
Pharmacy benefit managers have been caught inflating drug prices by over 1,000%, raising concerns about healthcare affordability and market competition.
At a Glance
- Top three pharmacy benefit managers (PBMs) generated $7.3 billion through drug price markups over five years.
- PBMs inflated costs of life-saving medications, with some price hikes exceeding 1,000%.
- Specialty drugs, particularly for cancer and multiple sclerosis, were significant contributors to the markups.
- The FTC report suggests PBMs may be directing prescriptions to their own affiliated pharmacies.
- Bipartisan support in Congress calls for addressing PBM practices.
FTC Reveals Shocking Drug Price Markups
The Federal Trade Commission (FTC) has released a report exposing how the top three pharmacy benefit managers (PBMs) in the United States have been marking up drug prices, particularly for specialty medications. CVS Health’s Caremark Rx, Cigna’s Express Scripts, and UnitedHealth Group’s OptumRx generated a staggering $7.3 billion through these markups over a five-year period starting in 2017. This practice has significantly impacted the affordability of essential medications for millions of Americans.
The investigation found that these PBMs, which administer 80% of U.S. prescriptions, inflated the costs of life-saving medications for conditions such as cancer, heart disease, and HIV. In some cases, the price hikes exceeded 1,000% of the national average. This alarming trend has caught the attention of policymakers and healthcare advocates who are now calling for urgent action to address the escalating drug prices.
For the second time in less than a year, the FTC has released a highly critical report of pharmacy benefit managers, or PBMs. https://t.co/XSM1LbSgn8
— STAT (@statnews) January 14, 2025
Impact on Specialty Drugs and Healthcare Costs
The FTC report highlights that specialty drugs, particularly those used to treat cancer and multiple sclerosis, were major contributors to the $7.3 billion in markups. Cancer drugs alone accounted for nearly half of this amount. In 2021, the top 10 specialty generics made up almost 11% of the companies’ pharmacy-related operating income, indicating the significant impact these markups have on overall healthcare costs.
“The FTC staff’s second interim report finds that the three major pharmacy benefit managers hiked costs for a wide range of lifesaving drugs, including medications to treat heart disease and cancer” – FTC Chair Lina Khan
The investigation revealed that more than 20% of “specialty drugs” were marked up by over 1,000%, while 41% were marked up between 100-1,000%. These figures demonstrate the extent to which PBMs have been inflating drug prices, potentially putting life-saving medications out of reach for many patients.
PBMs’ Response and Ongoing Investigations
In response to the FTC’s findings, the three major PBMs have disputed the conclusions. CVS Health called the report “inappropriate and misleading,” while OptumRx emphasized patient savings. Express Scripts has gone as far as to legally challenge the FTC’s claims.
The FTC, however, remains committed to its investigation. Chair Lina Khan has emphasized the need for continued scrutiny and swift action against any illegal conduct by the PBMs. The commission has ongoing legal actions against the top PBMs for alleged anticompetitive practices, signaling a broader push for reform in the pharmaceutical industry.
Impact on Independent Pharmacies and Market Competition
The FTC’s report also sheds light on how these practices affect market competition. Independent pharmacies claim they are being unfairly squeezed by low reimbursement rates, while the PBMs’ own affiliated pharmacies receive preferential treatment. This disparity puts smaller businesses at a significant disadvantage and potentially limits patient choice.
The findings have garnered bipartisan support in Congress, with members from both parties calling for action to address PBM practices. This rare show of unity underscores the severity of the issue and the widespread recognition that reform is necessary to ensure fair pricing practices and enhanced healthcare access for all Americans.
Sources:
- Top three insurers reaped $7.3 billion through their drug middlemen’s markups, FTC says
- FTC alleges PBMs cost consumers $7.3 billion marking up drug prices
- Pharmacy Benefit Managers Marked Up Specialty Drugs By Over 1,000%: FTC Report