Pharmacy Benefit Managers hiked medication prices over 1000%, says new report
Pharmacy Benefit Managers (PBMs) increased the price of medications by over 1000% while raking in enormous profits, according to a report published Tuesday by the Federal Trade Commission (FTC).
PBMs act as middlemen between pharmacies, drug manufacturers, and insurance companies. They were introduced in the 1960s with the goal of improving access to drugs at reasonable prices. Since then, however, PBMs have become intermediaries who wield enormous power without oversight. They secretly negotiate drug prices with insurance companies and drugmakers, often at excessive prices, and then reimburse pharmacies for the drugs at much lower rates, pocketing the profits. This is called spread pricing and is a major source of revenue for PBMs. Since PBMs also negotiate which medications are covered by insurers, pharmacies are forced to accept the terms set by PBMs or risk losing access to the insurers’ networks.
The three largest PBMs are Caremark Rx, LLC (owned by CVS), Express Scripts, Inc. (owned by Cigna), and OptumRx, Inc. (owned by UnitedHealth Group). Together, they control up to 80% of prescriptions in the United States. According to the FTC report, between 2017 and 2022 they marked up more than 20% of specialty drugs — like those for cancer and HIV — by 1000%. They also increased prices of 41% of non-specialty drugs by 100%-1000%.
“The FTC staff’s second interim report finds that the three major pharmacy benefit managers hiked costs for a wide range of lifesaving drugs, including medications to treat heart disease and cancer,” said FTC Chair Lina M. Khan. “The FTC should keep using its tools to investigate practices that may inflate drug costs, squeeze independent pharmacies, and deprive Americans of affordable, accessible healthcare—and should act swiftly to stop any illegal conduct.”
Trump: 'We’re going to knock out the middleman'
Last month, President-elect Donald Trump pledged to eliminate PBMs, who he said are “rich as hell.”
“We’re going to knock out the middleman,” Trump said at a press conference. “We’re going to get drug costs down at levels that nobody has ever seen before. I don’t know who these middlemen are, but they are rich as hell,” he added.
The federal government has slowly begun to acknowledge the tyranny of PBMs. The FTC filed a lawsuit in September against the Big 3 PBMs for artificially inflating the price of insulin drugs, and in December lawmakers introduced a bipartisan bill that would force PBMs to sell their pharmacies. However, PBMs are fighting to remain in power. The Pharmaceutical Care Management Association (PCMA), which represents PBMs, spent an estimated $8.7 million on federal lobbying in 2022. The PCMA also has its own political action committee that donates to federal candidates.
