[Recap] FTC to Sue PBMs over Negotiating Practices

Antitrust agency is investigating how drug middlemen are driving up prescription costs

3 min read • 2024-07-12

The Federal Trade Commission (FTC) is planning to sue the largest 3 pharmacy benefit managers (PBMs), reported by The Wall Street Journal. CVS Caremark, Express Scripts and OptumRx are named for driving patients to use more expensive drugs.

What are PBMs?

Pharmacy Benefit Manager (PBMs) are third-party administrators of prescription drug programs for health insurance plans, employers, and other payers. Instead of negotiating directly with hundreds of drug manufacturers for thousands of drugs, insurance plans work with PBMs to help manage their prescription coverage. PBMs also mantain the drug formulary and manage prescription claims with patients.

What is the purpose of PBMs?

In theory, PBMs help lower drug costs by negotiating with drug manufacturers, maintaining compeition in the market. Because PBMs manage prescriptions for millions of patients, PBMs can use their massive buying power to ask for rebates and discounts from drug manufacturers and pharmacies. The discount would be passed to patients, lowering cost of medications and healthcare.

However, the impact of PBMs has been an going debate. Most recently, FTC released an interim report showing that the 3 largest PBMs manage almost 80% of all prescriptions filled in the US. Instead of lowering cost for patients, PBMs leverage their scale to increase their own profits at the expense of the patients, by limiting access to low-cost options and squeezing out smaller local pharmacies.

What does the lawsuit mean for your prescription cost?

The FTC's care would target the 3 biggest PBMs - CVS Caremark, Express Scripts and OptumRx. Given that all 3 PBMs are part of top 20 largest companies in the US making billions of dollars every year, the lawsuit and impact, if any, are likely to drag out for years to come.

In the meantime, find your formulary and preferred pharmacy to get the best coverage with your insurance. Always ask for cash price and shop around the pharmacies to make sure you are not overpaying for your medications.

See our post for more tips to get the best price for your prescriptions.

More questions about PBMs or how drug pricing works?

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