The US healthcare system is a complex web of stakeholders, each playing a crucial role in the delivery of medical services and medications to patients. Among these stakeholders are Pharmacy Benefit Managers (PBMs), which act as intermediaries between drug manufacturers, insurers, and pharmacies. However, recent findings by the Federal Trade Commission (FTC) have cast a spotlight on the practices of PBMs, revealing a concerning trend of price markups on specialty generic drugs that has significant implications for patients, employers, and insurers.

According to an interim report issued by the FTC on Tuesday, PBMs reaped $7.3 billion in revenue from marking up the prices of dozens of specialty generic drugs between 2017 and 2022. This practice occurred during a period when spending on drugs by patients, employers, insurers, and others rose significantly. The nation’s three largest PBMs – CVS Health’s Caremark, Cigna’s Express Scripts, and UnitedHealth Group’s Optum Rx – were found to have inflated the prices of drugs dispensed at their affiliated pharmacies by hundreds or even thousands of percent.

The medications in question are critical for treating a range of serious conditions, including heart disease, cancer, and HIV. The FTC’s report highlights a disturbing trend where PBMs, which are ostensibly tasked with reducing the cost of drugs for their clients, are instead imposing significant markups on the acquisition costs for these essential medications. The report states, “Plan sponsors in particular should be aware that they and their members are paying the Big 3 PBMs and their affiliated pharmacies very significant markups over the acquisition costs for critical medications.”

The FTC’s investigation into PBM practices began in 2022, and last summer, the agency released a scathing interim report on the industry. This report detailed how increasing market concentration has enabled the three largest players to process nearly 80% of the roughly 6.6 billion total prescriptions filled in 2023 in the US, thereby reaping substantial profits. Following the release of this report, the FTC took legal action against Caremark, Express Scripts, and Optum Rx, accusing the companies of artificially inflating insulin list prices, which resulted in patients paying more for their medications.

The companies have taken issue with the FTC’s latest findings, contending that their practices actually reduce drug costs. Optum, for instance, claims to be lowering the cost of specialty medications and providing clinical expertise, programs, and support for patients with complex and rare conditions. The company states that in 2024, it helped eligible patients save $1.3 billion, with the median out-of-pocket payment for these patients being $5.

Caremark has criticized the FTC’s methodology, arguing that the agency “cherry-picked specialty generic outliers” and that it is “inappropriate and misleading to draw broad conclusions” from the data. The company also points out that specialty generic products accounted for less than 1.5% of its clients’ total drug spending between 2017 and 2022. Caremark further notes that the FTC’s interim analysis ignores the cost-saving guarantees it provides its clients across all drug categories to reduce their drug costs.

Express Scripts has also called the report “misleading,” stating that nothing in the FTC’s report addresses the underlying cause of increasing drug prices or helps employers, unions, and municipalities keep prescription benefits affordable for their members.

PBMs play a multifaceted role in the healthcare system. They negotiate rebates from drug manufacturers, pay pharmacies, and determine which medications are covered in plans sponsored by insurers, employers, and governments. However, their opaque practices have raised the ire of Congress and other stakeholders. Lawmakers came close last year to passing legislation that would have increased transparency in the industry and changed some of its practices, such as requiring PBMs to provide more information on the rebates they retain and to pass along all rebates to health plan sponsors in the commercial insurance market. Unfortunately, these measures did not make it into the final version of the federal government spending bill.

Efforts to overhaul the PBM industry are likely to continue under the incoming Trump administration. President-elect Donald Trump has been vocal about the need to address the issue of high drug prices and has targeted the PBM industry as a significant contributor to the problem. In December, Trump stated, “We have a thing called the middleman. You know the middleman, right? The horrible middleman that makes more money frankly than the drug companies, and they don’t do anything except they’re a middleman. We’re going to knock out the middleman.”

In conclusion, the FTC’s findings on the practices of PBMs reveal a concerning trend of price markups on essential medications, which contradicts their stated mission of reducing drug costs. As the healthcare system continues to grapple with the challenge of making medications accessible and affordable, the role of PBMs and the need for greater transparency and accountability in their practices will remain a critical issue. The incoming administration’s stance on this matter and potential legislative actions will be instrumental in shaping the future of the PBM industry and the broader healthcare landscape. It is imperative that all stakeholders work together to ensure that the system serves the best interests of patients, who rely on these medications for their health and well-being.