FTC nominees face Senators' questions on pharmacy benefit managers, AI, mergers

.Two Republican nominees for seats on the Federal Trade Commission were grilled at their Senate confirmation hearing Wednesday on how aggressively the FTC should regulate pharmacy benefit managers—the so called “middle men” in the pharmaceutical supply chain.

“Having access to affordable prescription drugs is an important issue for Americans,” Melissa Holyoak told the Senate Committee on Commerce, Science, and Transportation. Holyoak, now Utah’s solicitor general, said she supports the agency taking a more aggressive stance in regulating the industry. 

Andrew Ferguson said the “PBM market is very complicated.” Ferguson, now Virginia’s solicitor general, said he awaits of a pending finding FTC’s study on PBMs and if the examination “reveals that PBMs are engaged in unfair, deceptive acts or practices, the FTC should act.”

President Joe Biden nominated Holyoak and Ferguson to the two vacant Republican seats on the five-member commission in July.

If confirmed by the Senate, they would join FTC Chair Lina Khan and Commissioners Alvaro Bedoya and Rebecca Kelly Slaughter. Slaughter also appeared before the Senate panel, as Biden has nominated her for another term.

PBMs negotiate drug prices with drug companies on behalf of health plans. They largely set the terms on which patients can access drugs and decide the cost of the medicine.

The FTC has recently indicated its intention to take a stronger regulatory stance with PBMs.

In July, the agency cautioned PBMs against relying on 11 reports, studies, and comments by the agency from 2004 to 2014, stating they no longer reflect the consumer drug distribution market. 

The FTC is reviewing the business practices of the largest PBMs: CVS Caremark; Express Scripts Inc.; OptumRx Inc.; Humana Inc.; Prime Therapeutics LLC; and MedImpact Healthcare Systems Inc. 

Ferguson alluded to that review in his Senate testimony.

In addition to PBMs, senators questioned the nominees on the FTC’s regulatory efforts regarding robocalls and emerging technologies such as artificial intelligence.

“The FTC’s role has never mattered more” when it comes to protecting consumers from deceptive, unfair and anticompetitive business practices, said Sen. Maria Cantwell, D-Washington and the committee’s chair.

Sen. Jon Tester, D-Montana, said the agency’s “Do Not Call Registry” program does not work, asking the nominees what the FTC’s role should be in addressing the issue of robocalls. 

“This is the number one complaint that the FTC receives,” Holyoak said, adding that, if confirmed, she would support vigorous enforcement on this issue.

Ferguson agreed. 

Sen. John Thune, R- South Dakota, asked the nominees if they think the FTC has the authority to regulate artificial intelligence.

“I think we apply the laws that we have,” Holyoak said. “But certainly, if I’m confirmed, we’ll talk to you about if there are gaps that we think we need to address.”

When protecting consumer data, “the FTC is well-positioned to take on that type of role,” Holyoak said, adding that it is probably best for Congress to have comprehensive privacy legislation.

Ferguson said if AI technologies violate the laws the FTC regulates, the agency should take action, adding that Congress has the authority to create a regulated framework in this space. 

Slaughter told the senators that the FTC’s “job is to look at the laws that we have, which as we’ve discussed, primarily prohibit unfair, deceptive acts and practices and unfair methods of competition. And some of those may be triggered by some deployments or uses of AI.”

Slaughter, a Democrat, was grilled by Republican senators on what they believe has been Khan’s overly aggressive opposition to proposed mergers.

Khan has taken the “FTC wildly off course and pursued a blatantly partisan agenda far outside the agency’s legal authority and mission,” said Sen. Ted Cruz, R-Texas.

Cruz cited former commissioner Christine Wilson’s claim in a Wall Street Journal op-ed that Khan abused her power by participating in the review of Meta’s proposed acquisition of Within Unlimited even after reportedly being advised against it by an ethics official concerned about Khan’s criticism of Meta before joining the FTC.

Slaughter said communications between the ethics official and the chair are confidential.

“There is no statute that requires the protection of information prepared by staff for commission deliberations,” Slaughter added.

She cited a commission rule that states “staff deliberations cannot be made public or information prepared by staff for commission deliberations cannot be made public, and it has been applied equally to commissioners of both parties.” 

“I’m concerned that the FTC has lost all capacity for bipartisanship,” Sen. Deb Fischer, R- Nebraska, said. Fischer asked Slaughter if there was a way forward to work as a bipartisan commission. 

“I think working with people who have differing views from you is not only important, it’s an incredible opportunity,” Slaughter said. “So yes, I believe there is a way forward, and I’m fully committed to it.” 

Sen. Dan Sullivan, R-Alaska, said that there has been a lot of agency overreach. He asked each nominee if they would commit to including the agency’s statutory authority on every opinion they publish. 

“I’m reluctant to make a commitment on how to craft opinions,” Slaughter said. “But I will promise you that I am extremely committed to ensuring that there is clear statutory authority for everything that we do.” 

Ferguson said, “If I’m in the majority, I will explain why I think the commission has a statutory authority to proceed. And if I’m in dissent, I’ll explain why I think they don’t have statutory authority.”

Holyoak concurred with Ferguson. 

A full Senate committee vote on the nominees has yet to be scheduled.