FTC Warns PBMs Not to Cite Older FTC Statements

The Federal Trade Commission (FTC) has cautioned PBMs not rely on prior FTC statements that support the industry. The FTC issued the statement in response to PBMs’ use of older FTC materials that opposed PBM regulatory oversight and disclosure requirements.

The commission had issued nine letters and two reports between 2004 and 2014 supporting the industry. At that time, the FTC said that proposals to increase transparency could undermine PBM competition.

But, the PBM industry has changed, the letters and reports no longer accurately reflect the current PBM industry. In the last two decades, vertical and horizontal integration have increased leading to a concentration of larger players. Drug rebates and the use of direct and indirect remuneration (DIR) fees to pharmacies have also increased.

The two reports the statement cites — the Commission’s July 2004 joint report with the Department of Justice entitled “Improving Healthcare: A Dose of Competition” and the Commission’s 2005 study entitled “Pharmacy Benefit Managers: Ownership of Mail-Order Pharmacies — have since been removed from the FTC’s website.

Lina M. Khan

“PBMs are powerful intermediaries at the center of the U.S. prescription drug system,” FTC chair Chair Lina M. Khan, said in a separate statement. “Through mergers, the three largest PBMs — CVS Health, Express Scripts and Optum Rx — now control a large swathe of the marketplace. They have also vertically integrated such that each owns or is affiliated with health plans, specialty and mail order pharmacies, and health insurance providers. One — CVS — owns one of the nation’s largest drug store chains. Consequently, PBMs today have substantial influence over multiple parts of the pharmaceutical supply chain.”

Last year, the FTC launched an investigation of the six largest PBMs and the impact on access and affordability of prescription drugs. The commission is reviewing PBM business practices, including the impact of rebates on formulary design, the costs of prescription drugs to patients, and methods to determine pharmacy reimbursement.

In the statement, the FTC indicated the investigation is a result of bipartisan “concerns about how PBMs may be using market power to undermine competition from independent pharmacies, and its concerns about the role of PBMs in determining the prices consumers pay for prescription drugs, including the impact of PBM rebates.”

Related: FTC Targets Two GPOs in PBM Investigation

This year, the FTC expanded its investigation 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.