Investing.com — The Federal Trade Commission (FTC) has released a report showing that the three largest pharmacy benefit managers (PBMs) in the industry have significantly marked up prices on specialty generic drugs. The PBMs, Caremark Rx, LLC, Express Scripts, Inc., and OptumRx, Inc., are all owned by major healthcare conglomerates. Caremark is a subsidiary of CVS, Express Scripts is owned by Cigna (NYSE:), and United Health owns OptumRx.
The FTC’s report reveals that these PBMs have marked up the prices of a variety of specialty generic drugs, including those used to treat cancer, HIV, and other serious conditions, by hundreds to thousands of percent. The report shows that from 2017 to 2022, these three PBMs and their affiliated specialty pharmacies generated over $7.3 billion in revenue from dispensing drugs, a figure that far exceeds the estimated acquisition costs of the drugs.
The FTC’s investigation analyzed 51 specialty generic drugs, covering 882 National Drug Codes, and found that the PBMs’ affiliated pharmacies were reimbursed at higher rates than unaffiliated pharmacies for nearly all of the specialty generic drugs examined. The report also uncovered a trend of the PBMs directing profitable prescriptions to their affiliated pharmacies.
The FTC report also showed that a significant portion of commercial prescriptions for specialty generic drugs marked up more than $1,000 per prescription were filled by pharmacies affiliated with the three PBMs, rather than unaffiliated pharmacies. The report found that the top 10 specialty generic drugs accounted for $6.2 billion of dispensing revenue above the National Average Drug Acquisition Cost (NADAC), representing 85 percent of the total excess revenue.
The FTC report also indicated that the three PBMs generated an estimated $1.4 billion from spread pricing, which is when they bill their plan sponsor clients more than the reimbursement to pharmacies for drugs, over the study period. The revenue from dispensing these specialty generic drugs was a significant contributor to the operating income of the parent healthcare conglomerates’ business segments, which include PBM and pharmacy operations.
Despite these findings, payments for drugs by patients, employers, and other health care plan sponsors have continued to increase annually. In 2021, plan sponsors paid $4.8 billion for specialty generic drugs, with patient cost sharing totaling $297 million.
FTC Chair Lina M. Khan has emphasized the importance of using the Commission’s tools to investigate and act against practices that may inflate drug costs and hinder access to affordable healthcare. The FTC staff has expressed an urgent need for policymakers to address the growing problem of drug cost inflation.
This report is part of the Commission’s ongoing study of the PBM industry. The FTC staff have promised to provide timely updates as they continue to review additional information related to this study.
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