Comments to the Federal Trade Commission on Pharmacy Benefit Managers

Editor’s Note: This comment letter was submitted to the Federal Trade Commission on May 25, 2022, in response to a solicitation for public comments. Schaeffer Center experts have studied the pharmaceutical distribution system since 2016. These comments are based on a body of research included in the Value of Life Sciences research program. The views expressed in this letter are those of the authors and do not necessarily reflect the views of the Schaeffer Center or the University of Southern California.

Executive Summary:

• PBMs play a central role in the economic system that distributes and pays for life-saving drugs in the United States. Unfortunately, evidence indicates they leverage their position to extract profits from other distribution system participants in ways that are detrimental to patients, payers, and the drug innovation system more broadly.
• In addition to their benefitting from a lack of transparency in the system, PBMs employ anticompetitive strategies and tactics that warrant investigation. These include gag clauses and copay clawbacks, rebate-driven formulary design, excessive prior authorization requirements, and vertical integration which are used to increase PBM profits at the expense of patients, taxpayers, and employers.
• Research on economic rents earned by different sectors of the distribution system indicates PBMs are earning excessive profits.
• PBMs are not delivering generic prescriptions to patients at the lowest possible cost. A 2020 study of cash prices at Costco for common generic prescriptions compared to Medicare costs found that Medicare overpaid on 43% of prescriptions in 2018, amounting to $2.6 billion in overpayments that year.
• An FTC investigation of anticompetitive and harmful PBM business practices could help spur a more efficient and equitable pharmaceutical distribution system by: (1) increasing access to lifesaving medications for patients who need them, and (2) sharing economic surplus in a way that ensures both near-term affordability and ongoing healthcare innovation.

Read their full comment letter here.