Pharmacy Benefit Managers Under FTC Investigation

Increasing transparency and lowering the cost of prescription drugs has long been a point of discussion in Congress, medical offices, and dining room tables. In November 2021, the Biden-Harris administration increased oversight of prescription drug costs requiring health plans, health insurance issuers offering group or individual health insurance coverage, and health benefits plans offered to federal employees to submit key data to the departments of Health & Human Services (HHS), Labor, Treasury and the Office of Personnel Management.

Now, under increasing pressure from Congress, the Federal Trade Commission (FTC) has launched a probe of the six largest pharmacy benefit managers (PBMs) in the U.S., including CVS Caremark, Express Scripts, Optimum Rx, Humana, Prime Therapeutics, and MedImpact Healthcare Systems. With this move, each of these companies is required to present records and additional information on their business practices within 90 days to a commission comprised of three Democrats and two Republicans.

The primary focus of this investigation is to analyze how vertical integration is impacting prescription drug access and the price patients pay for them. In the last decade, the division between PBMs and health plans has gotten increasingly blurred. In 2018, CVS, which owns Caremark, bought out Aetna, and Cigna purchased Express Scripts. Optimum Rx is part of UnitedHealth Group, which is owned by UnitedHealthcare. This integration has given these large PBMs greater control over the pharmacy supply chain, including mail order and specialty suppliers.

The FTC plans to dig into the following practices in this probe:

• How health plans encourage members to use pharmacies owned by PBMs
• What fees unaffiliated pharmacies must pay that affiliated ones don’t
• What processes are in place that complicate reimbursement for unaffiliated pharmacies
• How independent pharmacies are audited
• What administrative hurdles are in place
• What policies exist regarding specialty drug lists
• How formulary placement and cost to patients are impacted by drug rebates

While not a criminal investigation, this commission has very strong investigatory power and broad authority to look into whatever the agency is interested in pursuing. The 90-day clock is ticking, but the PBMs can file a dispute, or even go to court if they feel turning over the documents is unfair.

It is expected to be at least a year before a report is completed, but many expect it to launch sweeping reforms in the industry. For example, if practices are found to be deceptive, or even fraudulent, the commission can require changes in business practices for the PBMs, including consumer protection and antitrust actions. Once completed, the report will be sent to Congress as well, where additional actions may be recommended. Considering that some lawmakers have already introduced legislation to expand the FTC’s oversight of BPMs, including the bipartisan Pharmacy Benefit Manager Transparency Act of 2022 by Sen Chuck Grassley, R-Iowa and Sen. Maria Cantwell, D-Washington, the chances of additional requirements and restrictions are high.

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