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chuck grassley
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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As Medicare Turns 58, It Still Must Be Protected and Expanded
Despite the demise of Build Back Better, we should not give up on expanding traditional Medicare. Real change takes time and persistence.
Jul 31, 2023
President Lyndon Johnson signed Medicare into law 58 years ago Sunday—on July 30, 1965. Before Medicare, most American seniors could not obtain health insurance; they had to rely on charity or help from relatives with medical bills.
"Millions of our citizens do not now have a full measure of opportunity to achieve and to enjoy good health. Millions do not now have protection or security against the economic effects of sickness,” said President Johnson at the signing ceremony. “And the time has now arrived to help them attain that opportunity and to help them get that protection."
Medicare was modeled on a typical Blue Cross/Blue Shield plan in 1965. The average health insurance plan 58 years ago did not include hearing, vision, or dental coverage. As Kaiser Health News points out, “Back in 1965, life expectancy was lower and health care (including dental) was more affordable.”
“When Medicare was created, its architects assumed expansion… in terms of benefits. (But) they didn’t anticipate the shift in American politics to the right.”
Today, life expectancy is longer and healthcare costs have skyrocketed. But traditional Medicare still does not cover hearing, vision, and dental care—leaving beneficiaries to bear the full cost of care for their ears, eyes, and teeth. Hearing aids, dental crowns, and eyeglasses can amount to thousands of dollars in out-of-pocket expenses, which many seniors simply can’t afford.
President Joe Biden’s original Build Back Better plan finally would have added hearing, vision, and dental coverage to traditional Medicare. The White House ultimately dropped dental and vision care from its plan after objections from Democratic centrists, leaving hearing coverage as the only potential benefit expansion. Then, the entire Build Back Better plan was killed at the end of 2021 when Senator Joe Manchin (D-W.Va.) withdrew his support, effectively ending any real chance to expand traditional Medicare benefits while Democrats controlled the White House and both houses of Congress.
As Jonathan Oberlander, professor of health policy at UNC-Chapel Hill, observed, “Medicare is the kind of program where you’d expect the benefits to be expanded over and over again.” But other than the addition of Part D prescription drug coverage (administered by private plans) in 2003, Medicare benefits have not been expanded in the 58 years since the program was enacted.
“When Medicare was created, its architects assumed expansion… in terms of benefits,” Oberlander told Kaiser Health News. “(But) they didn’t anticipate the shift in American politics to the right.” This shift, which took root with the election of Ronald Reagan in 1981, emphasized tax cuts for the wealthy and corporations, increased military spending, and spouted a lot of bluster about reducing deficits (hard to accomplish given the first two items on the list).
What President Biden called “human infrastructure”—services for everyday Americans struggling to thrive in a global economy amid growing wealth inequality—became a tougher political sell after 1981. The ill-fated Build Back Better plan was an earnest attempt to begin investing more resources in “human infrastructure.” Despite the demise of Build Back Better, we should not give up on expanding traditional Medicare. Real change takes time and persistence.
In fact, there has been real progress on Medicare in other ways. The Inflation Reduction Act (the reconstituted version of Build Back Better) finally allows Medicare to negotiate prescription drug prices with Big Pharma—an historic reform that took some 20 years to enact. The Inflation Reduction Act will cap beneficiaries’ out of pocket drug costs at $2,000 per year (starting in 2025), limits seniors’ insulin costs to $35 a month, and penalizes drug-makers for raising prices above the rate of inflation.
While Congress was unable to enact a hearing benefit for traditional Medicare enrollees, legislation introduced by Senators Elizabeth Warren (D-Mass.) and Chuck Grassley (R-Iowa) required the Food & Drug Administration (FDA) to create a rule greatly expanding access to over-the-counter (OTC) hearing aids, which the FDA did in 2022. These OTC products (suitable for mild-to-moderate hearing loss) can be significantly less expensive than prescription hearing aids. And while the president’s proposed dental benefit for traditional Medicare did not survive the legislative process, the Biden administration has expanded the definition of “medically necessary” dental care under Medicare Part B.
A 2021 study by Kaiser Family Foundation indicated that MA customers “still generally end up with significant out-of-pocket costs” for hearing, dental, and vision care.
Some Medicare Advantage (MA) plans do offer hearing, dental, and vision coverage—but those benefits are extremely modest and don’t always make up for the disadvantages of Medicare Advantage. Many MA insurers are under investigation for overbilling the government, denying authorizations for reasonable medical procedures, and misleading customers through celebrity ad campaigns. Meanwhile, Medicare Advantage plans restrict beneficiaries to limited networks of providers and sometimes don’t cover medical care outside of a patient’s home region.
A 2021 study by Kaiser Family Foundation indicated that MA customers “still generally end up with significant out-of-pocket costs” for hearing, dental, and vision care. “It stands to reason there would be lower out-of-pocket spending in Medicare Advantage than in traditional Medicare, but the differences are not as large as one might expect,” Tricia Neuman, a senior vice president at Kaiser Family Foundation, told Kaiser Health News.
