When patients and their employers can barely afford drug costs and the health insurance costs for them, who is to blame? When independent pharmacies go out of business because they’re reimbursed pennies on the dollar to fill a prescription, how did that happen? A federal interim report issued Tuesday has a suggestion, but not yet an answer.
Powerful pharmacy middlemen who are supposed to lower drug costs may instead “be profiting by inflating drug costs and squeezing Main Street pharmacies,” the Federal Trade Commission, which oversees fair market competition, said in an interim report released Tuesday. But it couldn’t say for sure because it’s still waiting for the middlemen, called pharmacy benefit managers, or PBMs, to turn over all the documents requested, it said.
And that lack of data is the problem, say both supporters and detractors of the report.
The report details how PBMs may drive up the costs for many lifesaving drugs, including cancer drugs, and squeeze independent pharmacies out of the market.
The three largest PBMs are: CVS Health’s Caremark; Cigna’s Express Scripts; and UnitedHealth Group’s Optum RX. They and three more of the largest PBMs were asked by the FTC to produce records of their business practices, but some have still not fully complied, the federal regulator reported.
PBMs on Tuesday replied that the interim report was full of “cherry-picked case studies.” A Georgia Congressman who is also a pharmacist said the FTC report proves it’s time to require more transparency and “to bust up the PBM monopoly.”
Pharmacy benefit managers oversee prescriptions for hundreds of millions of Americans, including Georgians. They are owned by health care corporations and are hired by employers and governments who provide prescription drug coverage for their workers. The PBMs negotiate prices with drug companies, negotiate payments to pharmacies on behalf of the insurance companies, and are key to deciding which drugs patients can get at what price.
Industry watchers say the FTC report marks a shift from federal regulators’ hands-off attitude toward the complex issue, and that it could lead to a formal investigation into PBM practices or to a lawsuit accusing benefit managers of anticompetitive conduct.
An investigation by The New York Times published last month found that the benefit managers often act in their own interests, at the expense of patients, employers and taxpayers. An advocacy group for the benefits managers responded in a national statement, saying that investigation, too, was based on incomplete data, and was biased. “PBMs have a proven track record of lowering prescription drug costs for employers, health plan sponsors, taxpayers and patients, a fact that has been verified by numerous government agencies and economic experts,” said advocacy group PCMA.
The issue of PBMs came to a head this year in the Georgia Legislature, where a PBM affiliated with CVS was accused of helping drive the state’s small independent pharmacies out of business. It’s a claim the PBM industry has strongly denied. At least three independent pharmacies have gone out of business this year in Georgia. In an interview, one pharmacy owner placed much of the blame squarely on PBMs, in particular the one that negotiates prices for the state of Georgia’s health insurance plan, which covers teachers and other government workers.
Credit: Courtesy
Credit: Courtesy
Data released by the independent pharmacies showed that when it came to some popular drugs, the PBMs contract set reimbursement rates for the independents at a small fraction of what big chains like CVS got for the same drugs. A bill that would’ve made the payments more equal was passed almost unanimously in the Georgia General Assembly. It was later vetoed by Gov. Brian Kemp, citing the cost to the state budget.
Georgia has so far not done an independent investigation of whether its own PBM, CVS Caremark, is saving or costing the state money.
Asked if the governor would support a future study looking at the overall cost or benefit of having a PBM, a spokesman for Kemp said that “out of respect for the legislative process we don’t comment on pending or proposed legislation.” Kemp has approved a study to look at what it would cost to pay the independent pharmacies equivalent to the chains.
An advocate for PBMs, PCMA, said that when they look at all available contracted drugs together, not just the popular ones cited by the independents, the whole list reflects higher average reimbursement rates are paid to the independents.
The job of a PBM is to reduce drug costs, and PCMA said they do exactly that.
“This (FTC) report is based on anecdotes and comments from anonymous sources and self-interested parties, and supported only by two cherry-picked case studies that are implied to be representative of the entire market,” PCMA said in a written statement. “The report completely overlooks the volumes of data that demonstrate the value that PBMs provide to America’s health care system by reducing prescription drug costs and increasing access to medications.”
Georgia Congressman Buddy Carter (R-Pooler) lauded the FTC’s interim report. He said PBMs “use deceptive and anti-competitive practices to line their own pockets while reducing patients’ access to affordable, quality health care.”
Carter pointed out that the interim report found that the biggest PBMs control 95% of prescriptions filled in the United States every year. “I am calling on the FTC to promptly complete its investigation and begin enforcement actions if – and when – it uncovers illegal and anti-competitive PBM practices.”
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