In the wake of an interim staff report released Tuesday on the relationship between pharmacy benefit managers (PBMs) and American pharmaceuticals, it looks like the FTC is planning to sue three of the largest PBMs for the way they’ve negotiated drug prices.
While protecting consumers from unfair or deceptive trade practices certainly falls under the FTC’s purview, their lawsuit will be based on a flawed report. The FTC should do its research before rushing ahead to sue on shaky grounds.
PBMs contract with health plans to manage pharmacy benefits and create prescription drug formularies. They act as intermediaries between health plans and pharmaceutical manufacturers, often receiving rebates and discounts from pharmaceutical companies in exchange for placing certain drugs on their formularies. The interim staff report was supposed to provide an update to previous findings from a 2005 report on PBM’s effect on the drug market. The new report findings suggest that increasing vertical integration and market concentration has allowed for six of the largest PBMs to monopolize the industry, filling nearly 95% of all American prescriptions, leading to more expensive prescription drugs.
Important if true. But that’s just it: Dissent from within the FTC itself reveals the report is politically motivated and full of holes. The effect of PBMs on the drug market are worth scrutinizing, but that’s something that should be done carefully and impartially.
The FTC should conduct more thorough research before jumping to conclusions that could have an enormous impact on consumers.
In a dissenting statement, FTC Commissioner Melissa Holyoak writes that the report fails to meet the rigorous standard necessary to produce fruitful policy debate. She writes that the report was “plagued by process irregularities and concerns over the substance — or lack thereof — of the original order.” And she writes that the politicized nature of the report led to the departure of a senior leader at the Commission.
“Rather than generate public engagement and fruitful policy discussion, the Report will only exacerbate ideological schisms and further degrade the legitimacy of the Commission,” she writes.
She goes on to point out that the new report completely ignores the findings from 2005 and it does so without conducting any new research of market conditions and with no explanation of why the old findings should be disregarded.
Holyoak is right. The FTC’s lack of transparency raises questions both about the integrity of the commission and the reliability of the study's findings. Stakeholders, including health plans, pharmaceutical manufacturers, and the public, deserve to understand how the FTC is conducting its analysis and ensuring that all relevant factors are considered.
The interim report was even criticized by concurring commissioner Andrew N. Ferguson, who says staffers should have examined more than just two case studies before proceeding with a final report. “The case studies are illuminating, but hardly definitive,” he writes. “Before issuing a final report, we need to determine whether these findings are representative of market dynamics for other drugs, and we need to learn whether any reimbursement practices ultimately affect consumers’ out-of pocket costs.”
No doubt the FTC’s impending lawsuit is well-intentioned, but ignoring empirical data and rushing to sue based on a predetermined conclusion won’t help consumers. Instead, the FTC must be frank with the American people, and consider how limiting the strength of PBM’s will affect the drug market, both in pricing and overall accessibility.
