, Cigna owns Express Scripts and CVS Health owns Aetna and CVS Caremark.

“Experts have long sounded the alarm that PBM abuses and vertical integration are a disaster for quality and freedom of choice, and yet countless mergers and acquisitions have been allowed. If the FTC is truly serious about addressing the broken PBM marketplace, dramatic and urgent action will be necessary,” the Community Oncology Alliance wrote.

PBM negotiations with drug manufacturers on rebates and other financial and operational information must be more transparent, the American Medical Association wrote.

The evidence on whether PBMs harm patients and providers is mixed. Larger rebates are positively correlated with rising list prices for drugs, which supports the hypothesis that PBMs’ demand for rebates contributes to inflating drug prices, according to a University of Southern California-Schaeffer Institute Center for Health Policy study published in 2020.

But the Office of the Actuary at the Centers for Medicare and Medicaid Services reports that PBM rebates constrained prescription drug spending growth in 2017, and a separate federal report found PBMs retained less than 1% of rebates in 2016 and passed the rest along to plan sponsors that can use the extra funds to reduce premiums.

The AMA also notes that PBMs have expanded their operations and often do more than just negotiate prices, such as design formularies and make coverage decisions. Consequently, PBMs should be regulated as insurance companies, the AMA wrote.

CMS finalized a policy last month to stop PBMs from clawing back fees from pharmacies. Provider groups including the Community Oncology Alliance and the American Society of Health-System Pharmacists maintain that policy is insufficient.

The American Hospital Association asks the FTC to investigate ‘white bagging,’ a practice under which medications are covered only when dispensed at specialty pharmacies, which precludes providers from administering the drugs themselves. This can delay care and raises safety concerns, according to the AHA.

“With the implementation of these new practices, hospitals are no longer responsible for the purchasing of pharmaceutical products, but still are left with the real consequences of drug shortages, such as needing to explore alternative medication options or experiencing delays in receiving drugs needed for patient care,” the AHA wrote.

But PBMs and health insurers maintain their mission is to control drug costs and point to pharmaceutical companies as the culprits for rising prices.

“It is clear drug prices are out of control, and the problem is the price that Big Pharma, and Big Pharma alone, controls,” the insurance group AHIP wrote. AHIP urges the FTC to investigate the drug supply chain, including pharmacies, hospitals and physicians, rather than focus on PBMs.

The Pharmaceutical Care Management Association, which represents PBMs, argues regulators should eliminate barriers to biosimilars and restructure the Medicare prescription drug benefit to discourage pharmaceutical companies from increasing prices.

“While PBMs are using all available tools to help drive down drug costs and more consumers are benefiting from PBM-negotiated savings than ever before, it is simply not enough,” PCMA wrote.

The FTC will take comments into account to inform the agency’s policies and enforcement work, according to the notice it published in February.

Lawmakers also are watching. Last Tuesday, Sens. Maria Cantwell (D-Wash.) and Chuck Grassley (R-Iowa) introduced legislation to curb some PBM practices.

The bill would stop PBMs from clawing back fees or overcharging pharmacies, offer liability exceptions to PBMs that pass all rebates on to payers, and require PBMs to report more financial data. The measure would also require the FTC to report to Congress on its enforcement activities, and on whether formularies are designed unfairly.

“Pharmacy benefit managers and other intermediaries in the pharmaceutical supply chain must be held accountable for increasing the cost of healthcare,” Grassley said in a news release. “It is critical for Congress to direct the Federal Trade Commission to go after these arbitrary, unfair and deceptive practices while also establishing more transparency and accountability.”