Posted on Thursday, January 23, 2025

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by AMAC Action

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Back in 2022, AMAC Members helped spark a Federal Trade Commission (FTC) investigation into pharmacy benefit managers (PBMs) for employing potentially unethical practices that could be leading to higher prescription drug costs for patients. The latest interim report stemming from that investigation has provided shocking new details on the extent to which PBMs are apparently marking up drugs to increase profits.

According to the report, which was released on January 14, the “Big 3 PBMs,” which manage nearly 80 percent of all prescriptions filled in the United States, “marked up numerous specialty generic drugs dispensed at their affiliated pharmacies by thousands of percent, and many others by hundreds of percent.” Those drugs include potentially lifesaving medications to treat cancer, HIV, and heart disease, among other serious ailments. In some extreme cases, the Big 3 PBMs imposed “markups of hundreds and thousands of percent on numerous specialty generic drugs dispensed at their affiliated pharmacies.”

As AMAC Action has previously reported, PBMs are private intermediaries who are supposed to negotiate with drug manufacturers and pharmacies on behalf of insurance providers to deliver lower costs for patients. However, in recent years monopolistic practices and a lack of transparency have created cause for concern that PBMs may be abusing their position for their own gain while patients foot the bill.

In light of these concerns, AMAC Action has been a leading voice in calling for a federal investigation into PBM practices. From March through May 2022, the FTC opened a web page seeking comments on PBMs. Of the 24,000 comments the FTC received, 17,000 were from AMAC members. The FTC subsequently launched an investigation into the six leading PBM firms.

The FTC’s first interim report, released last July, described PBMs as “the powerful middlemen inflating drug costs and squeezing main street pharmacies.” Pointing to a “high degree of consolidation and vertical integration,” the first report concluded that “the leading PBMs can now exercise significant power over Americans’ access to drugs and the prices they pay.” These PBMs also “exert substantial influence over independent pharmacies, who struggle to navigate contractual terms imposed by PBMs that they find confusing, unfair, arbitrary, and harmful to their businesses.”

The second interim report just released provides figures to back up these assertions. In total, the Big 3 PBMs “generated an estimated $1.4 billion of income from spread pricing—i.e., billing their plan sponsor clients more than they reimburse pharmacies for drugs—on the analyzed specialty generic drugs over the study period.” Those costs, which served to line the pockets of PBMs, are passed on to patients.

Big 3-affiliated pharmacies also “generated over $7.3 billion of dispensing revenue in excess of their estimated acquisition cost… on specialty generic drugs.” Moreover, “PBM-affiliated pharmacy dispensing revenue in excess of NADAC increased dramatically at a compound annual growth rate of 42 percent from 2017-2021.” In other words, PBM-affiliated pharmacies made a lot more money from selling certain expensive generic drugs than what they paid to buy them, and this profit margin has grown rapidly over the years.

Just as alarmingly, this most recent FTC report found that “a larger, disproportionate share of commercial prescriptions for specialty generic drugs marked up more than $1,000 per prescription were dispensed by the Big 3 PBMs’ affiliated pharmacies compared with unaffiliated pharmacies. Dispensing patterns suggest that the Big 3 PBMs may be steering highly profitable prescriptions to their own affiliated pharmacies (and away from unaffiliated pharmacies).”

“This second interim report further underscores the need for pharmacy benefit manager oversight and reform,” said AMAC Action Senior Vice President Andy Mangione. “Independent pharmacies are going out of business across the country while patients are losing access to care and are being overcharged for their medications as a result of PBM business practices. AMAC Action remains committed to fighting for the necessary PBM reforms that will lower the cost of drugs for all Americans, including seniors on Medicare.”

More action from the FTC is expected in the coming months. AMAC Action will continue to keep you informed when those developments occur, and is proud to be an advocate for our members and hold PBMs to a high ethical standard for the critical role that they play in the drug supply chain.