C Freeman, MD, MBA, FAPA’s Post

Late last week, the FTC sued the three largest #PBMs over rigging #pharma supply chain competition in their favor, resulting in artificially inflated #insulin prices for some patients. The lawsuit alleges that the Big 3 PBMs have created a “perverse” rebate system that favors higher-priced insulin products even when more affordable insulins with lower list prices are available. Below are a few of my takeaways, with the full story published in today’s EMARKETER Digital Health Briefing (link in comments for clients). ◾ I found it interesting that the agency targeted insulin prices specifically. No doubt insulin list prices have skyrocketed over time, but it’s also noteworthy to point out that 3 companies—which make up about 90% of the US market for insulin—have each recently slashed list prices for certain insulins while limiting patients’ out-of-pocket costs with monthly caps. Still, while the FTC’s lawsuit is against the PBMs, it warned that it may recommend suing these insulin manufacturers. ◾It’s likely that the FTC is looking to set a precedent with insulin prices that could apply to other prescription drugs in the future. ◾Ultimately, the FTC is right in taking issue with the convoluted US healthcare system that lets the Big 3 PBMs—and the health insurers they’re affiliated with—have outsized influence over medication pricing and access. PBMs and health plans ultimately decide what a patient pays at the pharmacy counter. ◾And nobody has an answer or a solution. Whenever PBMs and pharma manufacturers are asked why prescription drug prices are high for so many consumers, each side blames the other party. This is exactly how it played out following the FTC’s lawsuit. Would love to hear any thoughts on what folks think will come from this major development!

The high cost of prescription drugs is one of the major drivers of healthcare expenses in the U.S. I'm encouraged to see our government and innovative entrepreneurs stepping up to bring positive disruption in this area. When GLP-1 drugs were removed from the formulary for obesity at a previous employer, a pharmacy leader remarked, 'You only get the drug once you have diabetes.' What a response! This highlights the importance of bringing clinically and economically sound solutions, both in the short and long term, to the forefront—essential for success in the healthcare industry. Right? 💊 #valuebasedcare #healthcare #leadership #pharmacy https://lnkd.in/dQGh8ycH https://lnkd.in/dGWJEvsB

For a nuanced and detailed look into potential PBM reform, we suggest reading this report. It reinforces the important work PBMs perform in negotiating drug costs for payers and patients, a role we understand firsthand as partners of several specialty PBMs. #Pharmacy #Healthtech #Healthcare https://lnkd.in/g5u5hGPg

What Pharmacy Benefits Managers did to insulin prices--raise them to increase their profits--they do for many, many other drugs. It is time for purchasers of health services--employers--to disintermediate intermediaries like PBM's that do not add value but rather raise costs while also, through prior authorization practices, make patients' lives more difficult. #CVS #Optum #Anthem, #UnitedHealth #drugs #healthcarecosts

#Independentpharmacies in #Ohio are facing closure at an alarming rate, with #pharmacists blaming #Pharmacy Benefit Managers (#PBMs) for squeezing their #profit margins through unfair #reimbursement practices and lack of #transparency. The Community Pharmacy Protection Act (H.B. 505) aims to address these issues by requiring insurers to pay #pharmacies the actual acquisition cost plus a minimum dispensing fee, preventing situations where pharmacies pay more for #drugs than they receive in reimbursement. Testimony supporting the bill highlights how the three largest PBMs control a significant portion of the #prescription drug market, using their bargaining power to reduce reimbursements to the point of unsustainability for independent #pharmacies, leading to closures and reduced #healthcare access, particularly in rural areas. Opponents of the bill argue that mandating #dispensingfees would increase costs for consumers and that the proposed 'actual acquisition cost' does not account for manufacturer discounts, potentially leading to inflated drug prices. The debate also centers on the role of PBMs in #formulary decisions, with concerns that PBMs may prioritize agreements with brand manufacturers, excluding cheaper generic drugs and limiting #patient access to affordable #medications; the bill seeks to increase transparency around drug pricing through mandatory monthly reporting by PBMs.

Regulating pharmacy benefit managers under federal ERISA law would help ensure the firms act in clients’ best interest, #USCSchaeffer Center Senior Scholar Geoffrey Joyce writes in a STAT letter to the editor. “[T]he lack of transparency and inability of plan sponsors to assess how much PBMs generate in savings and how much they retain for themselves is the root issue, with plan sponsors and others having little to no ability to monitor PBM behavior,” Joyce writes in the letter, which addresses recent claims about PBMs. Giving ERISA regulators oversight of PBMs would help correct much of what’s wrong in the pharmaceutical supply chain and restore PBMs’ role of efficiently administering drug benefits, he writes. Read more: https://lnkd.in/giaqtVHV USC Sol Price School of Public Policy USC Alfred E. Mann School of Pharmacy and Pharmaceutical Sciences

