FTC Complaint Against the Three Largest Pharmacy Benefit Managers

September 2024
The recent Federal Trade Commission (FTC) complaint against the three largest pharmacy benefit managers (PBMs) has brought critical issues surrounding insulin pricing and patient access to the forefront. Crystal Clear Rx remains dedicated to promoting transparency and advocating for a pass-through model that benefits patients, plans, and employers alike. The FTC’s case highlights the need for a fundamental shift in how PBMs operate, and it’s a pivotal moment for stakeholders across the healthcare spectrum.

The Case at a Glance: FTC View Of a Broken System
The FTC’s complaint accuses major PBMs and their affiliated group purchasing organizations of manipulating formularies to favor higher-rebate insulin products over those with lower list prices. This practice has led to skyrocketing costs for patients despite the availability of more affordable options. The complaint underscores how PBMs’ pursuit of rebates has distorted the market, prioritizing profit over patient care.

Since 2012, PBM practices have significantly changed. Formularies that once covered most approved medications have become restrictive, with coverage decisions heavily influenced by rebate potential rather than clinical efficacy or affordability. This has not only impacted insulin pricing but has also had a ripple effect across the pharmaceutical industry.

How Do Rebates Affect You?
The FTC’s focus on insulin pricing illustrates a broader issue affecting many other medications. While rebates were originally intended to lower costs, they have instead contributed to higher out-of-pocket expenses for patients. For patients, the higher list price means paying more at the pharmacy counter, even if their insurance plan covers a portion of the costs. For employers and plan sponsors, this opaque system can lead to higher overall healthcare expenses and misaligned incentives that do not necessarily benefit their workforce or beneficiaries.

The Push for Transparency and Reform
The FTC’s complaint is part of a broader movement toward transparency and fairness in the pharmaceutical and PBM industries. Legislative efforts, such as the Lower Costs, More Transparency Act and proposals to “delink” PBM compensation from drug pricing, reflect a growing consensus that the current system needs reform. These changes aim to curb the influence of rebates and promote a more straightforward negotiation process based on net pricing rather than inflated list prices.

Key Points to Watch:

1. 1. Potential Impact of FTC’s Action: If successful, the FTC’s administrative complaint could set a precedent, leading to reduced list prices for insulin and potentially other drugs. This would directly benefit patients by lowering out-of-pocket costs and improving access to essential medications.
   2. Legislative Developments: With bipartisan support for PBM reform, there is hope for more comprehensive legislation that addresses the root causes of high drug prices. This could include measures to increase transparency in PBM practices and limit the influence of rebates on formulary decisions.
   3. Changes to PBM Business Models: As scrutiny increases, PBMs may be forced to adopt more transparent, pass-through models. This would align incentives more closely with patient health outcomes rather than maximizing rebates and fees. However, while larger PBMs may change the model, time and time again has shown us that they will find other ways to maintain their profit margins.

What This Means for Our Clients
At Crystal Clear Rx, we advocate for a transparent pass-through PBM model that ensures all rebates and discounts are fully disclosed and passed back to the plan sponsors. Our model eliminates the conflicts of interest inherent in traditional PBM arrangements and provides our clients with clear, actionable data to make informed decisions.

With the ongoing scrutiny of PBM practices, now is the time for plan sponsors to evaluate their current PBM contracts and consider alternative models that prioritize transparency and cost-efficiency. Whether you are renegotiating your current PBM agreement or exploring new options, we are here to provide expert guidance and support.

Stay Informed with Crystal Clear Rx
As this case progresses and new developments emerge, we will continue to keep you informed about what it means for your organization and your members. For the latest updates and in-depth analysis, contact us directly to discuss how these changes may impact your PBM strategy.

Together, we can navigate these challenges and advocate for a more transparent and equitable healthcare system.

Crystal Clear Rx is committed to providing our clients with comprehensive insights and support. Contact us today to learn more about our transparent PBM consulting services and how we can help you optimize your pharmacy benefits.

Authored: Tito Chavez-Nguyen