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National News

FTC chair says big drug middlemen aren’t cooperating in antitrust investigation

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Marty Schladen, Ohio Capital Journal
March 4, 2024

Federal Trade Commission Chair Lina Khan on Monday said that middlemen known as pharmacy benefit managers haven’t cooperated fully in an antitrust probe her agency launched in June 2022. Speaking during a White House roundtable discussing abuses by the industry, Khan made a blunt promise. 

“So far, the PBMs have not fully complied with our orders to turn over documents and data,” she said. “FTC orders are not suggestions and we will not hesitate to use the full extent of our legal authorities to mandate compliance.”

The largest of the PBMs, CVS Caremark, appeared to dispute Khan’s statement.

“CVS Health has been working cooperatively with the FTC on an expedited basis since the 6(b) studies were issued in June 2022 and May 2023 and to date have provided several million pages worth of documents and all of the requested data, which totaled several terabytes,” spokesman Phillip J. Blando said in an email.

 Federal Trade Commission Chair Lina Khan. (Photo courtesy of the Federal Trade Commission.)

The three biggest PBMs are estimated to control more than 80% of the marketplace and each is part of a corporation that is among the 15 largest in the United States. The corporations are “vertically integrated,” meaning that they also control other aspects of the health business such as insurers, pharmacies and doctors’ offices.

The Biden administration has been touting work it’s done to bring down the costs to Medicare patients for insulin and other drugs by negotiating directly with the companies that make them. But until Monday, it hadn’t said much about the shadowy role played by pharmacy benefit managers, or PBMs.

The companies facilitate drug transactions on behalf of insurers, which are often part of the same corporation. PBMs decide what drugs are covered by insurance, so drugmakers give them huge discounts so that their products will be covered. The transactions aren’t transparent and it’s often unclear how much of those discounts the PBMs are pocketing and how much they’re passing along.

PBMs also create pharmacy networks and decide how much to reimburse them for the drugs they dispense. Critics say they have an inherent conflict in making those decisions because all three have their own mail-order pharmacies from which they often require patients to get the most expensive drugs. And the biggest PBM, CVS Caremark, also owns the biggest retail chain.

Drugmakers have abused patents and made other moves to artificially inflate drug prices. But in recent years, PBMs have come under increased scrutiny.

“Drugs are too expensive,” Neera Tanden, Biden’s domestic policy advisor, said during Monday’s White House event. “In fact, Americans pay two to three times more for prescription drugs than citizens in other developed countries.”

Khan, who took the helm at the FTC in 2021, said she’s been bombarded throughout her tenure with complaints about PBMs.

“The FTC over the past few years has been flooded with stories suggesting that these middlemen engage in tactics that hike the price of drugs, deprive patients of access to certain medicines, and drive community pharmacies out of business,” she said.

Two of the big-three PBMs — Cigna’s Express Scripts and UnitedHealth’s OptumRx — didn’t immediately comment for this story. Since they and CVS control access to 80% of insured patients, small chains and independent pharmacies have little choice about signing whatever contracts the PBMs put in front of them. At least since 2016, small pharmacists have complained of reimbursements and clawbacks that make it so they can’t cover their costs. The big PBMs deny that it’s the case, but many small pharmacists say the huge companies have employed a conscious strategy to drive them out of business.

“Few small businesses are as essential to communities as independent pharmacies — especially in rural America,” Khan said. “But independent pharmacies tell us they’re being squeezed and forced out of business due to coercive contracts and punishing fees imposed by the PBMs.”

Mark Cuban, an owner of the Dallas Mavericks and a venture capitalist on the business reality series “Shark Tank,” was part of Monday’s the roundtable. In 2022, he launched Mark Cuban Cost Plus Drug Company.

It sells drugs at a fixed markup over cost. Operating completely outside of insurers and PBMs, it and pharmacies like it are often able to supply medicines at a fraction of what a patient’s copayment would otherwise be.

Khan had described a patient who needlessly lost an eye and a West Virginia pharmacist who almost lost her pregnancy due to delays caused by PBM bureaucracy. For Cuban, the reason is clear.

“The dominant three PBMs put stock price over health,” he said.

Cuban added that many of his fellow businesspeople in the upper reaches of companies are being hoodwinked by the health care giants.

“I genuinely believe that CEOs do not understand how their health care costs work,” he said.

The FTC’s investigation is intended to get the clearest picture yet of how some of those costs work. Last year, the agency expanded its probe to include group purchasing organizations that the big PBMs have formed in recent years, some of them offshore. The PBMs say the organizations enhance their ability to get the best deal for patients, but skeptics think they’re intended to add another layer of obscurity to how drugs are priced.

Khan said the probe is moving ahead.

“We are undertaking this work with enormous urgency and focus,” she said. “And if we find evidence of illegal tactics, we will not hesitate to act.”

This report was first published in Ohio Capital Journal, which is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity.

This article is republished from Ohio Capital Journal under a Creative Commons license. Read the original article.