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Path to Pharmacy Agent Probe Cleared With FTC’s New Commissioner

May 13, 2022, 2:00 PM

FTC Democrats now have the majority to approve a probe into the entities that run prescription drug benefits, though antitrust attorneys say the agency’s chair will still aim to build broad consensus before moving ahead.

The Senate’s confirmation of Alvaro Bedoya gives Federal Trade Commission Chair Lina Khan the support she needs on the five-member agency to investigate the impacts pharmacy benefit managers have on drug prices. Bedoya could push a PBM study plan past the finish line after the agency’s previous effort failed in a 2-2 deadlocked vote.

But attorneys say Khan will likely, and should, attempt to gain support for a new study proposal from all commissioners, each of whom have called for a better understanding of how PBMs interact with the rest of the drug distribution chain.

“This is going to be full speed ahead for Khan, although I strongly believe you’re gonna see a bipartisan consensus here,” said David Balto, former assistant director for policy and evaluation at the FTC Bureau of Competition.

PBMs manage drug coverage for health insurers, large employers, Medicare prescription drug plans, and others. They negotiate discounts from drugmakers, collect rebates from them, and determine how pharmacies get reimbursed for distributing prescriptions.

Independent pharmacists argue that recent integration with retail pharmacies and health plans has allowed PBMs to steer patients to pharmacies owned by the insurers that own the PBMs. Drugmakers have also long argued that the rebates and discounts they must pay to PBMs result in higher initial list prices for drugs.

The FTC in February decided not to open a probe into PBMs after Republican members argued that the proposed study lacked clarity and specific plans to analyze what consumers ultimately pay for their prescriptions at the pharmacy counter. Noah J. Phillips, one of two Republicans on the FTC, voted against the study but said he would be open to working with his fellow commissioners on developing a new one.

The commission is accepting public comments through May 25 on PBMs’ rebates, pricing policies, and consolidation. It declined to comment on whether Bedoya’s confirmation would impact a PBM study, and has said a review of comments could take anywhere from weeks to months, depending on the volume received.

The Pharmaceutical Care Management Association, the leading PBM trade group, congratulated Bedoya on his confirmation. It also said in a statement that it was “confident the FTC will ultimately conclude that drug manufacturer price setting is the root cause of high drug costs,” and that “PBMs are holding drug companies accountable by relentlessly negotiating the lowest possible cost on behalf of patients.”

Bedoya’s Vote

Attorneys say that while Bedoya’s experience isn’t centered around the pharmaceutical industry, his nomination by the Biden administration means that he is likely to side with the Democratic majority on votes.

Bedoya, a visiting professor at Georgetown Law, is the founding director of the Center on Privacy and Technology and the author of a report analyzing the facial-recognition network used by police forces.

“Although Bedoya‘s portfolio is likely to focus on data privacy issues, as an administration nominee, he’s more likely to vote with the chair,” said Robin Feldman, a professor and researcher at the University of California, Hastings College of the Law.

“Commissioners do try to look for common ground among the commissioners, but the chair more likely now has the votes to move forward with her agenda, including investigating PBMs,” she said.

Bedoya said in his November 2021 confirmation hearing that he would want to help small businesses impacted by consolidation, including pharmacies.

The National Community Pharmacists Association, which represents more than 19,000 independent pharmacies across the country, said in a statement May 11 after news of Bedoya’s confirmation that the new commissioner “shares the commitment to investigating pharmacy benefit managers and empowering consumer choice by preserving small business competition.”

Building Broad Support

Although Democrats have the majority to pass a PBM study they would want, that doesn’t mean Khan should ignore the concerns from Republican members, attorneys say.

“I hope she would try to gain consensus, it seems like all five commissioners want to study the industry,” said Michael Carrier, an antitrust and intellectual property law professor at Rutgers University.

“But the devil is in the details of how the study is constructed,” he said.

FTC Commissioner Phillips told Bloomberg Law in February that the previously proposed study didn’t clarify what exactly the agency would review and whether it would account for consumer drug costs.

Balto, who has repeatedly called on the FTC to take action on PBMs, said in written testimony for a May 5 Senate subcommittee hearing that “PBMs are one of the least regulated sectors of the healthcare system and drug supply chain.”

He urged the committee to consider amending the FTC Act to specify which practices by PBMs could be considered for potential enforcement action, including whether PBMs actually use the rebates they get from manufacturers to bring patients discounts at the pharmacy counter.

An FTC study into PBMs has bipartisan support on Capitol Hill as well. Sen. Chuck Grassley (R-Iowa) wrote a letter to Khan in March with an appeal to “find consensus” among the commissioners to examine “whether they are causing Americans to pay higher prices for prescription drugs.”

“A lot of folks want to learn more about PBMs,” Carrier said. “A carefully targeted study could shed crucial light on the industry.”

To contact the reporter on this story: Celine Castronuovo at ccastronuovo@bloombergindustry.com

To contact the editors responsible for this story: Alexis Kramer at akramer@bloomberglaw.com; Karl Hardy at khardy@bloomberglaw.com

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