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FTC Pulls Back From Prior Support for Pharmacy Benefit Middlemen

  • Policy from 2000s put PBMs in ‘regulatory free zone’

  • Push for oversight of the companies heats up

The FTC on Thursday plans to walk back years of advocacy in support of the entities that manage prescription drug coverage—support that analysts say has helped fuel the growth and market integration the agency is now investigating.

The agenda for the Democratic-controlled Federal Trade Commission’s open meeting includes voting on a statement that would withdraw prior advocacy statements against state legislation aimed at boosting transparency, as well as studies related to pharmacy benefit managers that the FTC said “no longer reflect current market realities.”

The agency declined to provide specifics on the statement ahead of the meeting but said the vote is a direct response “to PBMs’ continued reliance on older FTC advocacy materials that opposed mandatory PBM transparency and disclosure requirements.”

A former top FTC policy official and other antitrust analysts said this includes several statements the FTC issued primarily in the early 2000s against state legislation that would have required PBMs to disclose certain information about their business practices and finances to state governments. The entities manage drug coverage on behalf of health plans and others.

The attention expected Thursday signals an attempt by the commissioners to push back on PBM criticism of the agency and boost the FTC’s credibility as it carries out an investigation into whether PBM practices are anticompetitive and restrict patient access to low-cost medications.

“The fundamental effect of these comments” against state PBM bills “was basically to put the PBMs in a regulatory free zone, fundamentally like giving Tony Soprano a ‘Get Out of Jail Free’ card,” said David Balto, an antitrust attorney who served as assistant director of policy and evaluation at the FTC from 1997 to 2001.

“Now that it’s becoming crystal clear that federal regulation is essential, it is necessary to abandon past advocacy,” added Balto, who will be testifying at the FTC open meeting. Independent pharmacies and pharmaceutical manufacturers blame PBMs for high prescription drug costs in the US because of the rebates and fees they collect. But PBMs argue that they work to deliver discounts to patients, and that manufacturer list prices and use of patents that limit competition are responsible for driving up prices.

Supporting PBMs

PBMs’ consolidation with major health plans and retail pharmacies has enabled them to widen their influence on the pharmaceutical care industry. Today, the three largest PBMs—CVS Caremark, Cigna’s Express Scripts, and UnitedHealth Group’s OptumRx—control nearly 80% of the market.

But the FTC has previously opposed several state bills that would have increased transparency of these middlemen and prevented consolidation of mail-order pharmacies—moves that the PBM trade group Pharmaceutical Care Management Association has cited in recent statements criticizing the FTC study and congressional scrutiny of the PBM industry.

In 2004, the FTC wrote in a letter to Rhode Island state legislators that bills under consideration there, including one requiring health insurer and employee benefit plans offer in their network any pharmacy willing to agree to their terms, would be “eliminating an important form of competition in the market for pharmaceutical services,” and could increase costs for consumers.

And New York in 2009 attempted to pass legislation that would have put in place certain requirements for PBMs, including mandated disclosures on the costs of services, contracts with manufacturers, and any potential conflicts of interest.

“These requirements may not help health plans protect their interests,” and “will limit the ability of health plans and pharmacy benefit managers to reach cost-effective relationships,” the FTC commented at the time.

“The FTC appreciated the role of PBMs and it saw PBMs as providing a valuable service in trying to reduce drug costs,” Balto said.

Michael Carrier, an antitrust and intellectual property law professor at Rutgers Law School, also pointed to a 2005 FTC report on PBM ownership of mail-order pharmacies. Then-FTC Chair Deborah Platt Majoras said at the time that the data in the report “demonstrate that PBMs’ use of owned mail-order pharmacies generally is cost-effective for plan sponsors.”

PCMA cited the FTC’s past comments on state legislation and the 2005 study in a comment letter to the FTC in May 2022, arguing that “the FTC has determined that PBMs have a pro-competitive influence and their services provide a significant and measurable benefit to consumers.”

PBMs “have always opposed policies requiring the release of proprietary pricing information that could lead to drug companies getting information that would enable them to raise prescription drug costs,” Greg Lopes, PCMA’s assistant vice president of strategic communications, said in an emailed statement

“PCMA will continue to cite previous agency studies, statements, and enforcement actions that recognize the risks associated with proprietary pricing disclosure requirements,” Lopes said.

‘A New Direction’

FTC Chair Lina Khan’s “leadership has been taking the agency in a new direction,” said Stacy Mitchell, co-executive director of the Institute for Local Self-Reliance, a research and advocacy group focused on opposing corporate monopolies.

The agency “has become much more responsive to facts on the ground and more skeptical of the economic ideology that has guided agency decision making for many years prior,” Mitchell said.

The FTC’s probe is focused on areas like whether PBMs steer patients away from independent pharmacies and toward affiliated chains. The investigation started off focusing on the six largest PBMs, and has since expanded to also include purchasing groups launched by top PBMs to negotiate drug manufacturer rebates on their behalf.

From looking at existing data on consolidation and business practices, the FTC should conclude that “this vertically-integrated structure is inherently anti competitive, and therefore needs to be unwound,” Mitchell said.

“These companies need to be broken up in order to restore healthy competition and safeguard consumers and small businesses and state governments,” she added.

To contact the reporter on this story: Celine Castronuovo at

1 comment

1 Comment

Break all the insurance, pharmacy, and PBM businesses into separate entities.

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