Regulators on Tuesday dealt another blow to the drug middlemen known as pharmacy-benefit managers, who were chastised for charging far more for certain “critical” prescription medications than they actually cost.
In its second interim staff report on prescription-drug middlemen, the Federal Trade Commission stated that the three biggest PBMs and their connected pharmacies made an additional $7.3 billion in revenue between 2017 and 2022 as a result of “significant markups” in pricing over the cost of the prescriptions.
According to the FTC, the businesses also made almost $1.4 billion in profit via “spread pricing,” which is when they charge their plan-sponsor clients more for medications than they reimburse pharmacies. Additionally, on nearly every medication the FTC examined, they paid out more to their connected pharmacies than to unaffiliated pharmacies.
The so-called Big Three PBMs are Optum RX from UnitedHealth Group Inc. (UNH), Express Scripts Inc. (CI) from Cigna Group, and CVS Health Corp.’s (CVS) CVS Caremark.
According to the FTC study, the Big Three increased the cost of many specialized generic medications by “thousands of percent,” and many others by “hundreds of percent.” These medications include those that treat HIV, heart disease, and cancer.
About one month has passed since President-elect Donald Trump launched his own attack on PBMs, accusing them of being the cause of Americans’ excessive prescription drug costs and promising to “knock out the middleman.”
In afternoon trade, shares of Cigna added 0.2%, UnitedHealth’s stock increased less than 0.1%, and CVS’s shares fell 0.2%.
The FTC recognized that some pricing data did not represent any “postsale adjustment,” or cost-saving pledges, that the PBMs may have offered their plan-sponsor clients, according to CVS’s attempt to deny the allegations.
David Whitrap, vice president of external affairs at CVS, sent MarketWatch an email stating, “It is improper and misleading to draw broad conclusions from cherry-picked’specialty generic’ outliers, as the FTC has done with both of its interim reports.”
According to Whitrap, branded specialty pharmaceuticals accounted for over 50% of CVS Caremark’s customers’ total prescription spending between 2017 and 2022, whereas specialty generics made up less than 1.5%. According to Whitrap, people are primarily more concerned with the prices that large pharmaceutical companies charge for their branded prescription medications than they are with the function of PBMs.
Trump’s remarks from last month also followed his claims that he had dinner with the CEOs of Pfizer Inc. (PFE) and Eli Lilly & Co. (LLY), two major pharmaceutical companies.
Recent “anti-PBM” policies, Whitrap continued, would raise prescription prices “and serve as a handout to the pharmaceutical industry.”
In response to the article, Optum stated that it was “lowering the cost of specialty medications” and that for qualifying patients, the median out-of-pocket expenditure was as low as $5, helping them save $1.3 billion in 2024.
A request for comment from Cigna was not immediately answered.
The FTC’s report and Trump’s remarks, however, follow legislation introduced last month by Missouri Republican Sen. Josh Hawley and Massachusetts Democratic Sen. Elizabeth Warren that would compel PBMs to sell off their pharmacy operations. As a result, PBMs have been taking it from both sides of the aisle.
The FTC filed a lawsuit against the Big Three PBMs in September, claiming that they had inflated the cost of insulin medications.
The FTC’s first interim staff report, released in July, concentrated more on the ways in which the largest PBMs controlled and dominated the U.S. prescription medication industry. According to the research at the time, the top six PBMs processed over 90% of the 6.6 billion prescriptions written by U.S. pharmacies in 2023, while the Big Three processed almost 80% of those prescriptions.
“The largest PBMs often exercise significant control over what drugs are available and at what price, and which pharmacies patients can use to access their prescribed medications,” according to the research.
