In a groundbreaking report, the Federal Trade Commission (FTC) has shed light on a pressing issue affecting millions of Americans: the role of Pharmacy Benefit Managers (PBMs) in inflating drug prices.
This blog post breaks down the key findings of the FTC’s Second Interim Staff Report on prescription drug middlemen and what it means for consumers, healthcare providers, and the pharmaceutical industry.
What are PBMs?
Before diving into the report’s findings, let’s clarify what PBMs are. Pharmacy Benefit Managers (PBMs) are companies that manage prescription drug benefits on behalf of health insurers, Medicare Part D drug plans, large employers and other payers. They’re supposed to negotiate lower drug prices and help manage prescription drug use.
PBMs significantly influence what drugs are available to you and at what price, directly impacting your healthcare costs and access to medications. The “Big 3” PBMs are Caremark Rx (CVS), Express Scripts and OptumRx, and they control nearly 80% of the prescription drug market.
Key Findings from the FTC Report
The FTC’s investigation revealed several alarming practices by the Big 3 PBMs:
- Massive Price Markups: Specialty generic drugs were marked up by hundreds to thousands of percent. These markups affected critical medications for conditions like cancer, HIV and other serious diseases.
- Billions in Excess Revenue: From 2017 to 2022, PBMs generated over $7.3 billion in revenue above the estimated drug acquisition costs.
- Rapid Growth in Markups: PBM-affiliated pharmacy revenue from markups grew at a staggering 42% compound annual growth rate from 2017 to 2021.
- Steering Prescriptions: Evidence suggests PBMs may be directing highly profitable prescriptions to their own affiliated pharmacies, potentially limiting patient choice and competition.
- Additional Profit from Spread Pricing: PBMs generated an estimated $1.4 billion through spread pricing – charging plan sponsors more than they reimburse pharmacies for drugs.
- Impact on Healthcare Conglomerates: In 2021, these practices contributed significantly to the parent companies’ profits, accounting for 12% of their aggregated operating income in relevant business segments.
These findings aren’t just numbers on a page. They translate to real-world consequences:
Higher Out-of-Pocket Costs
Patients are paying more for their medications, with some potentially rationing or skipping doses due to costs.
Reduced Access to Independent Pharmacies
As PBMs steer prescriptions to their affiliated pharmacies, independent and community pharmacies struggle to compete.
Potential Quality of Care Issues
When patients are forced to use specific pharmacies or ration medications, it can lead to disruptions in care and poorer health outcomes.
Increased Healthcare Spending
Higher drug costs contribute to overall increases in healthcare spending, affecting individuals, employers, and government programs like Medicare.
What Can You Do?
As a consumer or healthcare professional, you’re not powerless in this situation. While it’s important to stay informed and keep up with developments in PBM regulation and drug pricing policies, you can take the following actions:
- Advocate by contacting your representatives to express support for PBM reform legislation.
- Shop around when possible comparing prices at different pharmacies. Tools like GoodRx can help you find the best prices for your medications.
- Talk to your doctor about lower-cost alternatives for your prescriptions, including generic options when available.
- Support independent pharmacies by filling prescriptions locally to help maintain competition in the market.
- Work with a UNICO advisor to save on costs. Our dedicated team of professionals can provide personalized guidance to help you navigate the complex healthcare landscape and identify potential savings opportunities for your prescription mediations.
Final Thoughts
The FTC’s report on PBMs has exposed significant issues in the prescription drug supply chain that affect millions of Americans. As the debate over healthcare reform continues, understanding the role of PBMs and advocating for transparency and fair practices in drug pricing will be crucial for ensuring accessible and affordable healthcare for all.
In the meantime, if you have concerns about how these issues may impact your prescription drug coverage or overall healthcare costs, don’t hesitate to reach out to UNICO Group. Our experienced team of insurance professionals is here to help you navigate these complex issues and find the best solutions for your unique needs.
