'They're now exposed': What an FTC probe, federal legislation and state actions could mean for the PBM industry 

It may feel like the walls are closing in around the pharmacy benefit manager industry. In less than a month's time, bipartisan legislation was introduced in Congress to create more regulations around the drug middlemen, and the Federal Trade Commission launched an inquiry into the six largest PBMs and their practices.

That's not to mention that in 2021 alone, 18 state legislatures passed or had legislation become effective that involves PBM licensing or registration requirements. 

"I think they're feeling the pressure because the business model is under threat," Prescryptive Health CEO Chris Blackley told Becker's. "They know they have to transform, but it's very hard and very difficult to turn a big ship."

Prescryptive is a Redmond, Wash.-based PBM that specializes in drug price transparency and describes itself more as a technology company operating under a software as a service business model.

For Mr. Blackley, he believes all the action around PBMs as of late has been a long time coming. 

"With the increasing percentage of costs as the total percentage of all healthcare spend paired with the increasing percentage of spend on specialty medications — that are now tens of thousands of dollars a year or even per month — the problem has just become so acute, it's untenable any longer. People are looking deeper into it," he said.

Traditional PBMs, who serve as a middleman between payers and drugmakers, will say that they actually help lower the cost of drugs for consumers. The Pharmaceutical Care Management Association, a trade group representing PBMs, said May 25 it supports the proposed federal legislation that would include a directive for the FTC to examine practices within the pharmaceutical supply chain that may stifle competition and increase the cost of drugs. According to the association, the agency would "ultimately conclude that drug manufacturer price setting is the root cause of high drug costs."

But Americans aren't so sure. A Morning Consult/PhRMA poll in June found that 81 percent of voters believe payers and PBMs are responsible for skyrocketing drug prices, and 80 percent believe the industry's power has both become too concentrated and should be sharing rebates with customers.

The six largest PBMs control 98 percent of the market: CVS Health's Caremark, Cigna's Express Scripts and Ascent Health, UnitedHealth Group's OptumRx, Humana Pharmacy Solutions, and MedImpact Healthcare Systems, respectively. CVS, Cigna and UnitedHealth's PBMs alone account for 79 percent of the market.

The FTC also isn't convinced PBMs aren't at least partially responsible for rising drug costs. On June 16, the agency voted unanimously to put pharmacy benefit managers and drug manufacturers "on notice" about a new enforcement policy against illegal bribes and rebate schemes that can block patient access to competing lower-cost drugs, specifically citing the 300 percent rise in the cost of insulin over the past 20 years.

"The solution is information," Mr. Blackley said. "Even if there's no action by the FTC, the fact that they're doing this makes the market more efficient because the PBMs are now exposed. They can't ignore it, they're going to be scrutinized. Employers are going to ask deeper questions and patients are going to demand a more efficient market and a better patient experience that allows them choice." 

Patient choice and lower drug costs is exactly what Marley Drug, an online pharmacy in Winston-Salem, N.C., hopes to accomplish, at least for generic medications.

"I don't think there's a role for PBMs and distributing generic medication, especially when they're so cost effective to acquire," Reuben Saba, PhD, told Becker's. "But nevertheless, I think there is a role for PBMs when it comes to specialty medication. I think that's where their role should be currently and also going forward."

Dr. Saba is vice president of medical and business affairs at Medicure, a value-based pharmaceutical company based in Canada that owns Marley Drug. The company, which sells to patients in all 50 states, launched in January on the same day as Mark Cuban's Cost Plus Drug Co. The two companies are part of an ongoing trend of online pharmacies that aim to increase transparency, decrease costs and avoid traditional PBMs altogether.

"The word will get out about access to medication without having a third payer involved. I think we're basically at the tipping point of this whole phenomenon," Dr. Saba said. "Certainly having a lot of players brings a lot of options and a lot of noise to this arena that may have not been available only a few years ago."

Still, Mr. Blackley believes there are specific policies and actions regulators should take to help bring drug costs down: require pricing transparency, ban PBMs from restricting patient pharmacy choice and enforce rules against bundling to create a more competitive market.

"One of the most powerful things that they could do to affect drug pricing is to require that the PBMs give the payer, employers and patients access to the data that is rightfully theirs on the prices that are actually paid, which would expose the spread pricing," Mr. Blackley said. "The only way to solve it is to shine the light on it."

Under the FTC probe, the six largest PBMs will have 90 days to respond to the agency's compulsory order from the date they receive it.

"This study will shine a light on these companies' practices and their impact on pharmacies, payers, doctors and patients," FTC Chair Lina Khan said.

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