The FTC has released a Second Interim Staff Report (“Report”), which follows the First Interim Report released this past summer as part of its ongoing examination into Pharmacy Benefit Managers (“PBMs”) and their impact on prescription drug costs. Frier Levitt previously discussed the FTC’s findings on rebate aggregators and patient steering and vertical integration that disadvantages independent pharmacy providers and inflates drug costs for patients. The Second Interim Report entitled, Specialty Generic Drugs: A Growing Profit Center for Vertically Integrated Pharmacy Benefit Mangers, analyzes a broader set of specialty generic drugs compared to two specialty generic drugs analyzed in the previous report.
Overview of Second Interim Staff Report
The Second Interim Report focuses on 51 different specialty generic drugs, including cancer, heart disease and HIV medications, dispensed from 2017 to 2022 for members of commercial health plans and Medicare Part D prescription drug plans managed by three PBMs: Caremark Rx, LLC Express Scripts, Inc., and OptumRx, Inc.
Price Markups: According to the Second Interim Report, these three PBMs marked up life-saving specialty generic drugs dispensed at their affiliated pharmacies by thousands of percentage points. For example, for commercial prescriptions, certain specialty generic drugs were marked up by over 1,000% when dispensed through one of the PBMs’ affiliated pharmacies compared with unaffiliated pharmacies. [1] The Report states a large share of the drugs marked up more than 1,000% were taken by patients with cancer, multiple sclerosis, and pulmonary hypertension. [2] When viewed in monetary terms, for example, a pulmonary hypertension drug purchased by pharmacies for $27 was marked up by PBMs to $2,079 and then the PBMs paid their affiliated pharmacies $2,106 for a 30-day supply. These markups generated $7.3 billion in dispensing revenue for the PBMs because they dispensed drugs in excess of the drugs’ estimate acquisition costs during the relevant time period.
Dispensing Volumes: According to the Second Interim Report, members of commercial health plans managed by the PBMs filled a larger, disproportionate share of high markup specialty drug prescriptions at PBM affiliated pharmacies. [3] The Report says this suggests PBMs may be steering these prescriptions to their own affiliated pharmacies instead of unaffiliated pharmacies. [4] This finding is also consistent with the First Interim Staff Report. When looking at Medicare Part D claims, PBM affiliated pharmacies dispensed fewer 30-day equivalent prescriptions than unaffiliated pharmacies, which the FTC suggests may mean that PBMs have less ability to influence patient pharmacy choices in Medicare Part D. [5] The Report also notes that Medicare’s “any willing pharmacy” rule may help explain these results.
FTC’s Call for Action: Based on the Second Interim Report, the FTC had stated further scrutiny of PBMs is required based on the specialty generic drug pricing and steering practices. The FTC is continuing its examination because various productions, data and document requests have not been answered or submitted by the PBMs yet. The FTC further stated plan sponsors must be aware they are paying PBMs and their affiliated pharmacies significant markups over the acquisition costs for live-saving medications. Specifically, in 2021, plan sponsors paid $4.8 billion for specialty generic drugs and patient cost sharing totaled $297 million. Between the relevant time period, plan sponsors and patient payments increased at compounded annual growth rates of 21% for commercial plans and 14-15% for Medicare Part D claims. The FTC noted legislative reforms may be warranted and the FTC is ready to provide assistance to policymakers in addressing PBM practices.
How Frier Levitt Can Help
Frier Levitt represents independent pharmacies and self-funded employers in their dealings with PBMs. Our attorneys have decades of experience assessing contract terms, reimbursement rates, and network agreements, and providing litigation support to address unfair practices and ensure independent pharmacies’ interests are protected. In addition, we assess contract compliance, financial accuracy, and performance metrics to ensure that your PBM arrangements align with fiduciary standards and your company’s financial interests. If your pharmacy has experienced unfair practices by PBM-affiliated pharmacies, contact Frier Levitt today. We have the expertise to help you navigate these challenges and protect your business interests.
[1] Report p. 11.
[2] Id. p.14.
[3] Id. p. 17.
[4] Id.
[5] Id.