These privatized Medicare plans, which unfortunately are growing in market share under the power of their advertising (boosted by a pro-MA bias during the Trump administration), were not part of the original vision for Medicare when President Johnson signed it into law. Traditional Medicare is the bedrock program which has provided seniors with health security since 1965. It must be preserved—and expanded—in accordance with the real needs of 21st century seniors.
On this 58th anniversary of Medicare, let’s recommit to President Johnson’s promise of the “opportunity to achieve and enjoy good health” and provide “security against the economic effects of sickness.”
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Sanders Unveils Bill to Force Pentagon to Pass an Audit—or Return Part of Its Budget
"The Pentagon and the military-industrial complex have been plagued by a massive amount of waste, fraud, and financial mismanagement for decades. That is absolutely unacceptable."
Jun 22, 2023
A bipartisan group of lawmakers led by Sen. Bernie Sanders introduced legislation Wednesday that would require the Pentagon to return a portion of its enormous and ever-growing budget to the Treasury Department if it fails another audit in the coming fiscal year.
The Audit the Pentagon Act, an updated version of legislation first introduced in 2021, comes amid mounting concerns over rampant price gouging by military contractors and other forms of waste and abuse at an agency that's set to receive at least $842 billion for fiscal year 2024.
"The Pentagon and the military-industrial complex have been plagued by a massive amount of waste, fraud, and financial mismanagement for decades. That is absolutely unacceptable," Sanders (I-Vt.) said in a statement as he unveiled the bill alongside Sen. Chuck Grassley (R-Iowa).
"If we are serious about spending taxpayer dollars wisely and effectively," said Sanders, "we have got to end the absurdity of the Pentagon being the only agency in the federal government that has never passed an independent audit."
In December, the Pentagon flunked its fifth consecutive audit, unable to account for more than 60% of its $3.5 trillion in total assets.
But congressional appropriators appear largely unphased as they prepare to raise the agency's budget to record levels, with some working to increase it beyond the topline set by the recently approved debt ceiling agreement. Watchdogs have warned that the deal includes a loophole that hawkish lawmakers could use to further inflate the Pentagon budget under the guise of aiding Ukraine.
Late Wednesday, following a lengthy markup session, the House Armed Services Committee passed its version of the National Defense Authorization Act, which proposes a total military budget of $886 billion. Rep. Ro Khanna (D-Calif.) was the only committee member to vote no.
A huge chunk of the Pentagon's budget for next year is likely to go to profitable private contractors, which make a killing charging the federal government exorbitant sums for weapons and miscellaneous items, from toilet seats to ashtrays to coffee makers.
"Defense contractors are lining their pockets with taxpayer money while the Pentagon fails time and time again to pass an independent audit. It's a broken system," said Sen. Ed Markey (D-Mass.), a co-sponsor of the new bill. "We need to compel the Department of Defense to take fraud and mismanagement seriously—and we need Congress to stop inflating our nation's near-trillion-dollar defense budget."
"Putting the wants of contractors over the needs of our communities," he added, "isn't going to make our country any safer."
"If the Department of Defense cannot conduct a clean audit, as required by law, Congress should impose tough financial consequences to hold the Pentagon accountable for mismanaging taxpayer money."
If passed, the Audit the Pentagon Act of 2023 would force every component of the Defense Department that fails an audit in fiscal year 2024 to return 1% of its budget to the Treasury Department.
A fact sheet released by Sanders' office argues that "the need for this audit is clear," pointing to a Commission on Wartime Contracting in Iraq report estimating that "$31-60 billion had been lost to fraud and waste."
"Separately, the special inspector general for Afghanistan Reconstruction reported that the Pentagon could not account for $45 billion in funding for reconstruction projects," the fact sheet notes. "A recent Ernst & Young audit of the Defense Logistics Agency found that it could not properly account for some $800 million in construction projects. CBS News recently reported that defense contractors were routinely overcharging the Pentagon—and the American taxpayer—by nearly 40-50%, and sometimes as high as 4,451%."
Further examples of the Pentagon's waste and accounting failures abound.
Last month, the Government Accountability Office released a report concluding that the Pentagon can't account for F-35 parts worth millions of dollars.
Earlier this week, as The Washington Postreported, the Pentagon said it "uncovered a significant accounting error that led it to overvalue the amount of military equipment it sent to Ukraine since Russia's invasion last year—by $6.2 billion."
"The 'valuation errors,' as a Pentagon spokeswoman put it, will allow the Pentagon to send more weapons to Ukraine now before going to Congress to request more money," the Post noted.
Sen. Ron Wyden (D-Ore.), chair of the Senate Finance Committee and a supporter of the Audit the Pentagon Act, said Wednesday that "taxpayers can't keep writing blank checks—they deserve long-overdue transparency from the Pentagon about wasteful defense spending."
"If the Department of Defense cannot conduct a clean audit, as required by law," said Wyden, "Congress should impose tough financial consequences to hold the Pentagon accountable for mismanaging taxpayer money."
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