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prescription drugs
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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'Unfit': Trump Nominates Dr. Oz to Run Medicare
"By nominating RFK Jr. and Mehmet Oz," said one public health expert, "Trump is giving his middle finger to science."
Nov 19, 2024
If confirmed to be the next U.S. secretary of health and human services, anti-vaccine activist Robert F. Kennedy Jr. could be working "closely" with another official who's infamous for his questionable health guidance: Dr. Mehmet Oz, who President-elect Donald Trump on Tuesday nominated to run the Centers for Medicare and Medicaid Services.
Trump said in a statement that if confirmed, Oz would "cut waste and fraud within our Country's most expensive Government Agency"—a plan that advocates for Medicare said would be carried out by privatizing the healthcare program that serves more than 66 million senior citizens.
As The Lever reported in 2022, Oz aggressively pushed Medicare Advantage plans on his show, The Dr. Oz Show, airing one segment about the insurance agency MedicareAdvantage.com and urging viewers to sign up for the program via a hotline. Insurance companies that offer Medicare Advantage plans are notorious for requiring "prior authorization" for doctors to provide certain medical procedures, subjecting patients to deceptive marketing, and harming senior citizens.
Considering his opposition to traditional Medicare, Matt Stoller of the American Economic Liberties Project said Oz "is not a good pick for a very powerful position in charge of a trillion dollars of healthcare spending."
The advocacy group Social Security Works noted that plans to "completely privatize Medicare" are also in Project 2025, the far-right policy agenda that Trump repeatedly tried to distance himself from while campaigning.
"Hands off our earned benefits!" said the group.
With Trump's support, Oz unsuccessfully ran to represent Pennsylvania in the U.S. Senate in 2022. The president-elect said Tuesday that if confirmed, Oz would work closely with Kennedy "to take on the illness industrial complex."
Kennedy's proposals for doing so include halting research on drug development, removing teeth-strengthening fluoride from drinking water, and firing Food and Drug Administration employees who have waged a "war on public health" through the "suppression" of the veterinary drug ivermectin and raw milk, which has been associated with disease outbreaks.
Oz has spent years peddling health advice, half of which University of Alberta researchers found to be "baseless or wrong" in a 2014 study published in the British Medical Journal. He promoted a study claiming coffee bean weight loss pills would "burn fat fast for anyone," but the research was later retracted. Oz also claimed that eating certain foods like red onion and endive could reduce a person's cancer risk by up to 75%, leading one paper published in the journal Nutrition and Cancer to assert, "Reality Check: There is no such thing as a miracle food."
Oz has also maintained close ties to multi-level marketing companies that promote products like vitamins with false claims about their ability to treat, cure, or prevent diseases.
"Dr. Oz is unfit to run CMS," said Lawrence Gostin, director of the O'Neill Institute at Georgetown University. "He peddles conspiracy theories on vaccines and fake cures. He profits from fringe medical ideas."
"By nominating RFK Jr. and Mehmet Oz," he added, "Trump is giving his middle finger to science. Having worked for 40 years in public health, it's utterly disheartening."
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US Drug Prices Still Far Higher Than Other Nations' Even After Medicare Talks
The U.S. "has always accepted that we are the country that overpays relative to the rest of the world," said one health policy expert.
Sep 03, 2024
The Biden administration's Medicare drug price negotiations yielded lowered costs for 10 commonly used drugs, and the White House said last month that Americans would save an estimated $1.5 billion in out-of-pocket expenses thanks to the talks—but an analysis out Tuesday found that the U.S. will still be paying far more than other wealthy countries.
Reuters reviewed the maximum prices that Australia, Japan, Canada, and Sweden have agreed to pay for nine of the 10 drugs for which Medicare negotiated prices this year, and found that the U.S. will still be paying more than double the amount for the medications on average.
The new prices are set to go into effect on January 1, 2026, but two of the highest prices the U.S. will still pay are for Imbruvica, for blood cancers, and Stelara, for conditions including Crohn's disease and psoriasis.
Medicare will be charged $9,319 for a 30-day supply of the latter drug, compared to $4,607 in Sweden. For Stelara, the U.S. will pay $4,695 under the negotiated prices—more than four times the amount it costs in Sweden, Australia, and Canada.
For Enbrel, which treats conditions including arthritis, Medicare will pay $2,355 per month—far less than the list price of $7,106, but still more than $1,000 over what Sweden is charged: $709. Australia pays $573, while Canada pays $704, and Japan pays just over $300 for the drug.
"The government negotiations are especially significant for drugs where market forces were most limited and therefore had the least impact on producing price concessions."
Stacie Dusetzina, a professor of health policy at Vanderbilt University, told Reuters that the U.S. has "always accepted that we are the country that overpays relative to the rest of the world."
The analysis comes two weeks after the Brookings Institution published a review of the impact of the United States' first federal negotiations of prescription drug prices, finding that just three of the drugs which had little competition in the market accounted for more than half of the $6 billion the U.S. is expected to save in 2026.
"The government negotiations are especially significant for drugs where market forces were most limited and therefore had the least impact on producing price concessions," said Brookings.
Reuters noted that in other countries, prices generally come down over time, but U.S. drugmakers are able to raise prices annually and often extend patents by making small changes to medications, stopping less expensive generic versions from hitting the market and saving patients money.
Unlike in other wealthy countries, Johns Hopkins Bloomberg School of Public Health scientist Mariana Socal told Reuters, "the longer a drug is in the U.S. market, the more we pay."
With previous list prices well into the hundreds and thousands for the 10 drugs included in negotiations so far, Medicare agreed to pay close to $200 for a 30-day supply for drugs including Xarelto, Jardiance, and Farxiga—medications for which other governments examined by Reuters pay $78 or less, thanks to their longstanding negotiations.
The RAND Corporation found in a study in February that before the Medicare negotiations were included in the Inflation Reduction Act, U.S. health plans paid more than three times as much as other countries for brand-name drugs, even after discounts.
"A contributor to higher U.S. per capita drug spending is faster uptake of new and more expensive prescription drugs in the United States relative to other countries," wrote researchers at the London School of Economics in a study in 2013. "In contrast, the other OECD countries employed mechanisms such as health technology assessment and restrictions on patients' eligibility for new prescription drugs, and they required strict evidence of the value of new drugs."
The researchers suggested pharmaceutical companies in the U.S., like in other countries, should be required "to provide more evidence about the value of new drugs in relation to the cost" and negotiate prices accordingly.
As Merith Basey, executive director of Patients for Affordable Drugs, said in August after the results of the first round of negotiations were announced, advocates are still pushing for far more savings in upcoming talks between Medicare and drug manufacturers, which are expected to start next year.
"We remain committed to expanding the Medicare negotiation program to more drugs," said Basey last month, "and fighting for additional reforms to lower drug prices for all patients who need relief."
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