The US Federal Trade Commission released part two of its inquiry into how middlemen involved in selling prescription drugs mark up costs of specialty generic medications by hundreds or even thousands of percent when sold at pharmacies affiliated with them, highlighting the need for immediate action from lawmakers.
A study on consolidated pharmacy benefit managers found that the three largest of these middlemen, CVS Health’s Caremark Rx, Cigna Group’s Express Scripts, and UnitedHealth Group’s OptumRx, “marked up two specialty generic cancer drugs by thousands of percent, then paid their affiliated pharmacies hundreds of millions of dollars more than estimated acquisition costs for each drug every year.”
Of specialty generic drugs analyzed in this report and dispensed by pharmacies affiliated with the three largest PBMs for commercial health plan members between 2020 and 2022, 63% were reimbursed at a cost marked up by more than 100% above their estimated purchase price, while 22% were marked up by more than 10 times the purchase price.
For example, when it comes to the pulmonary hypertension medication tadalafil, which is sold under the brand name Adcirca, pharmacies bought the generic version for an average of $27 in 2022. However, the three major pharmacy benefit managers (PBMs) increased the price by a staggering $2,079 on average, while paying their affiliate pharmacies $2,106, on average, to dispense the medication for a 30-day supply of commercial claims.
The FTC’s second interim report starkly reveals the blatant profiteering by the pharmaceutical benefits manager (PBM) industry giants.
The markups allowed the Big Three PBMs and their specialty pharmacies to earn over $7.3 billion in revenue from prescription drug markups above the cost of the actual drugs themselves from 2017 to 2022,” the FTC stated. “The Big Three PBMs profited greatly from annual increases in payment for prescriptions from patients, employers, and other healthcare plan sponsors.
The Big Three PBM-affiliated pharmacies earned 68% of the dispensing income generated by specialty medications in 2023, which was a 14% increase from 2016.
Tuesday. “The FTC should continue using its tools to investigate practices that artificially drive up drug costs, unfairly limit competition at independent pharmacies, and make it harder for Americans to access affordable, accessible healthcare—and should act quickly to put an end to any illegal activity.”
Andrew Ferguson as the next FTC chairman. As Ferguson is already on the commission, his elevation to chairman won’t require Senate confirmation.
On Tuesday, he stated that “this report clearly fails to take into account the entire prescription drug supply chain and makes broad claims about the role of PBMs without a full understanding of their important role in saving costs for employers, unions, taxpayers, and patients.”
The Big Three and their affiliated group purchasing organizations are accused of engaging in anticompetitive and unfair rebating practices that artificially inflate the list price of insulin drugs, prevent patients from accessing lower-priced products, and shift the financial burden of high insulin list prices to vulnerable patients.
FTC Office of Policy Planning Director Hannah Garden-Monheit stated on Tuesday that the issue of PBM price inflation is increasing rapidly, and as a result, policymakers must take action immediately to address it.
A bill backed by the AARP aimed at increasing transparency and “holding PBMs accountable for deceptive and unfair practices that drive up prescription drug costs and force independent pharmacies out of business,”
This report serves as an urgent appeal to policymakers to dismantle these exploitative systems.
Tuesday, the FTC’s second interim report exposed the blatant profiteering by powerful pharmacy benefit manager industry giants, which are inflating prices on life-saving medications like cancer, HIV, and multiple sclerosis treatments by thousands of percent, leaving patients to bear the cost.
PBM’s are earning billions in excess revenue in just five years-$7.3 billion simply by directing prescriptions for expensive specialty generics to their own pharmacies. Meanwhile, they are shrinking the profits of independent pharmacies and leaving both patients and health insurers with skyrocketing bills,” Freer said. “This report is a call to action for lawmakers to dismantle these exploitative practices, outlaw the rebate system that is driving up prices, and give back fairness and affordability to the US healthcare system.
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