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american economic liberties project
FTC Report Shows Big Pharma Middlemen Jack Up Prices by Up to 7,736%
Pharmacy benefit managers "are raking in billions in excess revenue—$7.3 billion over just five years—while squeezing independent pharmacies and leaving patients and health plan sponsors with skyrocketing costs."
Jan 14, 2025
The U.S. Federal Trade Commission on Tuesday published the second part of its investigation into how prescription drug middlemen are marking up the prices of specialty generic drugs dispensed at their affiliated pharmacies by hundreds—and in some cases, thousands—of percent, underscoring what advocates say is the need for urgent action by policymakers.
The FTC's second interim staff report on consolidated pharmacy benefit managers (PBMs) found that the three largest of these middlemen—CVS Health's Caremark Rx, Cigna Group's Express Scripts, and UnitedHealth Group's OptumRx—"marked up two specialty generic cancer drugs by thousands of percent and then paid their affiliated pharmacies hundreds of millions of dollars of dispensing revenue in excess of estimated acquisition costs for each drug annually."
"Of the specialty generic drugs analyzed in this report and dispensed by the 'Big Three' PBMs' affiliated pharmacies for commercial health plan members between 2020 and 2022, 63% were reimbursed at rates marked up by more than 100% over their estimated acquisition cost... while 22% were marked up by more than 1,000%," the report states.
"For the pulmonary hypertension drug tadalafil (generic Adcirca), for example, pharmacies purchased the drug at an average of $27 in 2022, yet the Big Three PBMs marked up the drug by $2,079 and paid their affiliated pharmacies $2,106, on average, for a 30-day supply of the medication on commercial claims," the publication notes. That's a staggering average markup of 7,736%.
"The FTC's second interim report lays bare the blatant profiteering by PBM giants."
"Such significant markups allowed the Big Three 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 2017-22," the FTC said. "The Big Three PBMs netted such significant revenues all while patient, employer, and other healthcare plan sponsor payments for drugs steadily increased annually."
The new analysis follows a July 2024 report that revealed Big Three PBM-affiliated pharmacies received 68% of the dispensing revenue generated by specialty drugs in 2023, a 14% increase from 2016.
"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," FTC Chair Lina Khan said in a statement Tuesday. "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."
Khan's time as chair is limited. Republican U.S. President-elect Donald Trump's inauguration is next week and he has named Andrew Ferguson as the next FTC chair. As Ferguson is already on the commission, his elevation to chair won't require Senate confirmation.
Greg Lopes, spokesperson for the Pharmaceutical Care Management Association, a PBM lobby group, said Tuesday that "it's clear this report again fails to consider the entirety of the prescription drug supply chain and makes sweeping assertions about the role of PBMs disconnected from a full appreciation of their critical cost-saving role for employers, unions, taxpayers, and patients."
Last September, the FTC sued the Big Three and their affiliated group purchasing organizations for allegedly "engaging in anticompetitive and unfair rebating practices that have artificially inflated the list price of insulin drugs, impaired patients' access to lower list price products, and shifted the cost of high insulin list prices to vulnerable patients."
FTC Office of Policy Planning Director Hannah Garden-Monheit said Tuesday that the problem of PBM price inflation "is growing at an alarming rate, which means there is an urgent need for policymakers to address it."
To that end, U.S. Sens. Maria Cantwell (D-Wash.) and Chuck Grassley (R-Iowa) introduced the Pharmacy Benefit Manager Transparency Act of 2023, a bill backed by the AARP aimed at increasing transparency and "holding PBMs accountable for deceptive and unfair practices that drive up prescription drug costs and force independent pharmacies out of business."
"This report is a call to action for policymakers to dismantle these exploitative schemes."
Responding to the FTC report, Emma Freer, senior policy analyst for healthcare at the American Economic Liberties Project—a corporate accountability and antitrust advocacy group—said in a statement Tuesday that "the FTC's second interim report lays bare the blatant profiteering by PBM giants, which are marking up lifesaving drugs like cancer, HIV, and multiple sclerosis treatments by thousands of percent and forcing patients to pay the price."
"By steering prescriptions for the most expensive specialty generic drugs to their own pharmacies, PBMs are raking in billions in excess revenue—$7.3 billion over just five years—while squeezing independent pharmacies and leaving patients and health plan sponsors with skyrocketing costs," Freer added. "This report is a call to action for policymakers to dismantle these exploitative schemes, outlaw the rebate system driving up prices, and restore fairness and affordability to the U.S. healthcare system."
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'Plutocracy Is Its Own Kind of Dictatorship,' Biden Antitrust Chief Warns in Farewell Address
"When companies larger, wealthier, and more powerful than most world governments threaten individual liberty with coercive private taxation and regulation, it threatens our way of life," said U.S. Assistant Attorney General Jonathan Kanter.
Dec 18, 2024
Assistant Attorney General Jonathan Kanter, the antitrust head at the Department of Justice who helped turbocharge the agency's efforts to rein in monopoly power, bid farewell to his post in a speech Tuesday during which he warned that "plutocracy is its own kind of dictatorship."
Kanter's deputy, Doha Mekki, will take over leading the Antitrust Division starting Friday. President-elect Donald Trump has tapped Gail Slater, a tech and media policy advisor who worked for Vice President-elect JD Vance, to permanently replace Kanter.
