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FTC Report Hits CVS and Others Claiming “Drug Middleman Profit at Expense of Patients”

FTC Report Hits CVS and Others Claiming “Drug Middleman Profit at Expense of Patients”

Wednesday, July 10, 2024


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CVS HQ in Woonsocket PHOTO: Company

On Tuesday, the Federal Trade Commission (FTC) issued a major update report highly critical of the so-called “middlemen” in the pharmacy industry, of which RI-based CVS is the largest.

CVS strongly disagrees with the FTC. And, one of the FTC commissioners issued a blistering dissent.

The interim report on the prescription drug middleman industry underscores the impact pharmacy benefit managers (PBMs) have on the accessibility and affordability of prescription drugs.


This report, which is part of an ongoing inquiry launched in 2022 by the FTC, details how increasing vertical integration and concentration has enabled the six largest PBMs to manage nearly 95 percent of all prescriptions filled in the United States.

This vertically integrated and concentrated market structure has allowed PBMs to profit at the expense of patients and independent pharmacists, the report details. 

“The FTC’s interim report lays out how dominant pharmacy benefit managers can hike the cost of drugs—including overcharging patients for cancer drugs,” said FTC Chair Lina M. Khan. “The report also details how PBMs can squeeze independent pharmacies that many Americans—especially those in rural communities—depend on for essential care. The FTC will continue to use all our tools and authorities to scrutinize dominant players across healthcare markets and ensure that Americans can access affordable healthcare.”

The report finds that PBMs wield enormous power over patients’ ability to access and afford their prescription drugs, allowing PBMs to significantly influence what drugs are available and at what price. This can have dire consequences, with nearly 30 percent of Americans surveyed reporting rationing or even skipping doses of their prescribed medicines due to high costs, the report claims.

The interim report also finds that PBMs hold substantial influence over independent pharmacies by imposing unfair, arbitrary, and harmful contractual terms that can impact independent pharmacies’ ability to stay in business and serve their communities. 


CVS Responds

CVS Caremark is proud of the work we do to make medicine more affordable for all Americans. We stand by our record of protecting American businesses, unions, and patients from rising prescription drug prices,” the company said in a statement. “Our efforts have resulted in members on average paying less than $8 per 30-day supply of medication. Independent analyses show net brand drug prices have declined six years in a row despite significant inflation across the U.S. economy and egregious list price increases from drug makers. This is the work we do every day on behalf of the businesses who provide benefits to their employees.”

The FTC was created to protect consumers. Any suggestions from the FTC about policies that limit the use of PBM negotiating tools would instead reward the pharmaceutical industry, leaving American businesses and patients at the mercy of the prices drugmakers set. We will continue to work every day on behalf of every business and consumer we serve, so that every prescription is delivered safely and affordably,” added CVS.


Strong Dissent

One of the FTC Commissioners was highly critical of the agency’s interim report.

“Understanding the role that PBMs play in the competitive process in our healthcare system is an important goal. Though facile arguments that rely on ideologically loaded buzzwords such as “control”28 or “power29” may stir emotions and make for entertaining social media posts and television interviews, ideological buzzwords are no substitute for rational, evidence-based research,” wrote FTC Commissioner Melissa Holyoak.

“A proper and thorough study of PBMs would shed light on how well the relevant markets are performing, determine whether PBM business practices increase the cost of prescription drugs for consumers, and inform the Commission’s future investigations and enforcement decisions. Moreover, it would illuminate legitimate concerns over PBMs’ opaque business model and price-making decisions. But instead of providing this much needed evaluation of a critical area of our healthcare system, the Report fails to provide the guidance the Commission needs or the public demands. And most importantly, it fails to provide a credible basis for future Commission action that can benefit consumers,” added Holyoak, a Republican appointed to the FTC by President Joe Biden.


FTC Interim Report Findings

The Commission’s interim report stems from special orders the FTC issued in 2022, under federal law, to the six largest PBMs—Caremark Rx, LLC; Express Scripts, Inc.; OptumRx, Inc.; Humana Pharmacy Solutions, Inc.; Prime Therapeutics LLC; and MedImpact Healthcare Systems, Inc. In 2023, the FTC issued additional orders to Zinc Health Services, LLC, Ascent Health Services, LLC, and Emisar Pharma Services LLC, which are each rebate aggregating entities, also known as “group purchasing organizations,” that negotiate drug rebates on behalf of PBMs.

“PBMs are part of complex vertically integrated health care conglomerates, and the PBM industry is highly concentrated. As shown in the below image, this concentration and integration gives them significant power over the pharmaceutical supply chain. The percentages reflect the amount of prescriptions filled in the United States,” said the FTC. 


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According to the FTC:

Concentration and vertical integration: The market for pharmacy benefit management services has become highly concentrated, and the largest PBMs are now also vertically integrated with the nation’s largest health insurers and specialty and retail pharmacies.

The top three PBMs processed nearly 80 percent of the approximately 6.6 billion prescriptions dispensed by U.S. pharmacies in 2023, while the top six PBMs processed more than 90 percent.
Pharmacies affiliated with the three largest PBMs now account for nearly 70 percent of all specialty drug revenue.

Significant power and influence: As a result of this high degree of consolidation and vertical integration, the leading PBMs now exercise significant power over Americans’ ability to access and afford their prescription drugs.

The largest PBMs often exercise significant control over what drugs are available and at what price, and which pharmacies patients can use to access their prescribed medications.
PBMs oversee these critical decisions about access to and affordability of life-saving medications, without transparency or accountability to the public.

Self-preferencing: Vertically integrated PBMs appear to have the ability and incentive to prefer their own affiliated businesses, creating conflicts of interest that can disadvantage unaffiliated pharmacies and increase prescription drug costs.

PBMs may be steering patients to their affiliated pharmacies and away from smaller, independent pharmacies.
These practices have allowed pharmacies affiliated with the three largest PBMs to retain high levels of dispensing revenue in excess of their estimated drug acquisition costs, including nearly $1.6 billion in excess revenue on just two cancer drugs in under three years.

Unfair contract terms: Evidence suggests that increased concentration gives the leading PBMs leverage to enter contractual relationships that disadvantage smaller, unaffiliated pharmacies.

The rates in PBM contracts with independent pharmacies often do not clearly reflect the ultimate total payment amounts, making it difficult or impossible for pharmacists to ascertain how much they will be compensated.

Efforts to limit access to low-cost competitors: PBMs and brand drug manufacturers negotiate prescription drug rebates some of which are expressly conditioned on limiting access to potentially lower-cost generic and biosimilar competitors.

Evidence suggests that PBMs and brand pharmaceutical manufacturers sometimes enter agreements to exclude lower-cost competitor drugs from the PBM’s formulary in exchange for increased rebates from manufacturers.



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