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FTC Study On PBM Practices, Rebates: Stalemate So Far, But Bipartisan Interest Remains

After motion to advance fails at 17 February meeting, proposed study design will be revamped, not scrapped. Despite the 2-2 deadlock on the vote, commissioners uniformly expressed an interest in proceeding with research on PBM industry, focusing on the leading players.

The Federal Trade Commission is interested in conducting a deep dive into the leading pharmacy benefit managers and their impact on prescription drug access, but the details of such a study – including whether and how it will address the way PBMs handle manufacturer rebates – are yet to be determined.

A motion to launch a so-called “6B” study on PBMs failed during a commission meeting on 17 February, with the Trump-appointed commissioners Joshua Phillips and Christine Wilson voting against moving ahead at this time and chair Lina Kahn and Rebecca Kelly Slaughter voting in favor. The commission is still operating with only four of its five commissioners in place.

President Biden announced the nomination of Alvaro Bedoya to serve as the fifth commissioner in September, but the appointment has not yet cleared the Senate. Bedoya is the founding director of the Center for Privacy and Technology at Georgetown Law. The Senate Commerce, Science, and Transportation Committee voted 14-14 on the nomination in December but despite the deadlock, the nomination could still head to the Senate floor.

Last year, when Democratic appointees held a 3-2 majority, FTC gave staff more freedom to launch investigations into pharma companies and PBMs. (Also see "US FTC Removing ‘Handcuffs’ To Pursue Pharma Companies, PBMs For Antitrust Violations" - Pink Sheet, 6 Jul, 2021.)

Section 6(b) of the FTC Act gives the commission special authority and tools to conduct policy and research studies, separate from its law enforcement authority. Under Section 6(b), the FTC can issue an order to require a company to file annual or special reports, in writing, to answer specific questions about various aspects of the company’s business conduct.

In presenting the PBM study to the commission for a vote, FTC chair Kahn said the research would focus on possible anticompetitive practices by PBMs that are vertically integrated with insurers and specialty and retail pharmacies. The three largest PBMs all would fit that description, with CVS Health Corp. combined with Aetna Inc., Express Scripts Holding Company with Cigna Corp. and OptumRx Inc. owned by UnitedHealth Group. All three PBMs own specialty pharmacies and CVS has its retail pharmacy chain as well.

PBM Impact On Independent Pharmacies, Prices At The Counter

Independent pharmacies have claimed vertically integrated entities threaten their “gradual elimination,” Kahn noted. She added that stakeholders have also “surfaced a growing concern with the impact of PBM rebates and other fees applied by manufacturers in their negotiations with PBMs that may increase patient prices at the pharmacy counter.”

Stakeholders point out patients usually have to pay copays, deductibles and coinsurance based on list prices, “as if no discount had been applied to the actual price of the drug through rebates that are shared with PBMs and payers,” she observed. In other words, “while PBMs may benefit from negotiating these rebates, it is maybe unclear whether patients, who ultimately need to buy the medicines, fully benefit from these reduced prices.”

Kahn also reported the commission has fielded “numerous complaints” that rebating leads PBMs to steer patient to more expensive drugs and “patients have less choice of pharmacies and drug products than ever before as PBMs may increasingly rely on restrictive formularies and dispensing options.” Therefore, and despite the agency’s limited resources, “I believe it is vital to launch this study,” she said.

In voting against the research, Phillips and Wilson explained they felt the study design has not been adequately fleshed out and although they support conducting a study on PBMs, a more detailed plan is needed.

Phillips said that commission staff revised and broadened the design of the study at the eleventh hour, and “I haven’t have chance to review it so I don’t know what questions it is designed to answer.” He added that “if we hope to use our 6B authority to scope a study on PBMs, we have to scope a study that can inform the public about when and how those practices impact out-of-pocket costs. I don’t have a basis at this point that this study would do that so I’m going to vote no.”

However, Phillips said he remains open to working on a 6B research plan “that would generate a useful study on prescription drug costs and the role and impact of PBMs,” including a merger “retrospective” or a study on “the competitive effects of specific PBM practices.”

Including A Focus On Manufacturer Rebates

Wilson similarly expressed a concern that she had not had time to consider the latest iteration of the study design, although “this version is far more comprehensive, for which I am grateful.” She maintained “it’s important to examine the manufacturer rebate issues,” which the latest version added. She said she would favor an “empirical and objective examination of competition in the PBM industry.”

Other questions she would like to examine include the factors driving formulary design and the “mechanisms” manufacturers use to “disincentivize PBMs from putting their competitors’ medicines on formulary,” Wilson said.


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