In January 2025, the US’s Federal Trade Commission (FTC) published a second interim staff report examining the role of pharmacy benefit managers (PBMs) in the prescription drug industry, with a specific focus on specialty generic drugs.
The report analyzed all specialty generic drugs dispensed from 2017 to 2022 for members of commercial health plans and Medicare Part D prescription drug plans managed by the three major PBMs, the Big 3—Caremark Rx (CVS), Express Scripts (ESI), and OptumRx—for which the FTC has relevant data.
The findings reveal that the Big 3 PBMs have imposed substantial price markups on cancer, HIV and other critical specialty medications.
Significant price markups
The FTC report shows that the Big 3 PBMs have marked up specialty generic drugs by hundreds to thousands of percent when dispensed through their affiliated pharmacies. The Big 3 PBMs also reimbursed their affiliated pharmacies at a higher rate than they paid unaffiliated pharmacies on nearly every specialty generic drug examined.
Dispensing the most profitable drugs
Additionally, the report indicates that the Big 3 PBMs have been steering the most profitable prescriptions toward their affiliated pharmacies, which dispensed a disproportionately high number of specialty generics that had price markups exceeding US$1,000 per prescription compared to unaffiliated pharmacies.
Over US$7.3 billion of dispensing revenue in excess of NADAC
Between 2017 and 2022, these Big 3 PBMs affiliated pharmacies generated more than US$7.3 billion of dispensing revenue beyond the estimated acquisition cost, as measured by the National Average Drug Acquisition Cost (NADAC), on specialty generic drugs. This revenue increase occurred while patients, employers, and other healthcare plan sponsors faced annual increases in drug costs.
Generating additional income via spread pricing
The report also highlights that the Big 3 PBMs have taken advantage of spread pricing, a practice in which they charge healthcare plan sponsors significantly more for drugs than they reimburse to pharmacies [1]. This practice generated an estimated US$1.4 billion in additional income for the PBMs over the study period.
Specialty generic drugs help drive parent healthcare conglomerates’ operating income
Furthermore, data analysis indicates that specialty generic drugs have contributed substantially to the operating income of the PBMs’ parent healthcare conglomerates. In 2021, the revenue generated from PBM-affiliated pharmacies dispensing specialty generic drugs accounted for 12% of the total operating income for the conglomerates' pharmacy and PBM business segments.
Plan sponsor and patient drug spending increased significantly
According to the FTC’s report, the overall expenditure by healthcare plan sponsors on specialty generic drugs increased significantly during the study period. In 2021 alone, plan sponsors paid approximately US$4.8 billion for specialty generics, while patient out-of-pocket cost-sharing reached US$297 million. The cost burden for both commercial insurance claims and Medicare Part D claims has been rising consistently, with annual increases of 21 percent for commercial claims and 14 to 15 per cent for Medicare Part D claims. The steady escalation of drug prices underscores the growing financial pressure on patients and healthcare providers.
PBM practices: pricing tactics and regulatory actions
This report builds on that published in July 2024, released after the US’s House Committee on Oversight and Accountability hearing titled ‘The Role of Pharmacy Benefit Managers in Prescription Drug Markets Part III: Transparency and Accountability’ [2]. Subsequently, a report was issued revealing that PBMs play an oversized role in the pharmaceutical supply chain and push deliberate pricing tactics to line their own pockets.
In September 2024, the FTC brought action against the Big 3 and their affiliated group purchasing organizations for engaging in anticompetitive and unfair rebating practices that have artificially inflated the list price of insulin drugs, impaired patients’ access to lower list price products, and shifted the cost of high insulin list prices to vulnerable patients [3]. Such insulin biosimilars were first added to PBM formularies in 2023 [4].
Some of the first investigations into these PBM practices that lead to generic price increases were sparked by a whitepaper published by the University of Southern California’s Schaeffer Center for Health Policy and Economics [5].
The Commission continues to study PBM impacts on drug costs, urging reforms to boost competition, transparency, and affordability. The findings of the second interim report, unanimously approved (5-0), highlights these needs.
Related articles
Reasons and solutions for the high cost of insulin in the US
Spotlight on the role of pharmacy benefit managers in the fight against rising drug prices
|
LATIN AMERICAN FORUM
The objective of GaBI’s Latin American Forum is to provide you with all the latest news and updates on developments of generic and biosimilar medicines in Latin America in Spanish. View the latest headline article: Biosimilares en países de ingresos bajos y medios Browse the news in the Latin American Forum! Register to receive the GaBI Latin American Forum newsletter. Inform colleagues and friends of this new initiative.
FORO LATINOAMERICANO
El objetivo del Foro Latinoamericano de GaBI es brindarle las últimas noticias y actualizaciones sobre desarrollos de medicamentos genéricos y biosimilares en América Latina en español. Ver el último artículo de cabecera: Biosimilares en países de ingresos bajos y medios !Explore las noticias en el Foro Latinoamericano! Regístrese para recibir el boletín informativo GaBI Foro Latinoamericano. Informe a colegas y amigos sobre esta nueva iniciativa.
|
References
1. GaBI Online - Generics and Biosimilars Initiative. Pharmacy benefit managers use spread pricing to increase profits in Michigan [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2025 Mar 12]. Available from: www.gabionline.net/generics/general/Pharmacy-benefit-managers-use-spread-pricing-to-increase-profits-in-Michigan
2. https://oversight.house.gov/release/hearing-wrap-up-oversight-committee-exposes-how-pbms-undermine-patient-health-and-increase-drug-costs/
3. https://www.ftc.gov/news-events/news/press-releases/2024/09/ftc-sues-prescription-drug-middlemen-artificially-inflating-insulin-drug-prices
4. GaBI Online - Generics and Biosimilars Initiative. US PBMs add multiple Humira biosimilars to formularies [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2025 Mar 12]. Available from: www.gabionline.net/biosimilars/general/us-pbms-add-multiple-humira-biosimilars-to-formularies
5. GaBI Online - Generics and Biosimilars Initiative. PBM practices lead US consumers to overpay for generics by 20% [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2025 Mar 12]. Available from: www.gabionline.net/reports/pbm-practices-lead-us-consumers-to-overpay-for-generics-by-20
Permission granted to reproduce for personal and non-commercial use only. All other reproduction, copy or reprinting of all or part of any ‘Content’ found on this website is strictly prohibited without the prior consent of the publisher. Contact the publisher to obtain permission before redistributing.
Copyright – Unless otherwise stated all contents of this website are © 2025 Pro Pharma Communications International. All Rights Reserved.
Source: Federal Trade Commission
0
Post your comment