The FTC just released an interim report on how PBMs drive up costs for medicines and drive out independent pharmacies. This report builds on additional efforts from Congress and federal and state agencies – including FTC, DOJ, HHS and state attorneys general – looking at harmful PBM practices.    The three largest PBMs controlled 80% of the prescriptions dispensed in 2023 and are vertically integrated with large insurers, providers, and pharmacies. As the WSJ reports, we are seeing how PBMs anti-competitive practices are now pushing patients to use PBM-owned specialty pharmacies to fill prescriptions. These middlemen are using opaque practices to control where you get your medicine and what you will pay at the pharmacy, all while pushing out independent pharmacies and marking up costs for patients.   https://lnkd.in/eCFYKYis

"PBMs contend that manufacturers are responsible for high drug prices, while drugmakers say rebates and fees collected by those middlemen force them to increase list prices for products." The #gridlock that is American #healthcare. If everyone points the finger at each other, then it's everyone's fault yet it's no one's fault. Two things can be true at once. Let's break this down: 1. Are manufacturers responsible for setting the list price? Yes. This allows "it's not me, it's them" positional statement by the #PBMs in blaming manufacturers. 2. Do increased PBM fees and #rebates force the hand of manufacturers to raise list prices? Yes. There have been numerous studies and disclosures, particularly with insulin, where manufacturers have disclosed that, while their list price has steadily increased, their net price has actually decreased. 2a. Why would a manufacturer HAVE to increase their drug price to pay a higher fee instead of just providing a deeper discount on an existing price? The answer lies with Medicaid Best Price regulation. CMS requires Medicaid to receive the best price, and for many drugs, the "net best price" after federally mandated rebates and supplemental rebates is already close to the ceiling. It's not mathematically possible for many manufacturers to provide deeper discounts without raising a list price. So, in the face of finding a way to divy up more money to the Godfather or be excluded from the formulary, the incentive is to "play the game" by increasing the list price, make less money on net basis, and pay the ransom in exchange for the coveted preferred formulary status. If you don’t play the game, you'll be on the sidelines of the formulary with minimal market share until next year. This allows the manufacturer to say "they were forced" to raise their list price. This is The Game.

The federal agency took action against CVS Health's Caremark, Cigna's Express Scripts, and UnitedHealth Group's Optum and their respective group purchasing organizations — Zinc Health Services, Ascent Health Services, and Emisar Pharma Services. The three PBMs administer 80% of prescriptions in the United States, the FTC said in a statement announcing the action. The agency filed an administrative complaint, which means its allegations will be tried in a formal hearing before an administrative law judge. It will not be heard in a criminal court. The three PBMs "have extracted millions of dollars off the backs of patients who need life-saving medications," said Rahul Rao, deputy director of the FTC's Bureau of Competition, in the statement. The FTC action is not the first taken by a government agency against PBMs. Ohio Attorney General Dave Yost sued Express Scripts and Prime Therapeutics in March 2023, alleging antitrust violations. The FTC's complaint, which is not yet public, alleges that PBMs excluded lower-priced insulins from their formularies "in favor of high list price, highly rebated insulin products." The FTC describes a market in which PBMs, as they consolidated market power, began to extract higher rebates from drug makers. In turn, insulin manufacturers started raising their prices. That allowed PBMs to collect larger rebates, even as drug makers profited, according to the FTC. The PBMs "engaged in unfair methods of competition and unfair acts or practices under Section 5 of the FTC Act by incentivizing manufacturers to inflate insulin list prices, restricting patients' access to more affordable insulins on drug formularies and shifting the cost of high list price insulins to vulnerable patient populations," said the FTC, in its statement. Andrea Nelson, chief legal officer for The Cigna Group, said in a statement that the lawsuit "continues a troubling pattern from the FTC of unsubstantiated and ideologically-driven attacks on pharmacy benefit managers, following the FTC's biased and misleading July 2024 report, which Express Scripts demanded the Commission retract earlier this week."

A recent The Wall Street Journal analysis reveals private insurers made hundreds of thousands of questionable diagnoses, triggering $50 billion in extra Medicare Advantage (MA) payments. The analysis follows a #USCSchaeffer Center white paper calling for MA reform to curtail significant overpayments. Co-authored by Paul Ginsburg and Steve Lieberman, the white paper proposes a competitive bidding model that would base MA rates on market forces, not traditional Medicare spending. Through competitive bidding and standardized benefit design, plans would compete on price and quality. This would rein in costs and help ensure Medicare’s long-term sustainability, argue the authors. https://lnkd.in/g-f6-NaZ USC Sol Price School of Public Policy USC Alfred E. Mann School of Pharmacy and Pharmaceutical Sciences