FTC releases second interim staff report on PBMs

The report finds PBMs charge significant markups for cancer, HIV and other critical specialty generic drugs.

1/31/2025

The Federal Trade Commission on Jan. 14 published a second interim staff report on the prescription drug middleman industry, which focuses on pharmacy benefit managers’ influence over specialty generic drugs, including significant price markups by PBMs for cancer, HIV and a variety of other critical drugs.

The staff’s latest report found that the "Big 3 PBMs"—Caremark Rx (CVS), Express Scripts and OptumRx marked up numerous specialty generic drugs dispensed at their affiliated pharmacies by thousands of percent, and many others by hundreds of percent. Such significant markups allowed the Big 3 PBMs and their affiliated specialty pharmacies to generate more than $7.3 billion in revenue from dispensing drugs in excess of the drugs’ estimated acquisition costs from 2017-2022. The Big 3 PBMs netted such significant revenues all while patient, employer and other health care plan sponsor payments for drugs steadily increased annually, according to the staff report.

“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.”

“FTC staff have found that the Big 3 PBMs are charging enormous markups on dozens of lifesaving drugs,” said Hannah Garden-Monheit, director of the FTC’s Office of Policy Planning. “We also found that this problem is growing at an alarming rate, which means there is an urgent need for policymakers to address it.”

The latest report builds on a report issued by FTC staff in July 2024, which found that pharmacies affiliated with the Big 3 PBMs received 68% of the dispensing revenue generated by specialty drugs in 2023, up from 54% in 2016. The latest report analyzes a broader set of specialty generic drugs compared to two specialty generic drugs analyzed in the July 2024 report and finds that the Big 3 PBMs impose significant markups on a wide array of specialty generic drugs.

The FTC’s second interim staff report analyzed all specialty generic drugs dispensed from 2017 to 2022 for members of commercial health plans and Medicare Part D prescription drug plans managed by the Big 3 PBMs. This includes an analysis of 51 specialty generic drugs comprising 882 National Drug Codes, which include the generic versions of Ampyra (used to treat multiple sclerosis), Gleevec (used to treat leukemia), Sensipar (used to treat renal disease) and Myfortic (used by transplant recipients).

Key findings:

The FTC’s latest interim staff report is part of the Commission’s ongoing study of the PBM industry. This report highlights several key insights gained from data and documents obtained from special orders the FTC issued in 2022 under Section 6(b) of the FTC Act.
Significant price markups: The Big 3 PBMs imposed markups of hundreds and thousands of percent on numerous specialty generic drugs dispensed at their affiliated pharmacies—including drugs used to treat cancer, HIV and other serious diseases and conditions. The Big 3 PBMs also reimbursed their affiliated pharmacies at a higher rate than they paid unaffiliated pharmacies on nearly every specialty generic drug examined.
Dispensing the most profitable drugs: A larger, disproportionate share of commercial prescriptions for specialty generic drugs marked up more than $1,000 per prescription were dispensed by the Big 3 PBMs’ affiliated pharmacies compared with unaffiliated pharmacies. Dispensing patterns suggest that the Big 3 PBMs may be steering highly profitable prescriptions to their own affiliated pharmacies (and away from unaffiliated pharmacies).
Over $7.3 billion of dispensing revenue in excess of NADAC: The Big 3 PBMs’ affiliated pharmacies generated more than $7.3 billion of dispensing revenue in excess of their estimated acquisition cost, as measured by the National Average Drug Acquisition Cost, on specialty generic drugs over the study period. PBM-affiliated pharmacy dispensing revenue in excess of NADAC increased dramatically at a compound annual growth rate of 42% from 2017-2021.
Generating additional income via spread pricing: In the aggregate, the Big 3 PBMs also separately generated an estimated $1.4 billion of income from spread pricing—i.e., billing their plan sponsor clients more than they reimburse pharmacies for drugs—on the analyzed specialty generic drugs over the study period.
Specialty generic drugs help drive parent healthcare conglomerates’ operating income: The top specialty generic drugs accounted for a significant share of the relevant business segments reported by the Big 3 PBMs’ parent healthcare conglomerates. Operating income from the Big 3 PBMs’ affiliated pharmacies dispensing of the analyzed specialty generic drugs accounted for 12% of the aggregated operating income reported by the parent healthcare conglomerates’ business segments that include their PBM and pharmacy businesses in 2021.
Plan sponsor and patient drug spending increased significantly: In 2021, the last year for which the FTC received full-year data for this study, plan sponsors paid $4.8 billion for specialty generic drugs, while patient cost sharing totaled $297 million. Between 2017 and 2021 plan sponsors and patient payments both increased at compound annual growth rates of 21% for commercial claims, and 14% to 15% for Medicare Part D claims.

The FTC staff said it remains committed to providing timely updates as the Commission continues to receive and review additional information as part of the ongoing study.

The Commission voted 5-0 to allow staff to issue the second interim staff report.

The National Association of Chain Drug Stores issued a press release today noting that it continues to call for an all-levels, all-branches of government approach to PBM reform, urging action without delay.

Steve Anderson, president and CEO of NACDS submitted a video statement for the Jan. 14 open meeting of the FTC. The statement relates to the FTC’s consideration of issuing a second interim staff report highlighting additional staff findings from the FTC’s 6(b) study on the contracting practices of PBMs.

The National Community Pharmacists Association issued a statement from its CEO Douglas Hoey.

“While the Big 3 have consolidated and vertically integrated over the years, they increasingly declare expensive medications to be ‘specialty’ to steer patients to a PBM-affiliated specialty pharmacy to the tune of $7.3 billion above the drug cost. They crush their competition by reimbursing their own pharmacies as much as 100 percent more than they reimburse independent pharmacies for the same drug, or more. This exploitative behavior is bad for taxpayers who subsidize Medicare prescription coverage but the FTC report found that commercial employers are getting hosed even worse. It’s no wonder employees are questioning why their employers are listening to insurance brokers who often recommend one of the giant PBMs.

“Patients would be well served if these so-called specialty drugs were able to be dispensed by their preferred community pharmacy," Hoey continued. "Instead, however, for the PBMs’ financial gain, patients’ choice is oftentimes limited to PBM-owned mail-order pharmacies and their care is unfortunately disrupted. This is just the latest obvious signal to policymakers that they must pass PBM reform that would include paying for prescriptions based on the cost of the drug plus a transparent pharmacist professional dispensing fee. PBM reform legislation would save taxpayers $5 billion. Legislation that would do just those things was nearly passed last month. Congressional leaders should see this second interim report as an imperative to action.”