In his speech, Kanter described how President Joe Biden's administration had a clear mandate from the public to break with the antitrust approach of previous decades: "When I took office in 2021, questions about monopoly power were no longer just a technocratic concern relegated to the narrow halls of white-shoe law firms and elite academic institutions. Our nation was experiencing a remarkable moment unlike any I had seen in my lifetime. Americans across the country had become acutely aware of the powerful forces that were suppressing their economic freedom."
To get himself ready for the role, he looked for inspiration from the "storied trustbusters of yesteryear"—particularly Assistant Attorney General Robert Jackson, who led antitrust enforcement at the Department of Justice under FDR. "In 2021, the similarities to 1936 were unmistakable. They say that history rhymes. Well, it sure does. And this time it had 'bars,' as the youth say."
Then, as now, antitrust enforcement is an engine for economic prosperity, Kanter said. It can lower prices by limiting the market power of large companies, increase growth and prosperity by curbing corporate-imposed private regulation that "sap entrepreneurs of opportunity," and provide greater mobility and higher wages for workers, he argued.
With that "why" in mind, the division "confronted the Herculean task of operationalizing our mandate to restore, revive, and reimagine antitrust enforcement for our nation."
In many respects, Kanter was successful in that mission. During his time with the Department of Justice, the agency notched a major legal victory over the company Google, which Kanter's team and states had argued held an illegal monopoly in the search engine and advertising market. In August, a federal judge ruled that Google was an illegal monopolist for spending tens of billions on default search deals, a decision that has been called the "biggest antitrust case of the 21st century."
The Antitrust Division has also filed ongoing cases against Visa, the rent-fixing software RealPage, Ticketmaster, and others. Cases brought by the division also successfully blocked a merger between publishing giants Penguin Random House and Simon & Schuster, as well as JetBlue's acquisition of Spirit.
In response to the news that Kanter is stepping down, Nidhi Hegde, interim executive director at the American Economic Liberties Project, said Tuesday that under Kanter's leadership "the DOJ Antitrust Division has become an enforcer fit for the modern economy—and a powerful ally of American consumers, workers, and small businesses."
Kanter offered advice to future enforcers, such as engaging people outside of the Beltway and "dispel[ling] the myth that less competition at home helps the U.S. compete more abroad."
The stakes of lax enforcement are high, he warned: "When companies larger, wealthier, and more powerful than most world governments threaten individual liberty with coercive private taxation and regulation, it threatens our way of life."
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Trump FTC Pick Casts Lone No Vote on Rule Banning Deceptive Junk Fees
Andrew Ferguson has opposed several major initiatives championed by Lina Khan, including FTC rules banning anti-worker noncompete agreements and making it easier for consumers to cancel subscriptions.
Dec 18, 2024
President-elect Donald Trump's pick to lead the Federal Trade Commission cast the lone no vote Tuesday against a newly finalized rule banning deceptive junk fees in live-event ticketing and short-term lodging.
The rule, according to an FTC release, "targets specific and widespread unfair and deceptive pricing practices in the sale of live-event tickets and short-term lodging, while preserving flexibility for businesses."
"It does not prohibit any type or amount of fee, nor does it prohibit any specific pricing strategies," the agency said. "Rather, it simply requires that businesses that advertise their pricing tell consumers the whole truth up-front about prices and fees."
FTC Commissioner Andrew Ferguson, Trump's choice to head the bipartisan agency, was the only member to vote against the junk fees rule. In his dissenting statement, Ferguson wrote that his opposition had "nothing to do with the merits" of the finalized rule but was rather a vote against any additional rulemaking by the Biden administration.
"It is particularly inappropriate for the Biden-Harris FTC to adopt a major new rule that it will never enforce, as the final rule will not take effect until many months after President Trump takes his oath of office," Ferguson wrote.
Ferguson has been a consistent opponent of causes championed by FTC Chair Lina Khan, including the agency's rules banning anti-worker noncompete agreements and making it easier for consumers to cancel subscriptions.
Nidhi Hegde, interim executive director of the American Economic Liberties Project, said in response to the newly finalized rule that "banning junk fees is broadly popular across the country because Americans are tired of being tricked by hidden costs that inflate prices and distort competition."
"Finalizing this rule with bipartisan support demonstrates Chair Khan and the commission's commitment to delivering real results for consumers, saving Americans both time and money," said Hegde. "We're pleased to see the FTC work to get this done, and encourage federal and state policymakers to build on this effort to put an end to junk fees once and for all."
With his dissent on Tuesday, Ferguson offered a glimpse of "how he plans to lead the FTC—and how the Trump administration plans to run the independent agencies put in the crosshairs by the Project 2025 plan," political reporter Matt Sledge wrote for The Intercept on Wednesday.
"While calling on the FTC to stop issuing rules until Trump takes office might win favor with the incoming president, it is sharply at odds with positions on the agency's independence that Republicans were putting out just weeks ago," Sledge noted. "As recently as October, the House Oversight Committee released a report dinging Khan for a supposed lack of independence from the Biden administration."
"Since Trump's election, however, Republicans have shown newfound enthusiasm for the idea of bringing independent agencies under executive control," he added. "That vision was laid out in Project 2025."
Since he's already a commissioner at the agency, Ferguson will not require Senate confirmation to become FTC chair once Trump takes office next month.
In his job pitch to Trump's team, Ferguson pledged to use his tenure as FTC chair to "reverse Lina Khan's anti-business agenda" and halt her "war on mergers."
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