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2. Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies

https://www.ftc.gov/system/files/ftc_gov/pdf/pharmacy-benefit-managers-staff-report.pdf

I. EXECUTIVE SUMMARY

This Interim Report is part of an ongoing study by the Federal Trade Commission (“FTC” or the
“Commission”) of pharmacy benefit managers (“PBMs”) and their impact on access to and
affordability of medicines. It describes how, amidst increasing vertical integration and
concentration, these powerful middlemen may be profiting by inflating drug costs and squeezing
Main Street pharmacies.

PBMs are at the center of the complex pharmaceutical distribution chain that delivers a wide
variety of medicines from manufacturers to patients. PBMs serve as middlemen, negotiating the
terms and conditions for access to prescription drugs for hundreds of millions of Americans. Due
to decades of mergers and acquisitions, the three largest PBMs now manage nearly 80 percent of
all prescriptions filled in the United States. They are also vertically integrated, serving as health
plans and pharmacists, and playing other roles in the drug supply chain as well. As a result, they
wield enormous power and influence over patients’ access to drugs and the prices they pay. This
can have dire consequences for Americans, with nearly three in ten surveyed Americans reporting
rationing or even skipping doses of their prescribed medicines due to high costs.

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. Between 2013 and 2022, about ten percent of independent retail pharmacies in rural
America closed. Closures of local pharmacies affect not only small business owners and their
employees, but also their patients. In some rural and medically underserved areas, local community
pharmacies are the main healthcare option for Americans, who depend on them to get a flu shot,
an EpiPen, or other lifesaving medicines.

PBMs oversee critical decisions about access to and affordability of medications without
transparency or accountability to the public. Indeed, PBM business practices and their effects
remain extraordinarily opaque. Accordingly, in 2022, the FTC issued special orders pursuant to
Section 6(b) of the Federal Trade Commission Act (the “6(b) Orders” or “Orders” ) to the six largest
PBMs—Caremark Rx, LLC; Express Scripts, Inc.; OptumRx, Inc.; Humana Pharmacy Solutions,
Inc.; Prime Therapeutics LLC; and MedImpact Healthcare Systems, Inc. (the “PBM respondents”
or “respondents”). The Orders requested data and documents regarding these six large PBMs’
businesses and business practices. In May and June 2023, the FTC issued supplemental Orders to
produce data and documents to three additional PBM-affiliated entities.

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