How FTC's Battle With PBMs Could Reshape The Pharmaceutical Industry

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PBM,Express Scripts,Optumrx

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So, what are PBMs and how did we get here? Essentially, PBMs administer prescription drug insurance benefits. They are one component of the complex web of players that impact the healthcare landscape—a topic that I have discussed in otherbefore. The history of PBMs is entwined with the history of pharmaceutical companies, pharmacies, and the broader industry as a whole.

However, PBMs’ recent move toward consolidation—driven by an interest in driving growth and minimizing competition—has caused them to stray from their original purpose. Over the decades, the PBM industry has undergone significant consolidation. Today, three PBMs—CVS Caremark, Express Scripts, and OptumRx—dominate the market, handlingof all prescription drug claims in the United States.

To understand the case, it’s important to know how PBMs profit through rebates negotiated with drug manufacturers. First, they can profit by retaining a portion of the rebate and passing only some to the insurer. Second, PBMs make money by spread pricing, a process in which PBMs charge insurers more for a drug than they pay pharmacies and pocket the difference.

Lastly, the investigation raises concerns about the transparency of PBM operations. The current way by which PBMs make their money is opaque and described by insiders as ‘complex.’ The complexity is in large part by design which makes it difficult for payers and policymakers to understand the true costs and benefits of PBM services, and nearly impossible for patients to know what they will be charged for a drug.

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