Bloomberg Law
Feb. 17, 2022, 8:34 PMUpdated: Feb. 17, 2022, 10:27 PM

Pharmacy Middlemen Dodge FTC Competition Probe in Split Vote (2)

Celine Castronuovo
Celine Castronuovo

The Federal Trade Commission Thursday failed to reach consensus on launching a study into the reimbursement rates set by the entities that manage prescription drug benefits on behalf of health insurers and Medicare Part D plans.

The FTC in a 2-2 party-line vote decided to not open a probe into pharmacy benefit managers (PBMs) and whether their drug price setting practices unfairly favor PBM-affiliated pharmacies at the expense of independent or specialty ones.

The move comes despite fervent demands from pharmacy and patient advocacy groups to look into a complex component of the health-care industry that has traditionally remained without strong federal oversight.

“I am really disappointed by this outcome,” FTC Chair Lina Khan, who backed the motion to launch a probe, said immediately after the vote Thursday. She noted that the commission has “for months been building a record with testimony from both patients and pharmacies alike underscoring the real urgency and life and death at stake in some instances.”

Independent pharmacy representatives testified earlier in the FTC meeting that low reimbursements rates PBMs set for pharmacies have threatened to put community pharmacies out of business amid the demands of the pandemic.

The Republican commissioners—Noah J. Phillips and Christine Wilson—voted against the motion, arguing that while the existing plans for a study include how PBM practices “may disadvantage independent or specialty pharmacies,” they do not adequately call for measuring how PBMs may influence out-of-pocket drug costs for consumers.

Concerns on pharmacy middlemen’s market impacts have grown in recent years, as the largest PBMs have integrated with retail pharmacies and health plans including CVS-Aetna, Cigna-Express Scripts and UnitedHealth-OptumRx. Independent pharmacy groups argue that PBM-owned or affiliated pharmacies often push patients to get drugs through their own facilities, turning costumers away from smaller, local ones.

‘Long Overdue’

Pharmacy and patient advocacy groups have long called for the federal government to take action against PBM practices that they say drive up consumer costs and limit business to independent pharmacies.

Formularies, or lists of drug products covered by payers, are set by PBMs and limit patient options, pharmacists say. They have also criticized practices like spread pricing, in which PBMs keep a portion of the amount paid to them by health plans instead of giving the full amount to pharmacies.

Scott Knoer, CEO and executive vice president of the American Pharmacists Association, said in testimony at Thursday’s meeting that a federal probe into PBMs was “long overdue.”

“Anti-competitive PBM practices are putting independent pharmacies out of business and creating pharmacy deserts in minority and underserved communities, where the neighborhood pharmacy may be the only health-care provider for miles,” he said.

No PBM representatives were present at Thursday’s meeting, though the Pharmaceutical Care Management Association, the leading PBM trade group, has said that its members work to reduce patient drug costs, and that drugmakers are the ones responsible for setting prices.

“Drug manufacturer price setting is the root cause of high drug costs, putting a strain on patients and forcing them to make difficult decisions about their drugs,” the group said in an emailed statement Thursday. “PBMs are holding drug companies accountable by relentlessly negotiating the lowest possible cost on behalf of patients, and are driving and delivering local competition that patients are demanding.”

JC Scott, president and CEO of the PCMA, said in a Feb. 15 post that through “expertise, data, and technology, PBMs pave the way for a seamless pharmacy experience helping patients to get and stay on their medications and through the process, lead healthier lives.”

A Divided Commission

FTC Commissioner Phillips said that while he supports examining PBM practices, the proposed study “was not designed to assess the competitive effects” of PBM contracts with pharmacies.

The study also “would not tell us how the contractual provisions at issue might impact drug prices overall, or the out-of-pocket drug costs consumers pay when they go to the pharmacy to get their prescriptions,” he said. “To me, the most important things are the amount of money that Americans are spending on prescriptions, and the kind of care they are getting.”

Wilson echoed these remarks, noting she didn’t receive the latest version of the study proposal until late Wednesday night. She added she would like a study to address whether the price and quality of medications vary from an independent pharmacy to a PBM-affiliated one.

But Rebecca Slaughter, a Democrat, who voted for the study, said it would have been a “starting point” for future probes into PBMs.

“There are many iterations of a PBM study that I could and would enthusiastically support,” Slaughter said. She added that not launching the study would be “a shame for the American people.”

National Community Pharmacists Association CEO Douglas Hoey blasted Phillips and Wilson for their votes Thursday, arguing that they “just let the worst actors in the market off the hook.”

“After hearing hours of testimony by community pharmacists and patients, all of whom painted the same shocking picture about PBM abuse, and not a single witness there to defend the PBM industry, it is inexplicable that two members of the commission could vote against the study,” Hoey said in a statement.

(Updated with comment from the PCMA in the 13th paragraph.)

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To contact the editor responsible for this story: Alexis Kramer at