Last month, the Federal Trade Commission (FTC) voted unanimously (5-0) to review rising insulin list prices, but also to probe possible anti-competitive practices by Pharmacy Benefit Managers (PBMs). regarding the use of rebate agreements. Rebates are payments from drug manufacturers to PBMs in exchange for shifting market share to formulary preferred products. The FTC cites cases in which cheaper generics and biosimilars are excluded from PBM formularies because doing so may violate competition and consumer protection laws.
Separately, in early June, the FTC opened an investigation into six major PBMs. The FTC also voted unanimously (5-0) to continue this investigation which will require CVS Caremark, Express Scripts, OptumRx, Humana, Prime Therapeutics and MedImpact Healthcare Systems to file information regarding their dealings with pharmacies.
The FTC has warned of legal action against PBMs if its investigations find evidence of anticompetitive practices.
Here, in addition to rebates, the FTC will investigate direct and indirect compensation (DIR) fees and spread pricing. PBMs assess DIR fees for pharmacies that dispense Medicare Part D (outpatient) drugs. These fees are often charged long after a pharmacy has filled a Medicare prescription. PBMs say they get money back because of a pharmacy’s performance on certain quality measures. However, observers point to the arbitrary and opaque nature of these quality measures. Tiered pricing is PBM’s practice of pocketing the difference between the payment PBM receives from a health plan and the reimbursement amount it pays the pharmacy.
There appears to be some overlap between the two investigations the FTC voted on in June. The FTC has announced that it will use “every tool at its disposal” to investigate PBMs and drugmakers, with a focus on the insulin market.
Insulin has long been a hot topic in Washington DC, given the ever-increasing out-of-pocket expenses of patients. Even insured patients spend an average of more than $750 a year on insulin. Uninsured patients spend at least twice as much. Insulin is an essential treatment for approximately 8 million Americans to control diabetes.
The insulin saga epitomizes the challenges facing US health care in access, equity, pricing and discounts. For years, voters have demanded that lawmakers and the executive branch make changes that reduce their non-cost burden, but also establish a more transparent market. So far, to no avail.
The FTC upped the ante because the agency included terms such as “commercial bribery” in its statements to describe what it perceives to be anti-competitive rebates in the insulin market.
The FTC’s latest investigation follows a recent investigation by Senators Grassley (R-Iowa) and Wyden (D-Oregon), who blamed rebate programs for much of the prescription drug market’s ills. Additionally, nearly two years ago, Sen. Klobuchar (D-Minnesota) and his colleagues tasked the General Accounting Office (GAO) with reviewing rebates. The GAO report is due out this fall.
There are many problems with the discount system as it currently exists in the United States. In the conventional rebate system that has been in place for decades, PBMs receive rebates from drug manufacturers in exchange for preferred positioning on the formulary, which in turn increases market share. Experts have criticized discounts for the fact that payers often do not base their decisions to include a drug on comparative cost-effectiveness. On the contrary, the decisions strictly depend on the financial conditions, namely which manufacturer offers a higher discount to the PBM. This applies to insulin as well as many other therapeutic classes.
What’s worse is when traps or rabbet walls are involved. Branded manufacturers leverage their market-leading position by offering financial incentives to PBMs and health insurers in the form of “all-or-nothing” conditional volume-based discounts, in exchange for (virtually) exclusive positioning on the form. This may mean excluding competitors from the formulary altogether, or severely limiting access to the formulary for a competing drug with drug usage management tools such as staged edits. Here, a patient must use a preferred drug and fail (a so-called “fail-first” policy) before switching to a non-preferred drug.
Since the portion of the discount retained by PBMs is often calculated as a percentage of a drug’s list price, PBMs may have an incentive to establish formularies that favor branded drugs with higher list prices and higher discounts. significant compared to cheaper biosimilars, specialty generics or even branded products. competitors. Competing drugs entering the market do not have sufficient sales volume to be able to offer the same level of discounts to PBMs that innovator companies can provide.
A growing number of states have called for more oversight regarding PBM transactions. However, the FTC survey offers a comprehensive review of PBM practices nationwide. Evidence of the establishment of anti-competitive practices could lead to legal action against PBMs.