Federal Trade Commission to Examine PBM Business Practices

Dominance of a handful of integrated firms “at the center of the US pharmaceutical system,” plus their trade practices, will be reviewed

The Federal Trade Commission (FTC), which is mostly concerned with antitrust or anticompetitive activities by businesses, has unanimously okayed a “Section 6(b)” inquiry, under which the Commission is authorized “to conduct studies without a specific law enforcement purpose.” Six pharmacy benefit managers—CVS Caremark, Express Scripts, OptumRx, Humana, Prime Therapeutics and MedImpact Healthcare Systems—will have 90 days to respond to requests for records and information.

The FTC action was expected. In February, a more limited investigation was not approved but the Commission opened a request for information that resulted in 24,000 responses, according to the agency. According to an FTC news release, PBMs “often have enormous influence on which drugs are prescribed to patients, which pharmacies patients can use, and how much patients ultimately pay at the pharmacy counter. 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.”

In particular, FTC will seek information on:

  • fees and clawbacks charged to unaffiliated pharmacies;
  • methods to steer patients towards PBM-owned pharmacies;
  • potentially unfair audits of independent pharmacies;
  • complicated and opaque methods to determine pharmacy reimbursement;
  • the prevalence of prior authorizations and other administrative restrictions;
  • the use of specialty drug lists and surrounding specialty drug policies;
  • the impact of rebates and fees from drug manufacturers on formulary design and the costs of prescription drugs to payers and patients.

For years, pharmacies and other drug purchasers have complained about PBM business practices and their dominance of commercial channels, in addition to being in competition with the specialty and mail-order pharmacies that the PBMs run themselves. Pharma manufacturers—who sit across the table from PBMs as rebates and formulary placements are discussed—are rarely outspoken about PBM practices, although they bear the brunt of the price negotiations that go on.

A decade ago there was a period of consolidation among PBMs leading to the dominance of the top three or five; in more recent years the PBMs were merged with insurance companies (Cigna owns Express Scripts, and CVS Caremark acquired insurer Aetna, while insurer Humana has expanded its PBM business) or health systems (Optum is owned by United Health).

For its part, the Pharmaceutical Care Management Assn., the trade group of large PBMs, stated in comments to FTC that “PCMA looks forward to having a conversation about the benefits that PBMs provide consumers and hopes that this will be the beginning of a larger process designed to identify and evaluate the root causes and impacts of rising drug prices.”