The Federal Trade Commission Launches Investigation into Pharmacy Benefit Managers

Tarter Krinsky & Drogin LLP

The Federal Trade Commission (FTC) has launched an inquiry into the largest Pharmacy Benefit Managers (PBMs) in the United States, with the goal of scrutinizing the PBMs’ practices and influence on the pharmaceutical industry. The inquiry can stand to potentially upend the current PBM practices and provide relief to patients and independent pharmacy owners.

Basis of the Inquiry

PBMs are the middlemen hired to negotiate drug rebates and fees with drug manufacturers. They have the power to decide exactly which drugs are covered by a drug plan’s formulary and determine where pharmacy patients must go to in order to have their prescriptions filled. PBMs often own their own pharmacies, such as CVS, where they tend to direct patients. Critics highlight the unfairness of certain practices including reducing patients’ access to drugs and receiving the benefits of manufactured drug discounts but forcing patients to pay more due to their policies. PBMs have massively utilized spread pricing by charging health insurers a much higher price than the cost they pay to reimburse pharmacies.

The FTC has made known that it is seeking more information concerning the “competitive impact of the contracting and business practices of PBMs.” According to the FTC, this information will provide more clarity on pharmacies, payers, doctors, and patients. Notices will be sent to the six largest PBMs in the U.S. Among them are CVS Caremark, Express Scripts, Inc., OptumRx, Inc., and Humana Inc. More information may be found here.

Who is Affected?

This action by the FTC intends to shed light on how PBMs hinder independent pharmacies and their patients due to potentially unfair audits of those pharmacies, while failing to audit their own pharmacies. This may also bring attention to PBMs’ complicated methods to determine pharmacy reimbursement, potentially large fees, and claw backs charged to unaffiliated pharmacies, as well as restrictive agreements that PBMs force independent pharmacies to sign. PBMs play a significant role in the pharmaceutical supply chain and dictate how much medicine to supply a pharmacy with, when the pharmacy will receive it, and the price it will pay for it.


PBM practices have not helped patients save any money on generic prescriptions, despite being established for this very purpose. Many argue that patients and pharmacies overpay for generic drug prescriptions, making it increasingly difficult for pharmacies to provide quality care to them. The FTC inquiry may be able to highlight these ongoing problems, as well as provide possible solutions.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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