Dive Brief:
- Pressure is increasing on pharmacy benefit managers as the middlemen come under rising scrutiny from Washington for their role in rising U.S. drug prices.
- The Federal Trade Commission voted unanimously on Thursday to adopt a policy statement to more closely examine fees and rebates paid to PBMs in exchange for preferred coverage for their drugs from payers. The more aggressive policy comes a little more than a week after the regulatory agency launched a full investigation into the industry.
- In addition, Republican members of the House Education and Labor Committee on Friday asked the Government Accountability Office to study PBMs and their role in the pharmaceutical supply chain, citing concerns about how PBMs are reimbursed for their services and their effect on competition.
Dive Insight:
PBMs, which negotiate rebates and fees with drugmakers, create drug formularies and reimburse pharmacies for prescriptions, have been facing criticism over their role in rising prescription drug spending from patient advocates, provider and pharmacy groups, federal regulators and politicians.
In particular, critics point to their complicated and often opaque contracts, controversial business practices and vertical consolidation that’s resulted in the biggest PBMs being financially tied to the biggest health insurance companies.
The FTC, which includes two Republican commissioners, voted 5-0 on Thursday to increase its scrutiny of how PBMs are paid rebates and fees.
Health insurers use formularies, which are generally determined by PBMs, to decide what medicines are covered. Drug manufacturers pay rebates to ensure their drugs will be covered, or placed on preferred formulary tiers. Some rebates or fees are conditional on the sales volume of certain high-list-price drugs, or the exclusion of competing drug products from the same formulary tier, the FTC said.
Regulators noted the arrangements could incentivize PBMs and other middlemen to steer patients to higher-cost drugs over cheaper alternatives.
The FTC highlighted insulin, a life-saving diabetes drug, as an example of how stifled competition affects patients. The wholesale price of insulin nearly tripled between 2009 and 2017, raising out-of-pocket costs for both insured and uninsured patients, regulators said, citing research from the Kaiser Family Foundation. As a result, many patients have been forced to ration insulin, causing illness and even death.
The new enforcement policy statement outlines the legal authorities that could apply to anticompetitive PBM practices, including the Sherman Act, the Clayton Act, the FTC Act and the Robinson-Patman Act.
The FTC said it will use its “full range of legal authorities” to combat any illegal practices.
“Today’s action should put the entire prescription drug industry on notice: when we see illegal rebate practices that foreclose competition and raise prescription drug costs for families, we won’t hesitate to bring our full authorities to bear,” FTC Chair Lina Khan said in a statement on the policy adoption, calling it a “top priority” for the commission.
Members of Congress are also calling for a better understanding of PBMs’ role in creating market prices in the commercial drug market.
In a letter sent Friday, members of the Committee on Education and Labor requested the Government Accountability Office to conduct a study addressing the extent to which PBMs provide services to commercial health plans and how they’re reimbursed, along with how PBM formularies and rebate arrangements affect commercial drug spending.
The letter also asked the GAO to examine the role that the Employment Retirement Income Security Act’s fiduciary requirements have in the services that PBMs provide to commercial plans. It was sent by Reps. Virginia Foxx, R-N.C., Rick Allen, R-Ga., and Diana Harshbarger, R-Tenn.
The GAO has examined PBM practices before. In 2019, the group published a report on PBMs in the Medicare Part D market.
