WSJ: FTC plans to sue 3 largest PBMs over pricing tactics

The Federal Trade Commission is planning to file a lawsuit against the nation’s three largest pharmacy benefit managers — CVS Caremark, Cigna’s Express Scripts, and UnitedHealth’s Optum Rx — regarding their business practices, with a focus on rebates the PBMs negotiate with drug manufacturers.

The FTC published an?interim staff report?Tuesday on findings it has gleaned thus far in an ongoing inquiry into PBM practices; the investigation was launched in 2022.?

The Wall Street Journal broke the news of the impending lawsuit the next day, citing sources familiar with the matter. According to the Journal, the lawsuit will focus on insulin.?

The interim report describes how increasing market concentration in the PBM industry and vertical integration of PBMs with the nation’s largest health insurers and pharmacies have allowed PBMs “to profit at the expense of patients and independent pharmacies,” the FTC stated in a?press release.?

The findings indicate that PBMs have “enormous power over patients’ ability to access and afford their prescription drugs,” which can have “dire consequences,” the agency said.?

The investigation also found that PBMs “hold substantial influence over independent pharmacies by imposing unfair, arbitrary, and harmful contractual terms that can impact independent pharmacies’ ability to stay in business and serve their communities,” the FTC added.

Collectively, CVS Caremark, Express Scripts, and Optum Rx manage 79% of all prescriptions filled in the U.S., according to the report. In 2023, U.S. pharmacies dispensed approximately 6.6 billion prescriptions.

According to the findings, pharmacies affiliated with the three top PBMs account for nearly 70% of all specialty drug revenue.?

The FTC said the investigation revealed that vertically integrated PBMs have the ability and incentive to “self-preference,” referring to the practice of steering patients to the PBMs’ own affiliated businesses and away from smaller, independent pharmacies.?

PBMs sometimes use marketing campaigns based on data they obtain from their own insurers to persuade patients to switch to pharmacies affiliated with the PBMs, according to an article by Healthcare Dive, and the information used in those marketing campaigns isn’t necessarily accurate.?

Further, according to the FTC, evidence from the investigation “suggests that PBMs and brand pharmaceutical manufacturers sometimes enter agreements to exclude lower-cost competitor drugs from the PBM’s formulary in exchange for increased rebates from manufacturers,” which limits access to potentially lower-cost generic and biosimilar competitors.?

The investigation is not restricted to the three dominant PBMs, but the FTC noted in the report that several PBMs still have not submitted complete responses to orders the agency has issued. The FTC said if the PBMs continue to engage in delay tactics, the agency could take them to district court to compel their compliance.

JC Scott, CEO of the Pharmaceutical Care Management Association, a lobbying organization, said in a?statement?that the FTC’s report “falls far short of being a definitive, fact-based assessment of PBMs or the prescription drug market,” and that it is “based on anecdotes and comments from anonymous sources and self-interested parties.”

“The report completely overlooks the volumes of data that demonstrate the value that PBMs provide to America’s health care system by reducing prescription drug costs and increasing access to medications,” Scott said.

One of the FTC commissioners, Melissa Holyoak, voted against issuing the report because, she said, it failed to meet the FTC’s “rigorous standard” for providing Congress and the public with “evidence-based, objective, and economically sound information.”?

In a?dissenting statement?Holyoak issued the same day the report was released, she stated that the report “was plagued by process irregularities and concerns over the substance — or lack thereof —?of the original order.”?

“And most importantly, the report leaves us without a better understanding of the competition concerns surrounding PBMs or how consumers are impacted by PBM practices,” Holyoak wrote.

Another FTC commissioner, Andrew Ferguson, noted in a?concurring statement?that the recently released report “is not a statement or report of the Commission. It is instead the staff’s report to the Commission about how it understands our complex health care markets in light of the information it has thus far received in response to the [orders the FTC issued].”

While Ferguson said he concurred with the decision to release the interim report, he referred to the “unusual nature of this particular interim report” and expressed concerns about “decisions that have hindered the Commission’s ability to complete the [investigation] in a timely manner.”

He said the report relied heavily on public comments, including comments submitted anonymously, and public information that was not collected from the PBMs or their affiliates during the process.?

Ferguson also pointed out that the report’s findings on PBMs’ pharmacy reimbursement practices and incentives are based (so far) on two case-study drugs.?

“The case studies are illuminating, but hardly definitive,” he wrote, adding that before the agency issues a final report, it needs to determine whether the case study findings “are representative of market dynamics for other drugs, and we need to learn whether any reimbursement practices ultimately affect consumers’ out-of-pocket costs.”?

Our Take: While the FTC continues its investigation, legislation crafted to regulate PBMs and bring greater transparency to their practices appears to be languishing in Congress.?

Individual lawmakers continue to call for action. For example, late last month Sen. Ron Wyden, D-Oregon and chair of the Senate Finance Committee, urged CMS in a?letter?to step up its oversight and enforcement of Medicare Part D program requirements that protect pharmacies from PBMs’ “unfair” contracting practices.?

“I am alarmed to hear reports that PBM contracting practices are straining the finances of pharmacies and directly contributing to their closures,” he wrote in the letter. “Local pharmacies not only provide access to prescribed medication, they also play an essential role in delivering critical patient services such as patient education, management of chronic illness, and preventive care.”

The Supreme Court’s recent decision to overturn the Chevron doctrine (see the Hackensack Meridian Health brief below for more details) could create more delays in efforts to reform PBM practices, as proposed legislation may need to be revised to incorporate more precise language.

Commission Ferguson said in his concurring statement that the FTC staff must be allowed to finish its work on the investigation into PBM practices “expeditiously, so that the Commission, Congress, and the public can benefit from a final … report on the role of PBMs in our health care and prescription drug markets.”?

