Why are US pharmacy benefit managers under fire?
By Ahmed Aboulenein
WASHINGTON, Sept 20 (Reuters) -The U.S. Federal Trade Commission said on Friday it was suing the country's three largest pharmacy benefit managers, accusing them of abusing their power and rigging the pharmaceutical supply chain to artificially inflate the cost of insulin.
Here is what you need to know about PBMs.
WHAT ARE PHARMACY BENEFIT MANAGERS?
Pharmacy benefit managers are companies that handle prescription drug benefits for health insurance companies, large employers, and Medicare prescription drug plans - a group often referred to as payers.
The PBMs negotiate fees and volume-based discounts, known as rebates, on behalf of payers with drugmakers and pharmacies; create lists known as formularies of medications covered by insurance plans; reimburse pharmacies by processing claims; and manage pharmacy networks. Many also operate their own mail-order pharmacies. They collect fees from payers and rebates from drugmakers.
Studies, including one from the Congressional Budget Office, show that rebates lower drug costs for the government and consumers. Other studies show a correlation between increases in a drug's list price and rising rebates for the drug.
WHO ARE THE BIG PBM PLAYERS?
Three companies controlled 79% of U.S. pharmacy benefit management in 2022, according to the data platform Statista: CVS Health's CVS.N CVS Caremark with 33%, Cigna's CI.N Express Scripts at 24%, and UnitedHealth Group's UNH.N OptumRx owns 22% of the market. The FTC's complaint says they now control 80% of the market.
The other noteworthy companies by market share are Humana Pharmacy Solutions at 8%, Prime Therapeutics at 5%, and MedImpact Healthcare Systems with 4%.
These six companies together control 96% of the PBM market.
HOW AND WHY ARE PBMs FACING INTENSE SCRUTINY?
The FTC began investigating the top PBMs and their impact on pricing and access to prescription drugs in 2022.
In an interim report on its investigation released in July, the agency said healthcare consolidation has given the companies outsized influence over prescription drug prices that could warrant regulation.
The FTC looked into the fees they charge, how they reimburse pharmacies, clawback of payments to pharmacies outside of their networks, and whether the companies steer patients to their own pharmacies. It also investigated whether benefit managers favor more expensive drugs that yield higher rebates over lower-cost alternatives.
Lawmakers have introduced about two dozen bills since last year targeting PBMs, including at least five with bipartisan support, congressional records show. Several have passed committees, but have yet to come to a vote by the broader Senate or House of Representatives.
There is bipartisan support for PBM reform, and lawmakers on both sides of the aisle heavily criticized the companies in a July hearing of the House Committee on Oversight and Accountability where PBM executives came under fire.
Separate bills aim to ban what is known as "spread pricing," a practice in which PBMs charge health plans a larger amount for a drug than they pay out to pharmacies. Some are seeking more transparency under which the companies would be required to provide more information on their non-public negotiations.
Rebates have also been a subject of proposed new government rules.
Reporting by Ahmed Aboulenein; Editing by Caroline Humer, Bill Berkrot and Aurora Ellis
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