The FTC accuses pharma intermediaries of inflating costs as prescription prices pop
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A look inside drug pricing… Regulators have been investigating companies at the center of the complex pharma-distribution chain since 2022. Yesterday the FTC dropped a scathing report saying it didn’t like what it found. At the root of the report are pharmacy-benefit managers (PBMs): intermediaries hired by employers and gov’t insurance programs to haggle prices with drugmakers and save patients and employers $$. Turns out, the FTC said they may actually be making drugs pricier and profiting on inflated costs.
High dose: Together the three biggest PBMs — CVS’s Caremark, Cigna’s Express Scripts, and UnitedHealth’s Optum Rx — processed about 80% of the US’s 6.6B prescriptions last year.
Family discount? The FTC said PBMs steer patients to pharmacies affiliated with their parent companies and give those pharmacies better rates, resulting in extra revenue.
Second opinion: A trade group representing PBMs criticized the report as being based on cherry-picked studies. As scrutiny mounts, the group boosted its federal-lobbying spend by 75%+ last year.
Prescription anxiety… isn’t just from long pharmacy lines. 30% of Americans report having rationed or skipped taking prescribed meds because of high costs. In 2022, US drug prices were about 3x higher than the average in 33 other high-income nations, with folks paying about $1.4K/year on scripts. One study suggested that Novo Nordisk could produce a month’s supply of Ozempic for $5 at a profit, but it charges about $1K in the US. PBMs say they save patients and clients $286B/year, but critics say they regularly overcharge.
Pressure is strongest in the middle… If the big three PBMs were standalone businesses, their revenues would put them in the top 40 US companies. But as Americans struggle with soaring drug costs, regulators and drugmakers are taking aim at PBMs. Meanwhile, direct-to-consumer competitors like Mark Cuban’s Cost Plus Drugs and Amazon Pharmacy have emerged with a focus on affordability. Blue Shield of California ditched CVS’s Caremark in favor of these rivals.