FTC criticizes Rx middlemen in new report

In a health care world filled with insane prices and complexities, the prescription drug middlemen, sometimes called Pharmacy Benefit Managers or PBMs, are at the top of the “is this even possible” list. The Federal Trade Commission or FTC criticizes PBMs sharply in a new 71-page report, reports Reed Abelson and Rebecca Robbins for The New York Times. Only when the government negotiates prescription drugs prices will we see fair prices for prescription drugs; PBMs would cease to exist.

So that we’re all on the same page: In a better world, PBMs would negotiate lower drug prices from pharmaceutical companies so that health insurance companies could pass on those savings to their members. In our world, the big health insurance companies own the PBMs and pocket all or most of the savings for themselves. Insured Americans end up paying more for their drugs in many cases than people without insurance. Sometimes, their insurers direct them to use higher cost brand-name drugs (because the pharmaceutical manufacturers pay the PBMs a fair bit to steer people to those drugs); people’s insurers might not even offer the generic substitute or do so at a higher copay.

PBMs keep drugs prices so high that, in many instances, even with a Medicare Part D prescription drug benefit, you will pay less for the full cost of your prescription from Costco or using GoodRx than the Part D copay. PBMs also sometimes overcharge people for the cost of drugs.

What the FTC says: “[T]hese powerful middlemen may be profiting by inflating drug costs and squeezing Main Street pharmacies.” They “wield enormous power and influence” and their practices “can have dire consequences for Americans.” The only quibble I have with that statement is the “may be;” PBMs profit substantially from these tactics.

The FTC has not sued a PBM yet. But, the PBMs and the big insurers who own them have taken notice and now worry that they will be sued for anticompetitive conduct. Until there’s a Democratic majority in both houses of Congress and a Democratic president, it seems unlikely that our federal government will block their bad behavior. The Republicans appear to have no interest in reducing drug prices.

Who owns the three biggest PBMs? CVS Health owns Caremark, UnitedHealth Group owns Optum Rx and Cigna owns Express Scripts. These three PBMs control about 80 percent of the prescription drug market in the US.

It seems to me that the only way to stop the PBMs from driving up drug costs is to put them out of business. In an ideal world, the US would negotiate drug prices as every other wealthy nation does. PBMs would lose their value. Americans would not be victims of PBM abuse.

As you might expect, the PBMs disagree strongly with the FTC’s report. They are huge corporations, and they will fight back as hard as they can. They correctly claim that they have enormous leverage to bring down drug prices. But they fail to acknowledge that once they negotiate lower prices, they pocket most, if not all of the savings, and/or pass the savings on to the health insurers who own them.

The evidence speaks volumes: The PBMs have pharmacies that send mail-order drugs to patients. The FTC found that PBMs paid their pharmacies a lot more for two generic cancer drugs than it would cost to buy these drugs directly from a wholesaler. As a result, in less than three years, they made $1.6 billion in revenue from these two drugs.

Here’s more from Just Care:

• Case study: Costco saves one couple hundreds of dollars over Medicare Part D
• Prescription drug middlemen, PBMs, will always drive up drug costs
• Medicare Part D drug coverage stunts are rampant
• Millions safely import low-cost drugs from abroad
• Some Medicare prescription drug plans dropping insulin coverage