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FTC Report Raises Concerns Over PBM Market Consolidation and Drug Prices

By  |  July 9, 2024
drugs

In a detailed interim report, the U.S. Federal Trade Commission (FTC) has highlighted significant concerns over the consolidation of pharmacies and health insurance companies, pointing to the outsized influence a few pharmacy benefit managers (PBMs) now wield over prescription drug prices. The FTC’s findings, revealed on Tuesday, underscore the impact of years of deal-making in the sector.

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    According to Reuters, PBMs act as intermediaries between drug manufacturers and consumers, playing a crucial role in negotiating volume discounts, setting lists of covered medications, and reimbursing pharmacies for prescriptions. The FTC’s interim report claims that the three largest PBMs — UnitedHealth Group’s Optum, CVS Health Corp’s CVS Caremark, and Cigna’s Express Scripts — manage 79% of U.S. prescription drug claims, a dominance that has allegedly led to substantial financial gains at the expense of smaller pharmacies and consumers.

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    “These powerful middlemen may be profiting by inflating drug costs and squeezing Main Street pharmacies,” the FTC stated, following a two-year investigation into the PBMs’ influence on prescription drug prices. FTC Chair Lina Khan emphasized the agency’s commitment to scrutinizing dominant players in the healthcare markets, vowing to use all available tools and authorities to ensure fair competition and protect consumers.

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    The report provides rare insights into the contracting practices of major PBMs, such as CVS Caremark, particularly in terms of formulary placement—the list of medications covered by insurance plans. It also details the recent creation of group purchasing organizations (GPOs) by these PBMs. Traditionally, GPOs are companies that buy drugs and medical supplies for healthcare providers, but the new PBM GPOs are responsible for negotiating contracts and rebates with drug manufacturers, a task previously handled directly by PBMs.

    This development has further consolidated the market, potentially exacerbating the issues identified by the FTC. By creating these GPOs, the largest PBMs may have increased their leverage over drug pricing and availability, raising additional concerns about market transparency and competition.

    As the FTC continues its investigation, the findings of this interim report could pave the way for greater regulatory scrutiny and potential policy changes aimed at curbing the influence of these dominant PBMs. The agency’s focus on market consolidation and its effects on drug prices signals a critical step towards addressing the growing concerns of consumers and smaller pharmacies struggling under the current system.

    Source: Reuters