America’s three largest pharmacy benefit managers have been accused by the Federal Trade Commission of significantly marking up the prices of certain medicines, including for heart disease, cancer and HIV, at their affiliated pharmacies, by hundreds or thousands of percent, to boost profits.
Between 2017 and 2022, the companies – UnitedHealth Group’s Optum, CVS Health’s CVS Caremark, and Cigna’s Express Scripts – added exorbitant mark-ups to prices at their pharmacies, netting them $7.3bn in revenue in excess of the acquisition costs of the drugs, the FTC said in its second report on the industry.
“That $7.3bn is the difference between what they are reimbursing themselves and what it is estimated to cost them to acquire the drug,” an FTC spokesperson told Reuters, adding that the figure was “probably an underestimate”.
Pharmacy benefit managers, or PBMs, act as middlemen between drug companies and consumers. They negotiate volume discounts and fees with drug manufacturers on behalf of employers and health plans, create lists of medications that are covered by insurance, and reimburse pharmacies for prescriptions.
The FTC prioritised testimony from drugmakers and pharmacies, industries that benefit from weakening PBMs, said David Whitrap, vice-president of external affairs at CVS Health.
An Optum spokesperson said the company lowered the cost of drugs and had helped patients save $1.3bn in 2024.
A spokesperson for Cigna’s Express Scripts described the report’s findings as misleading, saying the calculations were based on a subset of medications that represent less than 2% of what the country’s health plans spend on medications in a year.
The report said dispensing patterns suggested that the companies were steering more profitable prescriptions, ones marked up more than $1 000 per prescription, to pharmacies owned by their parent companies.
They also paid those pharmacies more than unaffiliated pharmacies for nearly every drug in the study, the report said.
In 2021, patient out-of-pocket costs for these drugs were at $279m, an annual compound increase of 14%-21% since 2017, the report found.
The companies were generating an additional $1.4bn over the study period from spread pricing – the practice of billing plan sponsors more than they reimburse pharmacies for drugs.
The FTC sued the three PBMs in September, accusing them of steering diabetes patients toward higher priced insulin products to reap millions of dollars in rebates from drugmakers.
The companies say the suit is baseless and defend their practices.
CVS, UnitedHealth and Cigna in October asked the FTC to disqualify Chair Linda Khan from the insulin suit, citing alleged bias against their pricing model.
“We’re confident our actions are going to be upheld in the litigation, and we’re not going to be distracted from our duty to inform the public and policy makers by the PBM scare tactics,” the FTC spokesperson said last week.
Khan’s term as chair officially expired in September. President-elect Donald Trump will be inaugurated on 20 January and has picked current Commissioner Andrew Ferguson to succeed Khan.
FTC Report – FTC Releases Second Interim Staff Report on Prescription Drug Middlemen (Open access)
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