FTC To Examine Business Practices of Pharmacy Benefit Managers

June 8, 2022


Craig Wilson, JD, MPA
Director, Health Policy

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The Federal Trade Commission (FTC) announced Tuesday, June 7, it has decided in a unanimous 5-0 vote to launch an examination into the business practices of pharmacy benefit managers (PBMs). PBMs negotiate fees and rebates with drug manufacturers, create approved drug lists for health insurers, and pay pharmacies for patients’ prescription drugs.

The FTC examination will focus on the vertical integration of PBMs with health insurers and its impact on drug access and affordability. The FTC will issue orders to PBMs requiring them to provide certain documents so the commission can examine contractual relationships and business practices including:

  • fees and clawbacks charged to pharmacies
  • steering of patients toward PBM-owned pharmacies
  • potentially unfair audits of independent pharmacies
  • methods to determine pharmacy reimbursement
  • the prevalence of prior authorizations and other administrative restrictions for drugs
  • the use of specialty drug lists and surrounding specialty drug policies
  • the impact of rebates and fees from drug manufacturers on formulary design and drug costs

The FTC decision follows the issuance of a request for information to the public seeking comments on PBMs in February but marks a reversal of an earlier decision not to investigate PBM practices.

Many states, including Arkansas, have taken steps to regulate PBMs. Arkansas requires PBMs to be licensed to operate in the state and bans PBM practices such as gag clauses that prohibit pharmacists from discussing the total cost for pharmacist services for a prescription drug and “spread pricing,” which occurs when a PBM pays a pharmacy one price for a drug and charges the health insurer a different price, allowing the PBM to keep the difference.

PBMs have challenged the legal authority of states to regulate their business practices as they relate to self-funded employer health plans. However, in 2020, the U.S. Supreme Court ruled against the PBMs and upheld a 2015 Arkansas law regulating PBM payments to pharmacies.

In 2019, the Arkansas Insurance Department examined three PBMs to determine whether they were engaging in spread pricing and other prohibited reimbursement activities. The report from the examination, which utilized health insurance claims data from the Arkansas Healthcare Transparency Initiative, found that one of the PBMs engaged in significant spread pricing practices during the audit’s time frame and charged a health insurer 15% more than what was paid to pharmacies.

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