Why the FTC should reconsider its vote on probing pharmacy benefit managers

More than one-third of retail pharmacies in the country are independently owned community pharmacies. There are roughly 20,000 of these small businesses across the country and nearly 500 in Tennessee. In many communities, especially in rural areas, they are the only accessible providers. That makes them essential health care providers, not just indispensable to their communities, but to our entire national healthcare system.

According to the Centers for Disease Control and Prevention (CDC), pharmacies working with the federal government have administered 230 million doses of COVID-19 vaccines. Tens of millions were administered by independent pharmacies, many serving vulnerable populations. There’s no doubt we would have suffered a great deal more without our network of independent pharmacies.

That network is under tremendous stress caused by many of the same factors battering other small businesses, like grocers and farmers: unchecked consolidation and rigged competition. 

Pharmacy benefit managers (PBMs) are the most powerful companies you’ve never heard of. Caremark (owned by CVS), OptumRx (owned by United Health), and Express Scripts (owned by Cigna) are the three largest, controlling more than 77 percent of all prescriptions filled in the U.S. PBMs decide which pharmacies you must use, which medicines your insurance will cover, how much you pay the pharmacy, how much your pharmacy will be reimbursed, and whether your pharmacy will pay thousands in retroactive fees tied to “performance standards” that are written and enforced by — you guessed it — the PBMs.

OptumRx and Express Scripts own mail-order pharmacies. Caremark is owned by the world’s largest retail pharmacy, CVS, and it also operates a mail-order pharmacy. Get the picture? Imagine running a business in which your biggest competitor sets your prices, tells your customers where to shop, has access to your customers’ data, and can tax you after the sale based on its own “performance standards.”

How did we get here? Vertical integration. It’s a fancy Wall Street term for giant companies buying other companies to control ever larger chunks of the market so they have more influence over where consumers get their health care. And it’s been going on for 40 years, enabled by the Federal Trade Commission (FTC) and Department of Justice (DOJ) generally picking big business over small business. In this case, mergers between dominant health insurers and dominant pharmacies have created monsters that don’t merely compete in the market. They control it.

This kind of unfair competition and harm to consumers is why the FTC was created. Under the leadership of Chair Lina Khan, and with the encouragement of a bipartisan chorus in Congress, the FTC decided to consider a study of PBM practices in which it would order PBMs to turn over troves of information. If they refused, they could be fined, just like any subject of other civil investigations.

At a recent FTC hearing, dozens of witnesses, including community pharmacists, patients, and even members of Congress, testified about PBM abuses. Hundreds more submitted written comments. Their stories painted a crystal-clear picture of PBMs systematically penalizing local pharmacies, manipulating patients’ coverage in favor of expensive brand-name drugs, restricting patient access by locking small pharmacies out of insurance networks, and steering patients to mail-order pharmacies that place some of them at risk.

Sounds like an open and shut case, right? Well, no. When it came time for the four FTC commissioners to approve the PBM study (there is one vacant seat), two of them voted “no,” despite overwhelming testimony in which not a single witness defended PBMs. Chair Khan conveyed shock at the outcome, but to her credit, she pledged to continue pushing for a probe of the PBMs. We encourage that and believe it to be imperative.

PBM operations have been conducted with grossly insufficient transparency for far too long. They are building massive profits on the backs of patients, taxpayers, and employers, and there is precious little evidence that their existence at the center of the supply chain improves health care outcomes for anyone. They don’t treat a single patient. They don’t cure a single disease. They don’t insure a single American. They are middlemen, operating for their own benefit and at the expense of patients and their local health care providers. The FTC had a chance to help consumers and whiffed. They must reconsider their inaction and take action to protect competition and consumers.

Rep. John Rose is a member of Congress representing Tennessee’s 6th District. Mr. Hoey is a pharmacist and CEO of the National Community Pharmacists Association, which represents 19,400 community pharmacies.