FTC launches inquiry into prescription drug middleman industry

The Federal Trade Commission is investigating the business practices of the six largest pharmacy benefit managers in the United States.

As part of its inquiry into the prescription drug middleman industry, the FTC has sent (or will be sending soon) orders to CVS Caremark, Express Scripts, Optum Rx, Humana, Prime Therapeutics, and MedImpact Healthcare Systems — requiring them to provide information and records regarding their business practices. The intent, according to agency officials, is to scrutinize the impact of vertically integrated pharmacy benefit managers (PBMs) on the access and affordability of prescription drugs. 

“Although many people have never heard of pharmacy benefit managers, these powerful middlemen have enormous influence over the U.S. prescription drug system,” Federal Trade Commission Chair Lina M. Khan said in a statement. “This study will shine a light on these companies’ practices and their impact on pharmacies, payers, doctors, and patients.”

The Commission’s inquiry will examine pharmacy benefit managers’ roles at the center of the U.S. pharmaceutical system. PBMs are the go-betweens who are hired to negotiate rebates and fees with drug manufacturers, create drug formularies and surrounding policies, and reimburse pharmacies for patient prescriptions. The FTC noted that the largest PBMs are now vertically integrated with the largest health insurance companies and wholly-owned mail order and specialty pharmacies.

In these roles, PBMs often have enormous influence on which drugs are prescribed to patients, which pharmacies patients can use, and how much patients ultimately pay. Many of these functions depend on highly complicated, opaque contractual relationships that are “difficult or impossible” to understand for patients and independent businesses across the prescription drug system, according to the FTC.

The inquiry is aimed at shedding light on several practices that have drawn scrutiny in recent years, including:

• Fees and clawbacks charged to unaffiliated pharmacies
• Methods to steer patients toward PBM-owned pharmacies
• Potentially unfair audits of independent pharmacies
• Complicated and opaque methods to determine pharmacy reimbursement
• Prevalence of prior authorizations and other administrative restrictions
• Use of specialty drug lists and surrounding specialty drug policies
• Impact of rebates and fees from drug manufacturers on formulary design and the costs of prescription drugs to payers and patients.

The FTC’s inquiry will build on the public record developed in response to the agency’s request for information about PBMs in February. Since then, it has received more than 24,000 public comments.

“PBMs behave like monopolies,” B. Douglas Hoey, chief executive officer of the National Community Pharmacists Association, said in a statement after the FTC launched its inquiry. “Their secretive, anticompetitive practices increase prescription drug prices, limit consumer choice, and stymie competition. They’ve escaped serious scrutiny for far too long.”