The Federal Trade Commission is launching an investigation into the pharmacy benefit management industry following rising criticism of the middlemen and their role in increasing the price of prescription drugs in the U.S.
Regulators on Tuesday announced they are requiring the six largest PBMs in the U.S. — CVS Caremark, Express Scripts, OptumRx, Humana, Prime Therapeutics and MedImpact Healthcare Systems — to turn over extensive information and records regarding their business practices, dating back five years.
The FTC said the inquiry will dive into fees and clawbacks PBMs charge unaffiliated pharmacies; methods to steer patients toward PBM-owned pharmacies; the prevalence of administrative restrictions like prior authorizations; the impact of rebates and fees from drug manufacturers on formulary design; and the costs of prescription drugs to payers and patients, among other research areas.
Pharmacy groups cheered the news, which reversed a vote earlier this year by FTC commissioners not to investigate PBMs' pricing and contractual practices.
When contacted with requests for comment, an OptumRx spokesperson directed Healthcare Dive to the PBM trade association for a response. A CVS spokesperson told Healthcare Dive, "We look forward to working cooperatively with the Federal Trade Commission." Express Scripts did not respond.
In the past, PBMs, which negotiate rebates and fees with drugmakers, create drug formularies and reimburse pharmacies for prescriptions, have maintained that they save money by negotiating down steep pharmaceutical prices.
But the PBM business model has come under heavy fire lately from provider and pharmacy groups, federal regulators and politicians. Critics are ringing the alarm over the middlemen's role in rising health spending, complicated and often opaque contracts, controversial business practices and vertical consolidation that's resulted in the largest PBMs being integrated with the largest health insurance companies.
The three biggest PBMs — CVS Caremark, Express Scripts and OptumRx — control nearly 80% of the prescription drug market, and are owned by CVS (which owns payer Aetna), Cigna and UnitedHealth (which operates payer UnitedHealthcare), respectively.
Congress has also taken note: Last week, a bipartisan duo of senators introduced legislation that would stop PBMs from business practices like clawing back fees or overcharging pharmacies, and require PBMs to report more financial data, among other measures.
“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 Khan in a statement on the inquiry. “This study will shine a light on these companies’ practices and their impact on pharmacies, payers, doctors, and patients.”
In February, the FTC issued a request for information about pharmacy benefits managers that has resulted in more than 24,000 public comments to date.
The request for information followed a vote in which FTC commissioners split 2-2 on a proposal to launch an inquiry into PBMs. At the time, Khan said she would call for another vote on the issue.
Commissioners on Tuesday said they voted 5-0 to launch the inquiry.
Alvaro Bedoya, who was sworn in as commissioner in May, joined Khan and Commissioner Rebecca Slaughter by voting in support.
Commissioners Noah Phillips and Christine Wilson, who had previously voted against the inquiry, also voted in support, noting in a joint statement that Tuesday's inquiry is more targeted than February's proposal.
The FTC is ordering the six PBMs to provide it with a swath of information, including how PBMs determine payments to other companies; how they limit participation in pharmacy networks; the formularies and prescription drug lists for the plans they administer; instances where a branded drug is placed on a more favorable formulary tier than a generic or biosimilar equivalent; annual pharmacy reimbursement data; and every rebate contract.
The companies will have 90 days from when they receive the order to respond.
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.
"We’re grateful to Chair Khan and the commissioners for considering these concerns and approving this study, which we hope will result in meaningful reforms to merger and acquisition reviews and, of course, to the insurer-PBMs themselves," Hoey, whose group represents some 21,000 U.S. pharmacies, concluded.