FTC Claims Pharmacy Benefit Managers Inflate Prices, Harm Smaller Drugstores: Report

Lina Khan, then-nominee for FTC commissioner, speaks during a hearing on Capitol Hill, on April 21, 2021. Graeme Jennings/AP Photo

Dominant pharmacy benefit managers (PBMs) are hiking the cost of drugs and squeezing independent pharmacies that many Americans depend on for essential care, according to a Federal Trade Commission (FTC) interim report released on July 9.

The report examined the roles PBMs play in the pharmaceutical supply chain, highlighting their impact on drug prices, access to medications, and the viability of independent pharmacies.

It follows an inquiry, launched in 2022, which revealed that the six largest PBMs manage nearly 95 percent of all prescriptions filled in the United States, with the three largest—CVS Caremark, Express Scripts, and OptumRx—overseeing nearly 80 percent of prescriptions.

This concentration has granted these PBMs significant influence over drug pricing and availability, “allow[ing] PBMs to profit at the expense of patients and independent pharmacists,” according to the report.

“The FTC’s interim report lays out how dominant pharmacy benefit managers can hike the cost of drugs—including overcharging patients for cancer drugs,” said FTC Chair Lina M. Khan. “The report also details how PBMs can squeeze independent pharmacies that many Americans—especially those in rural communities—depend on for essential care. The FTC will continue to use all our tools and authorities to scrutinize dominant players across healthcare markets and ensure that Americans can access affordable healthcare.”

The FTC warns that exclusionary practices could be seen as unreasonable restraints of trade under antitrust laws, necessitating further scrutiny and potential regulatory intervention.

The report also notes a decline in independent pharmacies, particularly in rural areas. 

The FTC concluded that the increasing concentration and vertical integration of PBMs have likely lessened competition and inflated drug costs, to the detriment of consumers and independent pharmacies.

Dissenting Opinion

In a dissenting statement, FTC Commissioner Melissa Holyoak criticized the report for not meeting the “rigorous standard” of being “evidence-based, objective, and economically sound.”

“The Report was plagued by process irregularities and concerns over the substance—or lack thereof—of the original order,“ Ms. Holyoak said. ”The concerns over process and substance turned out to be warranted. Rather than generate public engagement and fruitful policy discussion, the Report will only exacerbate ideological schisms and further degrade the legitimacy of the Commission. And most importantly, the Report leaves us without a better understanding of the competition concerns surrounding PBMs or how consumers are impacted by PBM practices.”

Ms. Holyoak criticized high health care costs and PBM practices, calling for a better understanding of their business models. She contrasted a rigorous 2005 FTC report with the flawed 2024 report, highlighting its lack of empirical evidence and thorough analysis. She urged for an objective, evidence-based investigation into PBM practices.

Industry Reaction

In response to the report, CVS Caremark, told The Epoch Times that it is proud of its efforts to make medicine more affordable.

“Our efforts have resulted in members on average paying less than $8 per 30-day supply of medication,” the company said in an emailed statement.

“Independent analyses show net brand drug prices have declined six years in a row despite significant inflation across the U.S. economy and egregious list price increases from drug makers. This is the work we do every day on behalf of the businesses who provide benefits to their employees.”

CVS Caremark further noted that the FTC’s role is to protect consumers and argued that limiting PBM negotiating tools would benefit the pharmaceutical industry, leaving consumers at the mercy of drugmakers’ prices.

“We will continue to work every day on behalf of every business and consumer we serve, so that every prescription is delivered safely and affordably,” the company said.

Express Scripts and OptumRx were also contacted for comment but did not respond before publication.

The National Community Pharmacists Association (NCPA) issued a statement endorsing the FTC’s findings and calling for further investigation into PBMs.

NCPA CEO B. Douglas Hoey praised the FTC’s efforts and emphasized the need for legislative and regulatory actions to address the alleged anti-competitive practices of PBMs.

Mr. Hoey stated that the pharmacy benefits space has transformed with mergers, acquisitions, and tactics favoring large PBMs, calling the system anti-consumer and anticompetitive.

He said policymakers should play a role in leveling “the playing field” by enacting reforms to “rein [PBMs] in” at the state and federal level.

“Regulators at all levels must keep a close eye on these entities and enforce the laws that are on the books,” Mr. Hoey said.