The current congressional inquiry into pharmacy benefit managers (PBMs) is being led by the House Committee on Oversight and Accountability, chaired by James Comer (R-KY). The inquiry is focused on the role of PBMs in rising health care costs and their impact on patient care.

Comer issued a report in 2021 outlining how pharmacy benefit managers’ (PBMs) practices increase prescription drug prices, impact patient health, hurt competition, and distort the marketplace. The report, entitled “A View from Congress: The Role of Pharmacy Benefit Managers in Pharmaceutical Markets,” details findings from a forum held by Comer examining how PBM tactics contribute to the rising cost of prescription drugs for Americans. The report emphasizes the need for greater transparency to determine the extent of the damage PBM practices are having on patients and the marketplace and calls for further congressional review of legislative solutions to provide meaningful reform.

Key views from his report include:

– – PBMs use their market leverage to increase their profits, not reduce costs for consumers. PBMs control which medications are included on a given health plan’s formulary, or the list of drugs that plan agrees to cover. Drug manufacturers agree to discounts, or pay rebates, in order to get their products placed more favorably on formularies. But the savings from the discounts and rebates do not make their way down to the consumer; they go to the PBMs’ bottom line.
– – Drug manufacturers actually raise their prices due to PBMs. As PBMs demand larger and larger rebates or discounts, manufacturers offset these reductions by raising the “list” prices for their drugs. PBMs encourage this practice because they pocket the higher rebates received from higher priced drugs.
– – PBMs own their own pharmacies, which creates conflicts of interest, hurts competition, and distorts the market. Another key function of PBMs is to establish a network of pharmacies from which plan beneficiaries can get their prescriptions filled. However, the three largest PBMs – CVS Caremark, Express Scripts, and Optum Rx – own their own pharmacies. They also control 80 percent of the market. But they are not the only ones – smaller PBMs own their own pharmacies too.
– – PBMs “steer” patients to the pharmacies they control, making it difficult for independent pharmacies to survive. PBMs also reimburse unaffiliated pharmacies at low rates and charge a number of fees to independent pharmacies. These retroactive fees can be for just participating in the network, or they can be tied to performance metrics, such as pharmacy refill rates, error rates, or audit rates, which the PBM establishes. These retroactive fees add up – sometimes it costs a pharmacy more to fill a prescription than it is reimbursed. For specialty pharmacies, they accrue fees based on irrelevant metrics.
– – Rebates are not the only way PBMs drive up costs. A list price is like the sticker price on a car: few people actually pay that amount. Higher list prices still drive-up costs, even if that’s not the actual cost patients are paying. Insurance premiums and copayments are based on list prices. PBMs engage in a number of questionable practices, one of which is “spread pricing,” in which PBMs pay a pharmacy a lower amount than they report to a health plan sponsor. The PBM pockets the difference. Sometimes they get caught – PBMs have overcharged state Medicaid programs in Ohio, Kentucky, Illinois, and Arkansas more than $415 million once spread pricing schemes were discovered.

More recently, in March 2023, Chairman Comer sent letters to senior officials at the Office of Personnel Management (OPM), Centers for Medicare and Medicaid Services (CMS), and the Defense Health Agency (DHA) requesting documents and communications related to PBMs. The letters stated that the Committee is “examining the extent to which PBMs’ tactics impact healthcare programs administered by the federal government.”

And on May 23, 2023, the Committee held a hearing on the role of PBMs in rising health care costs. The hearing featured testimony from representatives from PBMs, insurers, pharmacies, and patient advocacy groups.

The Committee is continuing its investigation into PBMs. It is unclear when the Committee will release its findings or make recommendations for reform.

In addition to the congressional inquiry, the Federal Trade Commission (FTC) is also investigating pharmacy benefit managers (PBMs). The FTC’s inquiry is focused on whether PBMs are engaging in anti-competitive practices that are driving up the cost of prescription drugs.

The FTC issued compulsory orders to six of the largest PBMs in the United States: CVS Caremark, Express Scripts, OptumRx, Humana, Prime Therapeutics, and MedImpact Healthcare Systems. The compulsory orders require these companies to provide the FTC with information and documents about their business practices, including their contracts with drug manufacturers, pharmacies, and health plans.

And last month issued two additional orders to Zinc Health Services, LLC, and Ascent Health Services, LLC. Zinc and Ascent refer to themselves as group purchasing organizations or GPOs, sometimes also called rebate aggregators, which negotiate rebates with drug manufacturers on behalf of the PBMs and hold the contracts that govern those rebates.

Zinc was founded in 2020 and operates as the GPO for CVS Caremark. Ascent was founded in 2019 and operates as a GPO for Express Scripts, Prime Therapeutics, Envolve Pharmacy Solutions, and Humana Pharmacy Solutions.

The FTC is issuing the orders under Section 6(b) of the FTC Act, which authorizes the Commission to conduct studies without a specific law enforcement purpose. The companies will have 90 days from the date they receive the order to respond.

The FTC’s inquiry is a significant development in the effort to address the high cost of prescription drugs. The FTC has the power to take enforcement action against companies that engage in anti-competitive practices. If the FTC finds that PBMs are engaging in anti-competitive practices, it could take steps to lower the cost of prescription drugs for patients and health plans.