Pharmacy benefit managers (PBMs) are coming under increased public scrutiny for their role in the healthcare industry. Last month the FTC released an interim report on their two-year investigation into PBMs vertical integration and drug pricing. Which is seemingly in preparation to sue the three largest PBMs for their tactics to negotiate drug prices between manufacturers and clients.
While it's important to talk about PBMs and their effect on the healthcare market, we can't do that effectively unless we have access to detailed reports and accurate analysis from the FTC. This most recent report from the FTC fails to deliver what we need.
I became aware of the focus on PBMs last year when I worked as a policy analyst for a state senator in Oregon. There was a litany of proposed bills targeted at PBMs, ranging from direct control over how they operate to restructuring the tax code to off-set their impact on pharmacies and healthcare providers.
Pharmacies have been struggling in Oregon. In 2021, Bi-Mart stopped filling prescriptions in Oregon and blamed a new tax and rising costs. Other chain pharmacies and independent pharmacies have struggled to stay open.
Consumers are having a harder time accessing pharmacies and getting the medicine they need. For rural folks this is especially hard as it can mean driving hours to get to a surviving pharmacy.
In Oregon and across the country, the blame for high drug prices has shifted away from drug manufacturers to PBMs. The pharmacy industry is behind this shift. Yet, data and analysis from PBMs shows they save consumers an average of $1040 per year on prescription drugs. The disparity between industry claims leaves the public wondering which to believe. There’s an opening for the FTC to provide some much needed clarity.
The FTC could have collected real data from PBMs to paint a clear picture of their role in the healthcare market. That’s not what the interim report did. Read through it and you will notice it often references the same anecdotes and stories that we the general public have been reading about in the news. Here lies the problem. All the negative stories and accusations against PBMs conflict with the hard data we do have.
Commissioner Holyoak pointed out in her dissent of the interim report, that a 2005 FTC report showed empirically that PBMs — including vertically integrated ones — produce cost savings for consumers. Granted, that report is almost 20 years old and there have been major changes to the healthcare system since then. That’s why one of the major disappointments with the interim report is that it doesn’t provide an empirical update to the more robust 2005 report. Furthermore, the interim report doesn’t address if consumers face higher drug costs because of PBMs, which is one the most important questions to answer.
Ire against PBMs comes from both sides of the aisle. So far in the 118th Congress, Republicans and Democrats have introduced 26 pieces of legislation relating to PBMs. However, the proposed changes are based on faulty assumptions and will likely fail to lower drug costs for consumers.
In 2019 the Trump administration pursued a rule that would have stopped rebates from drug manufacturers to PBMs clients. A Congressional Budget Office report estimated that the rule change would have increased federal spending for Medicare and Medicaid, as beneficiaries of PBMs, from 2020-2029 by $177 billion. This is because Medicare and Medicaid use PBMs to lower their costs..
The danger is that lawmakers are pursuing major policy changes — not in the absence of data — but in direct contradiction of the data we do have. Policymakers are basing their decisions purely off anecdotal evidence and disparate examples when the empirical data we have indicate that PBMs produce cost savings for their clients and consumers. The FTC should produce a full report that provides empirical analysis of PBMs and the healthcare market. Policymakers at every level depend on it to sort through the noise of politics to make sound decisions for their constituents.
