After a two-year investigation into the business practices of pharmacy benefit managers (PBMs), the Federal Trade Commission (FTC) released its interim findings, claiming that instead of saving employers money, PBMs steer patients towards higher cost medicines. PBMs have become the latest focus of members of Congress, the administration, and patients as the U.S. continues to seek solutions to address rising health care costs.
Background: PBMs are third-party administrators (TPAs) of prescription drug programs and are frequently used by large employers because they take on the administration of pharmaceutical benefits for employers.
- PBMs have negotiating power with drug manufacturers, manage lists of approved drugs (formularies), conduct claims processing, and often provide employee support programs through mail order pharmacies and medication adherence programs.
- However, many employers struggle to get data from PBMs on the actual price paid for drugs. The FTC launched an investigation into the business practices of PBMs in 2022 claiming rebates and fees “may incentivize PBMs and other intermediaries to steer patients to higher-cost drugs over less expensive alternatives…[which] could lead to increased costs for both patients and payers…[and] insulate more expensive drugs from competing with less expensive alternatives.”
By the numbers: The three largest PBMs control roughly 80% of the PBM market and are also integrated into larger health insurers. Employers have long struggled to get data regarding the prices paid by PBMs for prescription drugs.
Why it matters: As fiduciaries, employers must make sure they are paying fair prices for the health care services provided to employees. Legislative efforts to increase transparency, as well as investigations like the FTCs, will help employers better negotiate the prices they pay but will also increase the risk of alleged breaches of fiduciary duty.
Up next: The agency is also investigating the business practices of drug manufacturers, which PBMs argue are the real culprit because they set and continue to raise list prices of medicines. The House Oversight Committee will be holding a hearing with the CEOs of the three largest PBMs on July 23.
