On August 1, 2024, the Federal Trade Commission (FTC) held an Open Commission Meeting with the goal of addressing, among other things, the FTC’s recent interim “Pharmacy Benefit Managers Report,” and the FTC’s ongoing study of PBMs and their potential impact on access and affordability of medicines. Based on presentations from FTC staff, the Commission remained extremely focused on examining how increasing levels of vertical integration and horizontal concentration may have enabled PBMs to inflate drug costs, while squeezing independent pharmacies. This could not have been a more opportune moment to speak to the abuses and hardships PBMs have wrought upon independent pharmacy providers, and on behalf of Frier Levitt and independent pharmacies alike, I did not pass up the opportunity to speak about our experiences in dealing with PBMs.
Over the years, Frier Levitt has drafted multiple White Papers on PBM practices, including a PBM Exposé detailing the negative impact PBMs have had on patients, plans and providers, alike, which the FTC cited three times in its Interim Report. Additionally, one of our founding partners, Jonathan Levitt, testified before the Senate Finance Committee in 2023 about PBM abuses. Perhaps most important, we have decades of experience representing pharmacies against PBMs in litigation and arbitration, through which we have been able to peel away the layer of secrecy and confidentiality PBMs so desperately seek to use to cover their shell game and shine a light on details of PBMs’ abusive conduct.
Through these experiences, we have seen PBM abusive conduct come in many forms:
- Flouting “any willing provider” laws designed to ensure broad pharmacy participation, by arbitrarily denying network admission;
- Engaging in “patient trolling” by using claims data from independent pharmacies to switch patients to PBM-owned pharmacies;
- Reimbursing pharmacies less than available acquisition costs (despite charging plans and patients much, much more).
The list goes on and on.
This is all the result of years of vertical integration. But that term is too weak to describe the monopolistic power PBMs have and use to set prices at every level in the supply chain, from plan costs, to the reimbursement amounts paid to competing pharmacies, and now even to acquisition costs for the drugs those pharmacies dispense.
Integrated PBM conglomerates swallow up the profits from independent actors in the market, homogenizing the pharmacy business and ultimately hurting consumers by pushing them to PBM affiliates, while raising drug costs and creating waste. These same conglomerates leverage market power and siphon monies through each step of the supply chain, like manufacturer rebates being aggregated and skimmed by so-called GPOs, or spread pricing practices, allowing PBMs to inflate their own profits at the plans’ expense. These tactics drive up costs for plans as they do not receive full discounts on prescription drugs, and for patients through higher premiums and out-of-pocket drug costs.
Based on this, we urge the FTC to finally act on the information it has learned about PBMs through its interim study, and to enforce Section 5 of the FTC Act and antitrust laws to remedy PBMs’ abusive conduct. Moreover, we encourage every pharmacy provider and stakeholder in the drug supply chain to speak up and provide the FTC concrete data on how PBMs’ vertical integration has harmed competition, increased costs for patients and plans, while decreasing access and service. Only though this direct and specific data will the FTC be bold enough to take concrete steps to address prior and ongoing misconduct. It is truly an honor to wage this battle on behalf of independent providers, and we hope that you will join us.
