New Bill Would Require the FTC to Investigate Competition in the PBM Market

As we have previously mentioned, the pharmacy benefit manager (PBM) market lacks the essential ingredients needed for a competitive market that lowers prices and benefits consumers. Senators have become increasingly concerned about the effect PBMs are having on drug prices, and the lack of competition. And a couple of weeks ago Senators Chuck Grassley (R-IA), Maria Cantwell (D-WA), and Steve Daines (R-MT) introduced the Prescription Pricing for the People Act of 2019, which would investigate consolidation in the pharmacy benefit manager (PBM) industry.

This bipartisan proposal would shed light on the drug pricing process and the middlemen responsible for negotiating prescription drug costs-and who contribute substantially to higher drug prices. It requires the Federal Trade Commission to study the role of intermediaries in the pharmaceutical supply chain (chiefly PBMs) and provide Congress with appropriate policy recommendations. The FTC would have to submit a report to Congress that addresses:

1) Whether PBMs charge payers (including Medicare and Medicaid) higher prices than the reimbursement rates at which they reimburse competing pharmacies,

2) Whether PBMs steer patients to pharmacies in which the PBMs have an ownership interest,

3) Whether they audit pharmacies for anticompetitive purposes and use formulary designs that promote higher cost drugs,

4) The current state of competition in the PBM market, especially regarding recent mergers of PBMs with insurance companies,

5) How companies learn about the benefits and drawbacks of using PBMs, and whether consumers and payors need more information about this, and

6) Whether there are any obstacles the FTC faces in ensuring a competitive and transparent PBM marketplace

Finally, the FTC must provide policy recommendations to improve transparency and competition in the drug supply chain, to prevent anticompetitive behavior, and to make sure that consumers benefit from any cost savings that result from mergers and acquisitions.

While the FTC is in charge of ensuring competition in the PBM market, over the last fifteen years it has not done a very good job. The FTC approved several PBM mergers (the 2011-2013 Express Scripts-Medco and the 2018 Cigna-Express Scripts mergers among them) without taking action to protect consumers. As a result, the PBM market is now dominated by three companies-Express Scripts, CVS, and OptumRx-who control the vast majority of the market, with serious consequences for competition, prescription drug costs, and consumers. This bill is a step toward ensuring meaningful competition in the PBM market, and Congress should approve it without delay.