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Unions and Consumer Groups Submit Comments to FTC Encouraging it to Investigate PBM Practices

On May 25, AFSCME, American Family Voices, Consumer Action, Consumer Federation of America, Doctors for America, Treatment Action Group, and PIRG submitted comments to the FTC encouraging the agency to use its investigative authority under Section 6(b) of the FTC Act to issue orders to large vertically integrated pharmacy benefit managers (“PBMs”) to study how the industry is harming patients. This study would give the FTC better insight into PBMs’ drug pricing practices, anticompetitive behavior, rebate contracts with drug manufacturers, and onerous contracts with independent pharmacies. The study will help the FTC understand the role of PBMs in the drug supply chain; how PBMs contribute to higher list prices that harm patients who either must pay for the higher list prices until they meet their deductibles or have to pay coinsurance based on the higher prescription drug prices.

Key points made in the comments include the following

Consumer and Patient Advocacy Comments on 6b Study of PBMs 5.25.22.
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  • The U.S. antitrust agencies have failed to protect consumers and patients as they have allowed PBMs to form a tight oligopoly and engage in conduct that has harmed patients’ abilities to access affordable prescription drugs. The lack of antitrust enforcement has created an environment in which PBMs are free to engage in anticompetitive, deceptive, and fraudulent behavior that harms patients, payors, employers, unions, and pharmacists and significantly increases drug costs.

  • Because lax antitrust enforcement allowed the three largest PBMs to become vertically integrated and form a tight oligopoly, the PBM market lacks the essential elements for a competitive market: 1) choice, 2) transparency, and 3) a lack of conflicts of interest.

  • The PBM rebate system turns competition on its head with PBMs seeking higher, not lower prices to maximize rebates and profits. In the past decade, PBM profits have more than doubled and increased to $28 billion annually. PBMs are supposed to control costs, but because of the perverse incentives the rebate system creates, they frequently deny access to lower cost drugs to maximize rebates available from higher cost drugs. This conflict harms payors and patients. Patients must pay for drugs at the higher list price to meet deductibles and pay co-insurance based off the higher list prices. This results in patients paying more out of pocket and in some cases, they face the decision to go without life saving and maintaining drugs.

  • Because of their market power and vertical integration these middlemen increasingly stifle competition from this country’s most accessible and trusted health care professionals – community pharmacies. PBMs create endless schemes to reduce reimbursement, claw back funds, restrict networks, and effectively force pharmacies to provide drugs below cost. In 2020 alone, PBMs took $9,535,197,775 from independent pharmacies who serve Medicare Part D participants. Community pharmacies are crucial for patients in underserved low income and rural neighborhoods. These unfair and coercive tactics by PBMs result in inferior health care, less choice and higher costs.

The groups provided some recommendations to the FTC in designing its 6(b) study. The groups said the FTC needs to take a broad approach, including qualitative evidence (as opposed to a narrow focus on market shares, for example), while keeping impact on patients front and center. They strongly encourage the following key steps:

First, the FTC needs to determine the impact of PBM practices on actual consumers, not just payors. Actual consumers are the patients. To this end, the study should account for patient cost, choice, convenience, and service. It is critical for the FTC to consider how PBM conduct harms patients.

Second, the study should not simply rely on market shares to determine a PBM’s market power as market power can be demonstrated by the PBM’s ability to engage in anticompetitive conduct such as imposing gag clauses; depressing pharmacist reimbursement rates to uncompetitive levels; and offering “take it or leave it” contracts with onerous terms that generate profits for themselves.

Third, the study should evaluate how PBMs have the power to steer patients to affiliated services and simply exclude independent pharmacies from their networks altogether, limiting patient access and choice.

Fourth, the FTC needs to study PBMs’ rebate contracts with manufacturers. PBMs have a great deal of control in the construction of formularies for payors and manufacturers pay rebates for preferred position on the formularies. Not only does this practice lead to higher prices, but some branded drugs, generics, and biosimilars are being excluded from formularies, which results in patients not being able to obtain more affordable and efficacious drugs that they need.

Fifth, a broad study is necessary to capture allegations of widespread fraudulent and deceptive practices.

Sixth, the study should examine whether PBMs’ use of firewalls protect independent pharmacies’ patient data.

Finally, as part of the study, the FTC needs to conduct a retrospective of the Express Scripts/Medco merger, which the FTC cleared in 2012. Since then, concentration levels in the PBM industry have increased.

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