Photo by Bradley Andrews, Unsplash
Photo by Bradley Andrews, Unsplash
Pharmacy benefit managers "are raking in billions in excess revenue—$7.3 billion over just five years—while squeezing independent pharmacies and leaving patients and health plan sponsors with skyrocketing costs."
Republished with permission from Common Dreams, by Brett Wilkins
The U.S. Federal Trade Commission on Tuesday published the second part of its investigation into how prescription drug middlemen are marking up the prices of specialty generic drugs dispensed at their affiliated pharmacies by hundreds—and in some cases, thousands—of percent, underscoring what advocates say is the need for urgent action by policymakers.
The FTC’s second interim staff report on consolidated pharmacy benefit managers (PBMs) found that the three largest of these middlemen—CVS Health’s Caremark Rx, Cigna Group’s Express Scripts, and UnitedHealth Group’s OptumRx—”marked up two specialty generic cancer drugs by thousands of percent and then paid their affiliated pharmacies hundreds of millions of dollars of dispensing revenue in excess of estimated acquisition costs for each drug annually.”
“Of the specialty generic drugs analyzed in this report and dispensed by the ‘Big Three’ PBMs’ affiliated pharmacies for commercial health plan members between 2020 and 2022, 63% were reimbursed at rates marked up by more than 100% over their estimated acquisition cost… while 22% were marked up by more than 1,000%,” the report states.
“For the pulmonary hypertension drug tadalafil (generic Adcirca), for example, pharmacies purchased the drug at an average of $27 in 2022, yet the Big Three PBMs marked up the drug by $2,079 and paid their affiliated pharmacies $2,106, on average, for a 30-day supply of the medication on commercial claims,” the publication notes. That’s a staggering average markup of 7,736%.
“Such significant markups allowed the Big Three PBMs and their affiliated specialty pharmacies to generate more than $7.3 billion in revenue from dispensing drugs in excess of the drugs’ estimated acquisition costs from 2017-22,” the FTC said. “The Big Three PBMs netted such significant revenues all while patient, employer, and other healthcare plan sponsor payments for drugs steadily increased annually.”
The new analysis follows a July 2024 report that revealed Big Three PBM-affiliated pharmacies received 68% of the dispensing revenue generated by specialty drugs in 2023, a 14% increase from 2016.
“The FTC staff’s second interim report finds that the three major pharmacy benefit managers hiked costs for a wide range of lifesaving drugs, including medications to treat heart disease and cancer,” FTC Chair Lina Khan said in a statement Tuesday. “The FTC should keep using its tools to investigate practices that may inflate drug costs, squeeze independent pharmacies, and deprive Americans of affordable, accessible healthcare—and should act swiftly to stop any illegal conduct.”
Khan’s time as chair is limited. Republican U.S. President-elect Donald Trump’s inauguration is next week and he has named Andrew Ferguson as the next FTC chair. As Ferguson is already on the commission, his elevation to chair won’t require Senate confirmation.
Greg Lopes, spokesperson for the Pharmaceutical Care Management Association, a PBM lobby group, said Tuesday that “it’s clear this report again fails to consider the entirety of the prescription drug supply chain and makes sweeping assertions about the role of PBMs disconnected from a full appreciation of their critical cost-saving role for employers, unions, taxpayers, and patients.”
Last September, the FTC sued the Big Three and their affiliated group purchasing organizations for allegedly “engaging in anticompetitive and unfair rebating practices that have artificially inflated the list price of insulin drugs, impaired patients’ access to lower list price products, and shifted the cost of high insulin list prices to vulnerable patients.”
FTC Office of Policy Planning Director Hannah Garden-Monheit said Tuesday that the problem of PBM price inflation “is growing at an alarming rate, which means there is an urgent need for policymakers to address it.”
To that end, U.S. Sens. Maria Cantwell (D-Wash.) and Chuck Grassley (R-Iowa) introduced the Pharmacy Benefit Manager Transparency Act of 2023, a bill backed by the AARP aimed at increasing transparency and “holding PBMs accountable for deceptive and unfair practices that drive up prescription drug costs and force independent pharmacies out of business.”
Responding to the FTC report, Emma Freer, senior policy analyst for healthcare at the American Economic Liberties Project—a corporate accountability and antitrust advocacy group—said in a statement Tuesday that “the FTC’s second interim report lays bare the blatant profiteering by PBM giants, which are marking up lifesaving drugs like cancer, HIV, and multiple sclerosis treatments by thousands of percent and forcing patients to pay the price.”
“By steering prescriptions for the most expensive specialty generic drugs to their own pharmacies, PBMs are raking in billions in excess revenue—$7.3 billion over just five years—while squeezing independent pharmacies and leaving patients and health plan sponsors with skyrocketing costs,” Freer added. “This report is a call to action for policymakers to dismantle these exploitative schemes, outlaw the rebate system driving up prices, and restore fairness and affordability to the U.S. healthcare system.”
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