But even if the FTC manages to conclude its investigation “expeditiously,” there’s no guarantee that a final report will lead to actions that will benefit the public, or independent pharmacies, anytime soon.??

What else you need to know

The FDA?approved?Eli Lilly’s Kisunla (donanemab-azbt)?for adults with early symptomatic Alzheimer’s disease, with confirmed amyloid pathology, including individuals with mild cognitive impairment and those with the mild dementia stage of the disease. Lilly?said?Kisunla is the only amyloid plaque-targeting therapy with evidence that supports stopping treatment when amyloid plaques have been removed to minimal levels, noting that this can lead to fewer infusions and lower costs. A potential side effect of anti-amyloid drugs, which also includes Eisai and Biogen’s Leqembi (lecanemab-irmb), is the development of amyloid-related imaging abnormalities (ARIA), which are usually asymptomatic but can cause serious and life-threatening events, according to the FDA. Kisunla is administered via infusion every four weeks. Lilly has priced the drug at $695.65 per vial; with the required amyloid PET scans, a 12-month course of therapy would cost an estimated $32,000. Treatment duration will vary among individuals.

Edison, N.J.-based Hackensack Meridian Health?filed?a lawsuit?against Xavier Becerra, secretary of the Department of Health and Human Services, challenging the formula CMS uses to calculate disproportionate share hospital (DSH) payments. The health system claims in the?lawsuit?that CMS has deprived hospitals of reimbursements they are due, as well as patient-level supplemental security income data they need to check their reimbursement rates. The suit was filed on June 28, the same day the Supreme Court overturned the Chevron deference, which since 1984 had required judges to defer to federal agencies and their subject matter experts when interpreting ambiguous statutes. The SCOTUS ruling gives federal judges more power (and federal agencies less authority) to determine the meaning of statutes.?

Sanford Health and Marshfield Clinic Health System?signed?a nonbinding agreement to combine their assets and create an integrated nonprofit health system with 56 hospitals and nearly 56,000 employees, including 4,300 providers. The new entity would also have 271 clinic locations, research institutions, specialty pharmacies, and two fully integrated health plans. Dr. Brian Hoerneman, interim CEO of Marshfield Clinic, said a partnership between the two health systems presents an opportunity to “establish the premier rural health system in the nation.” The resulting entity would take the Sanford Health name and its headquarters would be in Sioux Falls, S.D., where Sanford Health is currently based. Marshfield Clinic, which serves rural Wisconsin and Michigan’s Upper Peninsula, would become “a region within Sanford Health,” maintaining regional leadership with its flagship medical campus in Wisconsin. Bill Gassen, Sanford Health’s current president and CEO, would lead the combined health system, and Dr. Hoerneman would serve as president and CEO of the Marshfield Clinic region. If regulatory approval is received and other closing conditions are met, the deal is expected to close by the end of the year.?

Geisinger plans to expand its Geisinger Medical Center campus?in Danville, Pa., a project that is expected to start next year and cost $880 million. The expansion includes an 11-story tower at the front of the hospital with a larger emergency department. Expanded intensive care units and operating suites will surround the ED, according to the?announcement, and the hospital will become a 100% private-room facility. The new tower is slated to open in 2028. Healthcare Dive reported that the expansion plans were already in the works before Risant Health acquired Geisinger, according to a spokesperson, though the acquisition accelerated the plans.?

Bloomberg Philanthropies is donating $1 billion to Johns Hopkins University.?The gift will allow the university to offer free tuition to medical students whose families earn less than $300,000 annually, starting with the fall semester this year. In addition, the university will cover living expenses such as rent for medical students from families that earn up to $175,000 a year. The university?said?nearly two-thirds of current and entering medical students will immediately qualify for either free tuition or free tuition plus living expenses. The endowment will also be used to increase graduate financial aid in the university’s school of public health and school of nursing and other graduate programs. According to Becker’s Hospital Review, the average debt of graduating medical students in 2020 was approximately $207,000. Bloomberg Philanthropies donated $1.8 billion to Johns Hopkins University in 2018 to assist low- and moderate-income undergraduate students.?

Executive Moves?

Cedars Sinai Health System?will have a new CEO starting Oct. 1. Dr. Peter Slavin, who served as president of Massachusetts General Hospital from 2003 to 2021, will take the helm when Thomas Priselac retires. Priselac has been with the Los Angeles-based nonprofit health system for 45 years and has served as president and CEO for the last 30 years, according to the?announcement.

Dr. Imran Andrabi assumed the role of president and CEO at?Froedtert ThedaCare Health?in Milwaukee on July 1, the health system?announced. Froedtert Health combined with ThedaCare in January, with a plan for Dr. Andrabi, who previously was president and CEO of ThedaCare, to serve as president of the combined organization for six months and for Cathy Jacobson, who previously was president and CEO of Froedtert Health, to serve as CEO of the combined organization for six months and then retire.?

Jim Rechtin is the new president and CEO of?Humana?as of July 1. Rechtin joined Humana in January as the company’s chief operating officer. Before that, he was CEO of Nashville, Tenn.-based Envision Healthcare since 2020. Bruce Broussard, Humana’s previous CEO, will serve as a strategic adviser for Humana into 2026. These transitions were initially?announced?in mid-May.?

What we’re reading

Medicare’s crazy payment system is creating monopolies in health care . Washington Post, 7.8.24 (subscription or registration may be required)

New Anti-Obesity Medications Should Be Considered Preventive Health Care . Health Affairs, 7.5.24

In the push for AI in health care, avoid EHR rollout mistakes . AHA, 7.1.24