FTC Targets Two GPOs in PBM Investigation

The Federal Trade Commission (FTC) is deepening its investigation into PBM business practices, issuing compulsory orders to two group purchasing (GPOs): Zinc Health Services, operated by CVS Caremark, and Ascent Health Services, the GPO for Express Scripts, Prime Therapeutics, Envolve Pharmacy Solutions, and Humana Pharmacy Solutions.

The compulsory orders will require the GPOs, which negotiate drug rebates on behalf of other PBMs, to provide information and records on their business practices.

FDA began the inquiry into the impact of PBMs on the access and affordability of prescription drugs nearly a year ago, when it asked six PBMs — CVS Caremark, Express Scripts, OptumRx, Humana, Prime Therapeutics, and MedImpact Healthcare Systems — for information and records about their business practices.

The inquiry is aimed at shedding light on several PBM practices, including charging fees and clawbacks to unaffiliated pharmacies; steering patients towards PBM-owned pharmacies; potentially unfair auditing of unaffiliated pharmacies; the use of complicated and opaque pharmacy reimbursement methods; and negotiating rebates and fees with drug manufacturers that may skew the formulary incentives and impact the costs of prescription drugs to payers and patients, the agency said.

The new inquiry comes on the heels of the Senate Health, Education, Labor & Pensions (HELP) Committee marking up the Pharmacy Benefit Manger Reform Act, a move criticized by PCMA.

“Just one day after examining the pricing power drug companies use to block competition, the HELP Committee took drug companies’ bait and wrongly blamed the one actor in the supply working to reduce drug costs,” PCMA said. “The committee advanced legislation, without allowing common sense amendments, that would increase prescription drug costs.”

The legislation would create a “one-size-fits-all contracting mandate that ignores the unique needs of patients and removes employer choice,” PCMA added. “Real solutions to existing gaps in prescription drug affordability could easily be included in a drug pricing bill that actually lowers costs.”

In addition to Congress and the FTC, PBM business practices face scrutiny from a number of organizations. The PBM Accountability Project, a coalition of 40 groups including the National Community Pharmacists Association, the National Consumers League, the Union of Bricklayers and Allied Craftworkers and the Coalition of State Rheumatology Organizations, is urging Congress to require PBMs to provide complete data transparency and break the link between drug prices and PBM revenues.

“PBMs can earn money only from a single, flat administrative fee for services they provide, but PBMs may not earn any revenues from manipulating prescription drug prices or imposing charges that are greater than PBMs’ own net cost of acquisition,” the organization said.

Eighty percent of voters are also concerned that PBMs steer patients to pharmacies they own or control to maximize their own profit, according to a recent NCPA poll conducted by Morning Consult. The same proportion also believe that PBMs keep all or most of the discounts on drugs they negotiate instead of passing the savings on to consumers, according to the association, which has been among the most vocal critics of PBMs.

There is also significant debate about why GPOs were formed and whether or not they successfully lower drug prices.

In 2019, Express Scripts formed Ascent Health Services, based in Switzerland. In 2020, CVS Caremark formed Zinc GPO and OptumRx formed Emisar Pharma Services, based in Ireland, in 2021.

Pricing is one reason Ken Paulus, president and CEO of Prime Therapeutics, gave in an interview last year with Formulary Watch sister publication Managed Healthcare Executive. Prime entered into an agreement with Express Scripts three years ago whereby Express Scripts handles some of the negotiations with pharmaceutical manufacturers. As a minority owner of Ascent GPO, Prime has direct access to all the GPO contracts and received savings it would not have gotten otherwise, Paulus said in the interview.

Alan Lotvin, president of CVS Caremark, CVS Health’s PBM, said in a recent interview with Managed Healthcare Executive that the GPO was a way for CVS Caremark to “separate out all the different lines of business onto separate contracts” and gain some bargaining power.

“It wasn’t, at least in our minds, so much about regulation,” Lotvin said. “I thought about more that if we have a single rebate contract that covers multiple lines of business, if one line of business is impacted by a decision, if I have to go back to pharma and renegotiate, I am renegotiating from a position of weakness. So, if I disaggregate proactively, now I’ve taken a tool away from the manufacturers.”

However, James Gelfand, executive vice president, public affairs, of the ERISA Industry Committee, a trade association representing large employers, expressed concerns about the GPOs last year. “Are you creating another intermediary in the supply chain to prepare for transparency requirements that are going to be specific to the PBM?” he asked.

Many have worked to bring more transparency to the drug supply chain and healthcare system in recent years. With so many entities involved in the drug supply chain, such as insurance companies, PBMs and vendors that set up and run the plans, adding another intermediary — the GPO — risks losing some of the progress made, Gelfand believes.

Evernorth, which owns Express Scripts; CVS Caremark, and Prime Therapeutics did not respond to a request for comment.