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FTC Releases Second Interim Staff Report on Pharmacy Benefit Managers

Posted on January 29, 2025 in Health Law News

Published by: Hall Render

On January 14, the Federal Trade Commission (“FTC”) published its Second Interim Staff Report (“Report”) on pharmacy benefit managers (“PBMs”), focusing on PBM pricing practices for specialty generic drugs. The Report described significant markups of cancer, HIV and other chronic condition specialty drugs and high reimbursement rates paid by Caremark Rx, Express Scripts and OptumRx (the “Big 3 PBMs”) to their affiliated pharmacies. The Report is one part of the FTC’s longstanding investigation of PBMs and comes at a time when PBMs face significant scrutiny from both federal and state policymakers.

FTC’s Findings

To compile the Report, the FTC analyzed data for specialty generic drugs dispensed from 2017 to 2022 for members of commercial and Medicare Part D prescription drug plans managed by the Big 3 PBMs. Key findings in the Report include:

  • For commercial health plan members between 2020 and 2022, the Big 3 PBMs’ affiliated pharmacies marked up more than half of the specialty generic drugs studied by more than 100% over the National Average Drug Acquisition Cost (“NADAC”). Of these specialty drugs, 22% were marked up by more than 1,000%.
  • The Big 3 PBMs reimbursed their affiliated pharmacies at a higher rate than unaffiliated pharmacies on nearly every specialty generic drug studied.
  • PBM-affiliated pharmacies generated more than $7.3 billion of revenue in excess of their estimated acquisition costs during the study period.
  • The Big 3 PBMs also engaged in spread pricing, which is PBM billing of plan sponsor clients at rates that exceed PBM reimbursements to pharmacies, to generate a $1.4 billion profit. Most of this profit was attributed to dispensing commercial prescriptions through pharmacies not affiliated with the Big 3 PBMs.
  • Plan sponsor spending and patient cost sharing on specialty generic drugs also increased significantly, with plan sponsor payments for specialty generic drugs growing at a compound annual growth rate of 21% for commercial claims and 14% for Part D claims between 2017 and 2021, and patient cost sharing increasing at 21% and 15%, respectively.

As a result of these findings, then-acting FTC Chair Lina Khan emphasized the importance of “investigat[ing] practices that may inflate drug costs, squeeze independent pharmacies and deprive Americans of affordable, accessible healthcare.” The Report calls for specialty generic drug pricing and PBM steering practices to receive further scrutiny and noted that “additional legislative reforms may be warranted.”

FTC Enforcement Activity and Practical Takeaways

The Report, which is part of the FTC’s ongoing investigation into the PBM industry, expanded on the FTC’s first interim report in July 2024, which found that PBMs wield significant influence over patients’ ability to access and afford their prescription drugs and independent pharmacies’ ability to stay in business and serve their communities. The Report also follows a September 2024 FTC administrative complaint against the Big 3 PBMs, alleging anticompetitive and unfair rebate practices resulting in the artificial inflation of insulin prices. Meanwhile, there is bipartisan interest on Capitol Hill to address PBM practices, as evidenced by several recent bipartisan bills that have been proposed in Congress addressing PBM activities. States are also addressing PBM practices through an influx of state legislation aimed at regulating PBMs.

All affected industry stakeholders, including pharmacies, health plans, PBMs and manufacturers, should take notice of these developments as new legislation, regulations and agency actions continue to impact PBMs.

Hall Render routinely works with pharmacies, health plans and PBMs on a wide range of PBM issues and will continue to monitor state and federal developments in this area.

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Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.