FTC Votes 5-0 to Approve Study of “Rotten” PBM Abusive and Anti-Competitive Practices

On Monday, June 6, 2022, the Federal Trade Commission (FTC) voted unanimously to approve a “6(b)” study into the anti-competitive and abusive practices of Pharmacy Benefits Managers (PBMs), a move that has the potential to lead to significant relief for independent pharmacies and other providers that dispense drugs to patients. This momentous vote comes after the FTC failed to approve a similar study in February, and after receiving over 24,000 comments from pharmacies and other stakeholders in response to a subsequent request for information. As indicated on the FTC’s website, this study “will build on the significant public record developed in response to the request for information about pharmacy benefits managers that the agency launched on Feb. 24, 2022.” Pharmacies and providers should be optimistic about this positive development.

What does the FTC do?

Along with the Department of Justice (DOJ), the FTC is the chief government agency charged with enforcing the FTC Act and protecting consumers and the marketplace. The FTC protects consumers and the marketplace by enforcing federal antitrust laws and by investigating companies suspected of engaging in monopolistic or consumer fraud behaviors.

What was the FTC voting on?

The FTC was voting on whether to approve a study pursuant to Section 6(b) of the FTC Act that requires the top six PBMs to provide the FTC with answers to a series of questions.  The FTC Act, codified at 15 U.S.C. § 46, contains certain powers Congress has delegated to the FTC.  One of those powers is the power to require companies to answer certain questions and turn over certain documents that the FTC believes will be helpful in furthering its mission.

Section 6(b) permits the Commission to require persons, partnerships, and corporations, engaged in or whose business affects commerce to file reports or answers in writing to the Commission.  The Commission may require these answers to be under oath and can enforce these orders in court and, in fact, the study approved by the FTC so requires, among other things.

What Does the Study Require?

The Study requires the top six PBMs—CVS Caremark; Express Scripts, Inc.; OptumRx, Inc.; Humana Inc.; Prime Therapeutics LLC; and MedImpact Healthcare Systems, Inc.—to provide, under oath, responses to 38 questions (with sub-parts) pertaining to, among other things,

  • fees and clawbacks charged to unaffiliated pharmacies;
  • methods to steer patients towards pharmacy benefit manager-owned pharmacies;
  • potentially unfair audits of independent pharmacies;
  • complicated and opaque methods to determine pharmacy reimbursement;
  • prevalence of prior authorizations and other administrative restrictions;
  • use of specialty drug lists and surrounding specialty drug policies;
  • impact of rebates and fees from drug manufacturers on formulary design and the costs of prescription drugs to payers and patients.

Many providers will note these subjects are precisely the subjects Frier Levitt has discussed regularly and are also highlighted by many stakeholders in response to the FTC’s request for information.  

What Happens Next?

The PBMs have 90 days to comply with the FTC’s Order. Once the FTC collects the information, it may, if it finds it is in the public interest, publish any non-confidential portions of the information it gathers in a subsequent report.  The law requires the FTC to maintain the confidentiality of certain documents, like trade secrets and documents protected by the attorney-client privilege, but the agency may still report some of this information if sufficiently anonymized.  If the PBMs fail to comply with the order, the FTC may seek the attorney general’s assistance in enforcing the order.

Why is this Significant?

6(b) studies are a powerful tool the FTC employs to determine whether to take further action against companies they suspect of violating federal antitrust laws. As Commissioner Bedoya expressed in a statement,

“PBM practices are cloaked in secrecy, opacity, and almost impenetrable complexity. “PBM,” “WAC,” “MAC,” “NADAC,” “DIR” – this acronym soup hides what’s at stake here, particularly for rural and urban America. This is why the 6(b) study issued today is so critical….People say independent pharmacies are a ‘critical part’ of the healthcare infrastructure. In many parts of rural and urban America, independent pharmacies are the healthcare infrastructure, full stop….And yet, independent pharmacies are shutting down one after another, after another….If the PBMs are contributing to the closure of independent pharmacies that so many Americans rely on for healthcare, and if they are hurting families…, we need to figure out what’s happening with PBMs.

Chair Lina Khan stated, “[a]lthough many people have never heard of pharmacy benefit managers, these powerful middlemen have enormous influence over the U.S. prescription drug system…“[t]his study will shine a light on these companies’ practices and their impact on pharmacies, payers, doctors, and patients.” Commissioner Slaughter, in a powerful statement, remarked, “something is rotten in the state of the U.S. pharmaceutical market, and it warrants serious investigation.”

Thus, once the FTC is armed with additional information on PBMs’ abusive practices, they can report this information to congressional representatives, who have previously urged the FTC to take action against PBMs, and have introduced legislation aimed at some PBM practices.  This study will provide further evidence on which legislators can base new laws regulating PBMs, and which the FTC itself can use to enforce antitrust laws.

How Frier Levitt Can Help

Frier Levitt has been at the forefront of this issue, as well as in litigation against PBMs for their abusive practices, on behalf of all stakeholders, including Plans, Providers, and Wholesalers, among others.  We drafted comments on behalf of clients for the Request for Information that led to the FTC’s decision to approve this study, have helped our clients draft legislation to regulate PBMs, and have been involved in advising government agencies on PBM practices.  Moreover, Frier Levitt’s attorneys have unparalleled experience in bringing complaints against PBMs on behalf of providers.  Call Frier Levitt today to learn more.