By Myles Starr

The Federal Trade Commission accused the nation’s largest pharmacy benefit managers (PBMs) of practices that hurt consumers by pushing up the price of prescription drugs in a report issued July 9.

“The report highlights the negative impact of vertical integration and PBMs’ efforts to use their market power to disrupt care,” commented Tom Kraus, the vice president of government relations at ASHP. “By favoring their own affiliated pharmacies and negotiating rebates with manufacturers, PBMs steer patients away from lower cost generics and biosimilars and drive up prescription drug costs.” 

The report further outlined how PBMs, because of their sheer size, can exercise great sway over independent pharmacies, imposing contractual terms that are “confusing, unfair, arbitrary and harmful” to small pharmacies, including:

• conducting business through complex and opaque contracts that obscure how much an independent pharmacy will actually be paid for the drugs they deliver;
• erroneous classification of drugs as “specialty,” meaning patients are incentivized to fill prescriptions at a pharmacy vertically integrated with a PBM; and
• sending unannounced faxes to pharmacies noting policy changes that can only be responded to via fax machine.

The three largest PBMs pay their affiliated pharmacies about $6,000 per month for generic abiraterone (Zytiga, Janssen)—approximately double what they pay nonaffiliated pharmacies for the medication, which costs $229 to purchase.

These practices place financial and administrative pressure on pharmacies and, in turn, the often-rural communities they serve.

Just a day after the report was issued, The Wall Street Journal reported that the FTC plans to sue executives from the largest PBMs (Cigna, CVS Health and UnitedHealth Group) over their tactics for negotiating drug prices.

On July 23, executives from these PBMs testified before Congress defending their business practices, broadly deflecting blame for rising drug costs to pharmaceutical companies. They further defended their actions by claiming that they provided a valuable service to patients—negotiating with drug manufacturers and lowering the cost of prescription drugs.

These executives’ claims did not influence Mr. Kraus, who noted that “policymakers must step up now to end abusive PBM practices that undermine patient access to safe and effective medications.” He advocated for the following concrete steps:

• adopting federal legislation mirroring ASHP’s model legislation to prohibit payor-mandated use of specialty pharmacy and payor discrimination against 340B covered entities;
• standardizing definitions of specialty pharmacy and specialty drugs to stop payor manipulation and ensure all qualified pharmacies have equitable access to participate in specialty pharmacy networks; and
• prohibiting PBMs from using formulary designations, prior authorizations and other utilization controls to steer patients and block access to therapies.

When asked about how the FTC was addressing the concerns raised in the report, a spokesperson from the commission noted its efforts to “scrutinize dominant players across healthcare markets” by challenging improperly listed patents and investigating profiteering as well as industry consolidation.


Despite these efforts, the FTC has not yet called for any separation of PBMs from affiliated drugstores and insurers, nor did the agency mention the lawsuit reported in The Wall Street Journal. However, Mr. Kraus said, the labeling of the report as “interim” leaves room for further scrutiny and action from the FTC as well as the possibility that Congress will pass laws to reign in PBMs.

Mr. Kraus reported no relevant financial disclosures.