For consumer advocates who contend that only the federal government has a hammer big enough to rein in controversial middlemen in America's drug supply chain, last month's rejection of a proposed sweeping investigation by the Federal Trade Commission was a body blow.
But perhaps the 2-2 deadlock wasn't a fatal blow.
A variety of forces are converging that could generate an FTC probe of pharmacy benefit managers (PBMs) after all. The PBMs are in the middle of a complex web that includes health insurers, pharmaceutical companies and others that determine how much patients pay for prescription drugs.
Pharmacists and many experts say PBMs are gaming the system to bolster their bottom line at the expense of U.S. consumers. Defenders of PBMs say they help consumers save money.
A "6b" examination – named after the section of the FTC Act giving the agency broad authority, including subpoena power, to conduct an investigation – is considered key because its findings could provide the basis for future federal action against the middlemen.
"If done right, a 6b study would create a comprehensive record and analysis of this sector. It would be something substantial, and hard even for Congress to run away from," said Stacy Mitchell, co-director of the Institute for Local Self-Reliance, a national research and advocacy nonprofit.
David Balto, who was an attorney in the Department of Justice's antitrust division and formerly a top staffer on merger issues with the FTC, said: "The evidence here is so strong that they are going to have to do the FTC study."
Five reasons FTC members may agree to probe pharmacy benefit managers
Several pieces of evidence back Balto up:
• Both commission members who voted against the PBM probe now say they want one – although details of exactly what they would support remain murky.
Christine S. Wilson told The Dispatch: "I remain committed to conducting a study of the PBM industry. When I voted 'no' at February’s open commission meeting, I was voting against issuing a specific set of questions sent to me only 19 minutes before the meeting began ... I am continuing to talk with pharmacists and work with staff to get a study across the finish line."
The other Republican on the panel, Noah Joshua Phillips, told Bloomberg Law that he backs a PBM study more "rigorous" than proposed last month.
• Influential senators from both parties are urging an in-depth FTC probe despite the February deadlock. The list includes Sen. Chuck Grassley, an Iowa Republican, and Ron Wyden, an Oregon Democrat, who have teamed up before to pursue PBMs.
"There is widespread bipartisan support for examining PBMs and looking into whether they are causing Americans to pay higher prices for prescription drugs," Grassley said in a letter to FTC Chair Lina Kahn.
• Ohio's senators are generally on board as well.
Democrat Sherrod Brown said: "I’ve fought for years to lower prescription drug costs, and to require pharmacy benefit managers – the pharmacy middlemen – to be more transparent about their costs and discounts, and to pass on more of their rebates directly to consumers in order to hold the industry accountable to Ohio taxpayers and patients.”
Mollie Timmons, press secretary for Ohio GOP Sen. Rob Portman, would not speak directly to the FTC study but said, “Rob supports more transparency and accountability for the prescription drug market in general and pharmacy benefit managers specifically."
• The commission is currently seeking public input "on the ways that large, vertically integrated PBMs are affecting drug affordability and access." New figures show that the three biggest PBMs processed 90% of U.S. prescription drug purchase revenue in 2021. Vertical integration happens when those big PBMs are combined with health insurers and other key players in the drug system.
• President Joe Biden's nominee Alvaro Bedoya awaits confirmation from the Senate to fill a vacancy on the FTC, but apparently will only get the seat if all 50 Democrats vote for him.
Bedoya is widely expected to vote in favor of a PBM study if and when he is finally confirmed.
During his November hearing before the Senate Commerce Committee, Bedoya talked about the need to help “small business owners who are struggling in the face of unprecedented consolidation.”
As his sole example, he cited independent pharmacies forced to close due to consolidation within the health-care industry.
'The FTC for more than a generation has been the best friend of PBMs'
Mitchell said her research shows that if the FTC decides to take on PBMs it would mark a rapid role reversal.
"These guys are supposed to be the cops on the beat here. We discovered that, in fact, the FTC has been running interference tor PBMs for many, many years," she said.
The FTC would even write letters to states considering guardrails for PBMs, insisting that concerns about PBMs’ conflicts of interest were unfounded, that the problems such legislation sought to address “are not widespread,” and that imposing transparency rules on these middlemen could lead to higher drug prices, Mitchell found.
"The FTC has actively discouraged regulatory efforts by many states and another federal agency, even as state officials have confronted mounting examples of market power abuse and even fraud," she wrote.
Balto, the former FTC policy staffer, said while the agency was historically pro-consumer, in recent decades it viewed that consumer as insurance companies, not individual customers. Thus, it was friendly to PBM mergers because they were touted as creating greater efficiencies for insurers.
"It's important to realize that the FTC for more than a generation has been the best friend of PBMs. I mean, just phenomenally the best friends," he said.
The Obama administration especially opposed cracking down on PBMs, mainly because of the Affordable Care Act, according to Balto.
"They really felt it was necessary for Obamacare to succeed. (The White House) wanted a really strong drug buyer. That's such a mistake," Balto said.
Both Mitchell and Balto say with Biden's new emphasis on examining anti-competitive behavior – personified by his appointment of Kahn to lead the FTC – the agency may finally be ready to challenge the PBMs' secretive business operations.
But Balto cautioned, “It’s not easy to turn things around on a dime, because this history here is profoundly on the other side.”
Even if PBMs are investigated, will Congress actually do anything?
Dr. Madelaine A. Feldman, president of the Coalition of State Rheumatology Organizations and clinical assistant professor of medicine at Tulane University School of Medicine, remains pessimistic anything substantive will change even if the FTC conducts some type of study.
"The FTC in the past never met a PBM policy that they didn't love. They should approach this from a consumer protection point of view and not just buy into the meme of PBMs repeating over and over again how much they 'save' the health-care system. I don't expect them to expose how 'savings' according to PBMs are actually profits for PBMs," she said.
After testifying before congressional committees herself, Feldman said it appears "politics play more into this than knowledge. I don't really think they understand the depth of the problem. Most of the congressmen have already made up their minds whose side they are on – I hope this is just ignorance and not something else.
"The lobbying money is just too big for elected officials to really get at the heart of the problem. The officials will be happy to put a BandAid on the problem to look good – optics. That often will only matter worse in the long run, simply because it does not address the root of the problem."