The US Federal Trade Commission [FTC] report "Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies" examines the influence of Pharmacy Benefit Managers (PBMs) in the pharmaceutical industry.

PBMs act as middlemen managing prescription drug coverage for millions of Americans.

“Over the past 20 years, pharmacy benefit services have become increasingly concentrated. In 2004, the top three PBMs served a combined 190 million people and managed 52 percent of prescription drug claims. Today, the top three PBMs—CVS Caremark, Express Scripts, and OptumRx (together, the “Big 3”)—manage 79 percent of prescription drug claims for approximately 270 million people.”

FTC Report Strikes at the High Cost of Drugs and PBMs

Through mergers and acquisitions, a few PBMs now control a large share of the market, giving them significant power.

“PBMs are at the center of the complex pharmaceutical distribution chain that delivers a wide variety of medicines from manufacturers to patients. PBMs serve as middlemen, negotiating the terms and conditions for access to prescription drugs for hundreds of millions of Americans. Due to decades of mergers and acquisitions, the three largest PBMs now manage nearly 80 percent of all prescriptions filled in the United States. They are also vertically integrated, serving as health plans and pharmacists and playing other roles in the drug supply chain as well. As a result, they wield enormous power and influence over patients’ access to drugs and the prices they pay. This can have dire consequences for Americans, with nearly three in ten surveyed Americans reporting rationing or even skipping doses of their prescribed medicines due to high costs."

The FTC alleges that this power is being used to:

Increase drug costs for consumers.

“Today, their combined revenue exceeds $1 trillion and equals 22 percent of national health expenditures...”

Squeeze out independent pharmacies through unfavorable contracts.

“The Big 3 PBMs all recently established separate, affiliated entities that they refer to as group purchasing organizations, so-called “PBM GPOs.” These entities, however, are not traditional GPOs that purchase drugs and other medical supplies on behalf of health care providers like hospitals. Rather, the entities—which we refer to as “rebate aggregators”—negotiate contracts, including rebates, with drug manufacturers—a task that PBMs historically engaged in directly.”

Limit patient access to certain medications, potentially leading to** skipping doses** due to affordability concerns.

The report raises concerns that the current system with powerful PBMs is harming consumers and independent pharmacies.

Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies

Recommended Citation: Gelman, Jon L., FTC Report Strikes at the High Cost of Drugs, www.gelmans.com (07/11/2024)

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*Jon L. Gelman of Wayne, NJ, is the author of NJ Workers’ Compensation Law (West-Thomson-Reuters) and co-author of the national treatise Modern Workers’ Compensation Law (West-Thomson-Reuters). For over five decades, the Law Offices of Jon Gelman 1.973.696.7900
jon@gelmans.com has represented injured workers and their families who have suffered occupational illnesses and diseases.