FTC Pharmacy Agent Probe Marks ‘Vital’ Step in Drug Price Fight

Patient advocacy groups praised the FTC for opening a probe into pharmacy benefit managers while urging the commission to include consumer feedback on how these entities impact drug prices.

The Federal Trade Commission voted 5-0 to issue orders to CVS Caremark, Express Scripts Inc., and four other of the largest pharmacy benefit managers—the entities that run prescription drug benefits—to submit data on their business practices. Several advocacy groups and a former FTC official say the inquiry is a critical step, but that the agency should go beyond that data to get a broader perspective on PBM operations and the fairness of their reimbursement policies.

The FTC staff “can look at a broad range of questions, and they’re not limited just to the scope of what that” FTC study describes, said David Balto, former assistant director for policy and evaluation at the FTC’s Bureau of Competition.

“It’s going to be up to the staff to broadly seek the comments of consumer and patient groups,” he said.

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.

Drugmakers have long argued that the rebates and discounts they must pay to PBMs result in higher initial list prices for drugs. The Pharmaceutical Care Management Association, the leading PBM trade group, has said that drug manufacturer price-setting “is the root cause of high drug costs.”

A previous FTC effort to study PBMs failed in a 2-2 deadlocked vote after Republican Commissioners Noah J. Phillips and Christine Wilson argued that the proposed study lacked clarity and specific plans to analyze what consumers ultimately pay at the pharmacy counter. The Senate’s confirmation of Alvaro Bedoya gave FTC Chair Lina Khan a Democratic majority to push forward a new FTC study.

The FTC said Tuesday that it received more than 24,000 public comments on the impact of PBMs’ practices, and that its “inquiry will build on the significant public record developed in response to the request for information.”

Phillips and Wilson said in a statement Tuesday that the approved study was an improvement from the previous one, as it “is scoped to study the competitive impact of PBM practices, including—critically—how those practices might impact out-of-pocket costs for consumers.”

They added it “will examine relationships between PBMs and pharmacies and also PBMs and pharmaceutical manufacturers, a matter of much public interest.”

PCMA President JC Scott said in a Tuesday statement that the group is reviewing the revised study and that “we are confident that any examination of pharmacy benefit managers, PBMs, will validate that PBMs are reducing prescription drug costs for consumers.”

Patient Voices

Quardricos Driskell, the Autoimmmune Association’s vice president of public policy and government affairs, called the FTC’s announcement “good news.” He added that it’s also essential for the FTC hear from patients, especially those with chronic illnesses, about how they are being impacted at the pharmacy counter.

“We are thrilled to see this small but vital next step and are hopeful that PBMs would begin to understand the patient perspective,” he said. The Autoimmune Association was one of more than 100 chronic illness organizations that signed onto a letter to the FTC arguing that PBM practices are hurting patient care and fueling higher costs.

Balto, who has repeatedly called on the FTC to take action on PBMs, said Tuesday’s vote is “a critical decision by the FTC. PBMs have “created inflated drug costs and denied consumers vital drugs, because their operations are cloaked in secrecy,” he said.

“This will begin to put a spotlight on those practices,” Balto said, adding that the FTC can then use its findings to take action on PBMs, including through enforcement actions or implementing new regulations.

The National Community Pharmacists Association, which represents more than 19,000 independent pharmacies across the country, hailed the FTC’s action, arguing that PBMs’ “secretive, anticompetitive practices increase prescription drug prices, limit consumer choice, and stymie competition.”

“We’re grateful to Chair Khan and the commissioners for considering these concerns and approving this study, which we hope will result in meaningful reforms to merger and acquisition reviews and, of course, to the insurer-PBMs themselves,” NCPA CEO B. Douglas Hoey said in a statement.

The American College of Rheumatology called the probe “a critical step toward greater transparency and oversight over PBMs’ opaque business practices, as well as the enactment of meaningful drug pricing reforms that will reduce costs and expand access to important therapies for our patients.”