The FTC Is Coming for Pharmacy Benefit Managers

Federal lawsuits loom for the middlemen who quietly set the high prices that patients pay for prescription drugs.

By Paul Blest

A multi-year investigation into drug company middlemen will reportedly end with the federal government suing the three biggest pharmacy benefit managers for business practices that push patients toward more expensive drugs. 

The Federal Trade Commission is preparing to file lawsuits against PBMs owned by CVS, United Health Group, and Cigna, the Wall Street Journal reported. The focus of the lawsuits will be rebates that are brokered with drug manufacturers, according to the Journal. 

The three companies — OptumRx, ExpressScripts, and Caremark — handle nearly 80 percent of prescriptions, according to an FTC report published on Tuesday. The PBM market has become “highly concentrated,” as the largest PBMs are now “vertically integrated” with health insurance and retail pharmacy conglomerates. 

Together, pharmacies affiliated with the three PBMs account for more than two-thirds of all specialty drug revenue. Because of this concentration, the FTC said, those corporations have leverage to force smaller and unaffiliated pharmacies into unfair contract terms.

What exactly are pharmacy benefit managers? And how are they contributing to high drug prices today? Watch our deep dive:

Caught between these opaque and unfair practices are patients, who are wholly dependent on the companies to decide which drugs they can access under their insurance and how much they pay for them. More than 30 percent of Americans reported not taking their prescriptions as instructed by their doctor as a result of cost, including roughly 12 percent who said they rationed or skipped doses due to cost, a Kaiser Family Foundation survey found last year. 

The increased concentration of pharmacy benefit managers is also limiting patients’ access to pharmacies to begin with. Nearly a third of independent pharmacies plan to close this year, according to a February survey by the National Community Pharmacists Association. And the major retail pharmacies aren’t filling the gap; Walgreens, CVS, and Rite Aid — the last of which filed for Chapter 11 bankruptcy last year — have collectively closed thousands of stores over the past few years. 

FTC Chair Lina Khan said in a statement after that report was released that pharmacy benefit managers “can hike the cost of drugs—including overcharging patients for cancer drugs,” and “can squeeze independent pharmacies that many Americans—especially those in rural communities—depend on for essential care.” 

Increasing public scrutiny of pharmacy benefit managers has led to a wave of state-level legislation in hopes of lowering prescription drug prices. In the absence of congressional action; there have been 175 laws passed since 2017 in all 50 states that affect pharmacy benefit managers, according to the National Academy for State Health Policy. 

On Thursday, for example, Pennsylvania lawmakers overwhelmingly passed a bill that supporters say will help local pharmacies compete with their major retail counterparts. The bill has been sent to Gov. Josh Shapiro for his signature. State Rep. Jessica Benham, the Democrat who sponsored the proposal, called it a “huge victory in the battle to reduce the cost of prescription medicine for Pennsylvanians.”

“Drug prices didn’t skyrocket overnight – it’s going to take measures beyond H.B. 1993 to make medicine affordable again,” Benham said. “But putting corporate middlemen like PBMs in check is essential in giving power back to independent pharmacies and the patients they serve every day.”