Simone Del Rosario:

A federal investigation revealed the nation’s three biggest pharmacy benefit managers marked up generic drugs by thousands of percent, raking in billions in revenue.

According to a report published by the Federal Trade Commission, the “Big 3” PBMs raised prices on drugs at their affiliated pharmacies, generating $7.3 billion in added revenue from 2017 to 2022. The “Big Three” are CaremarkRX, Express Scripts, and OptumRX.

The $7.3 billion figure is the difference between what it cost to acquire the drug and what they reimbursed themselves, according to the FTC.

This report is part of an ongoing FTC investigation into the PBM market.

Outgoing FTC Chair Lina Khan says her 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. 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.”

But a trade group representing PBMs is casting doubt on the report.

The Pharmaceutical Care Management Association told Straight Arrow News, “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.”

The FTC says patients paid $297 million for the drugs in question in 2021, while plan sponsors paid $4.8 billion. Between 2017 and 2021, costs for both parties increased about 21% a year for commercial health plans and 14% to 15% for Medicare Part D claims.

It’s another narrative PCMA is pushing back against. In a survey commissioned by the trade group, 90% of responding employers “expressed satisfaction with their PBMs’ clarity and transparency of contract terms,” while 88% “expressed satisfaction with their PBMs’ ability to provide the lowest costs for employees at the pharmacy counter.”

PBMs are starting to get more attention – and criticism – as drug prices rise.

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“I’m sorry, this medicine isn’t covered by your insurance.”
“Yeah… I decide which medicines you can get.”
“Wait, you’re not my doctor.”
“That’s right. I’m your insurance company’s Pharmacy Benefit Manager or PBM.”
“And I don’t make that much money off this one.”

Simone Del Rosario:

In short, a PBM is an intermediary between insurance companies and pharmacies. Ultimately they decide whether a drug is covered, and how much the pharmacy and the patient must pay for the medication.

PBMs have always been a part of the pharmacy supply chain.

Rep. Buddy Carter, R-GA:

“I started practicing pharmacy way back in 1980 and PBMs really started out as being nothing but processing. They just process claims. And all of a sudden, formularies became very prevalent, in hospital settings and in other ways, and insurance companies began to understand that they could influence the price of a medication by including them on their formulary.”

Simone Del Rosario:

A formulary is essentially a list of prescription drugs covered by an insurance plan.

Critics of PBMs say consolidation in the industry is a major problem. In multiple cases, insurance providers, PBMs and pharmacies are all owned by the same corporation.

Wendell Potter:

CVS owns, or has owned about 10,000 stores, and they own Aetna, which is one of the very biggest health insurance companies, but the PBM, which is called Caremark, actually generates more revenue and more profit than those 10,000 stores or the Aetna health plans.

And at UnitedHealth Group, Optum is the division that houses its PBM, which is called Optum RX, and it now, just this year, is generating more revenue and profits for the parent company, UnitedHealth than the health plan side.

Cigna, where I used to work, bought Express Scripts in 2018 and it is now much bigger than the health insurance part of Cigna. So Cigna now more is more is more apt to be described as a PBM or pharmacy benefit manager that also happens to own health insurance plans or operate health insurance plans is an entirely different company.

Simone Del Rosario:

This is a big point of contention for regulators. The FTC report claims the companies and their respective PBMs pushed more profitable prescriptions to pharmacies that they owned.

The study also found the PBMs in question reimbursed the pharmacies they owned more than providers that aren’t under their umbrella.

Douglas Hoey:

So these just a few companies decide what happens with prescription drugs for almost the entire country? That’s number one. Number Two. They also either own their own pharmacies. So the more pharmacies they can put out of business, the more business goes to their pharmacies, and the greater their monopoly. So they really have two incentives, one to make more money for them as well. Both will make more money for themselves. One, to choke off their competition. And two, by choking off their competition, they increase their own business to their affiliated or self owned pharmacies.

Simone Del Rosario:

The issue is catching attention in Congress, and in many cases, it’s receiving bipartisan support. In December, Senators Elizabeth Warren and Josh Hawley sponsored a bill that would force companies that own health insurers or pharmacy benefit managers to sell off their pharmacy business.

The FTC also sued three PBMs in September for steering diabetes patients toward higher-priced medications.