The Federal Trade Commission is launching an investigation into pharmacy benefit managers amid criticism of the role played by the middlemen companies in increasing the cost of prescription drugs in the U.S.
Regulators on Tuesday announced they are requiring the six largest PBMs in the U.S. — CVS Caremark, Express Scripts, OptumRx, Humana, Prime Therapeutics and MedImpact Healthcare Systems — to turn over information and records regarding their business practices over the past five years.
The FTC said the inquiry will examine the fees and clawbacks that PBMs charge unaffiliated pharmacies as well as the methods they use to steer patients toward PBM-owned pharmacies. The investigation will also look into administrative restrictions like prior authorizations, the impact of rebates and fees from drug manufacturers on formulary design and the costs of prescription drugs to payers and patients.
The decision to probe PBMs is a reversal from earlier this year, when FTC commissioners voted against investigating PBMs' pricing and contractual practices.
When reached for comment on this story, an OptumRx spokesperson directed Healthcare Dive to the PBM trade association. A CVS spokesperson told Healthcare Dive, "We look forward to working cooperatively with the Federal Trade Commission." Express Scripts did not respond.
PBMs, which negotiate rebates and fees with drugmakers, create drug formularies and reimburse pharmacies for prescriptions, have long maintained they save the healthcare system money by negotiating down steep drug prices.
But the PBM business model has come under fire from provider and pharmacy groups, federal regulators and politicians. Critics are alarmed by the middlemen's role in rising health spending, their complicated and often opaque contracts, and their controversial business practices.
PBMs have "escaped serious scrutiny for far too long, but this study will bring their dirty laundry out into the open," National Community Pharmacists Association CEO Douglas Hoey said in a statement.
Consolidation, meanwhile, has meant the largest PBMs are now integrated with the largest health insurance companies. CVS Caremark, Express Scripts and OptumRx control nearly 80% of the market, and are respectively controlled by CVS (which owns the insurer Aetna), Cigna and UnitedHealth (which operates the insurer UnitedHealthcare).
Congress has taken note. Last week, two senators introduced legislation that would stop PBMs from business practices like clawing back fees or overcharging pharmacies, and require PBMs to report more financial data, among other measures.
“Although many people have never heard of pharmacy benefit managers, these powerful middlemen have enormous influence over the U.S. prescription drug system,” said Federal Trade Commission Chair Lina Khan in a statement. “This study will shine a light on these companies’ practices and their impact on pharmacies, payers, doctors, and patients.”
In February, the FTC issued a request for information about pharmacy benefits managers that has to date resulted in more than 24,000 public comments.
The request for information followed a split 2-2 vote by FTC commissioners on a proposal to launch an inquiry into PBMs. At the time, Khan said she would call for another vote on the issue.
Commissioners on Tuesday said they voted 5-0 to launch the inquiry.
Alvaro Bedoya, who was sworn in this May, voted in support with Khan and Commissioner Rebecca Slaughter. Commissioners Noah Phillips and Christine Wilson, who previously voted against an investigation, this time supported the probe, noting in a joint statement that the planned inquiry is more targeted than February's proposal.
The FTC is ordering the six PBMs to provide a swath of information, including how PBMs determine payments to other companies; how they limit participation in pharmacy networks; the formularies and prescription drug lists for the plans they administer; instances where a branded drug is placed on a more favorable formulary tier than a generic or biosimilar equivalent; annual pharmacy reimbursement data; and rebate contracts.
The companies will have 90 days from when they receive the order to respond.