Feds Probe Middlemen's Role in High Rx Prices

You may never have heard of a pharmacy benefit manager but chances are one or more of them have their hand in your pocket. PBMs, as they’re called, are basically the middlemen of the prescription drug industry and their policies have a big impact on the prices you pay at the pharmacy.

The Federal Trade Commission is hoping to shed some light on the situation and is launching an inquiry, kicking it off by requiring the six largest PBMs to provide information and records. The compulsory orders are being sent to CVS Caremark; Express Scripts, Inc.; OptumRx, Inc.; Humana Inc.; Prime Therapeutics LLC; and MedImpact Healthcare Systems, Inc.

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

PBMs: Middlemen and profiteers?

PBMs are the middlemen who are hired to negotiate rebates and fees with drug manufacturers, create drug formularies and surrounding policies, and reimburse pharmacies for patients’ prescriptions. The largest PBMs are now vertically integrated with the largest health insurance companies and wholly owned mail order and specialty pharmacies.

These powerful companies influence which drugs are prescribed to patients, which pharmacies patients can use, and how much patients ultimately pay at the pharmacy counter. They use highly complicated, opaque contractual relationships that are difficult or impossible to understand for patients and independent businesses across the prescription drug system.

The National Consumers League has a simpler description.

“PBMs impede the savings that should be going to consumers in many ways. PBMs often demand that drug companies provide them ‘rebates’ or discounts to offer medicines as part of a drug benefit plan,” the NCL says on its website. These discounts are meant to lower the out-of-pocket costs consumers pay at the pharmacy counter, but we aren’t seeing the savings.

“PBMs also steer consumers to the higher-cost drugs that will make them the most money, regardless of patient and treatment considerations,” NCL said.

Independent pharmacies have been pushing for a probe of PBMs for years and welcomed news of the FTC’s latest action.

PBMs have “escaped serious scrutiny for far too long, but this study will bring their dirty laundry out into the open,” National Community Pharmacists Association CEO Douglas Hoey said in a statement. Hoey’s group represents some 21,000 U.S. pharmacies.

PBMs: What they do

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 towards pharmacy benefit manager-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.

Congress has been back and forth on PBMs, with various proposals being floated but no substantive action has been taken and it’s not clear that there’s any legislation likely in the immediate future.

Last September, legislation to allow the secretary of Health and Human Services to negotiate lower drug prices was voted down in the House Energy and Commerce Committee by three moderate Democrats who said it would harm innovation from drug companies.

Reps. Kurt Schrader (D-Ore.), Scott Peters (D-Calif.) and Kathleen Rice’s (D-N.Y.) votes put them in direct conflict with their party, which has made passing legislation to lower drug prices a primary goal.

“I get that the pharmaceutical industry owns the Republican Party and that no Republican voted for this bill, but there is no excuse for every Democrat not supporting it,” Sen. Bernie Sanders (I-VT) said at the time.