Empire State Today

The Federal Trade Commission (FTC) chair said a new report issued by her agency shows that the pharmacy benefit manager (PBM) industry is leading to higher prescription drug costs. 

The report comes after Attorney General Letitia James (D-NY) sent a letter in February asking the FTC and Congress to “act to ensure fulsome regulation of pharmacy benefit managers.”

"The FTC’s interim report lays out how dominant pharmacy benefit managers can hike the cost of drugs—including overcharging patients for cancer drugs," FTC Chair Lina M. Khan said in a press release. "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 report, required by a special order issued by the FTC in 2022, said that increased vertical integration and concentration have contributed to six PBMs —Caremark Rx, LLC; Express Scripts, Inc.; OptumRx, Inc.; Humana Pharmacy Solutions, Inc.; Prime Therapeutics LLC; and MedImpact Healthcare Systems, Inc. —   managing almost 95% of the nation’s prescriptions.

This industry concentration, said the FTC, has led to an increase in the cost of prescription drugs. 

A PBM is a third-party administrator of prescription drug programs for commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program, and state government employee plans. 

PBMs perform a variety of tasks such as processing and paying prescription drug claims, negotiating discounts and rebates with drug manufacturers, and managing pharmacy networks. 

In her February letter to Congress, James said federal legislation “should reform PBM practices to curtail their ability to unreasonably raise the price of drugs and to require greater transparency.”

“Such transparency should, among other things, require PBMs to produce pricing data to health plans and federal and state regulators in a standardized format,” said the letter. “This will enable health plans to negotiate better deals with PBMs and will allow regulators to better hold PBMs accountable.”

The letter signed by James was also signed by 47 different state attorneys general, and was sent to U.S. House Speaker Mike Johnson (R-La.), House Minority Leader Hakeem Jeffries (D-N.Y.), U.S. Senate Majority Leader Chuck Schumer (D-N.Y.), and Senate Minority Leader Mitch McConnell (R-Ky.)

James' letter also said three pending bills in Congress, The DRUG Act (S1542/HR6283), Protecting Patients Against PBM Abuses Act (HR2880) and The Lower Costs, More Transparency Act (HR5378), “would be an important first step toward reforming” PBMs.