PBMs Significantly Marked Up Specialty Generic Drugs
The Federal Trade Commission released its second interim staff report on industry-leading pharmacy benefit managers and their practices specifically regarding specialty drugs.
At the Federal Trade Commission’s (FTC) first Open Commission Meeting of 2025, the group unanimously voted to release its second interim staff report on pharmacy benefit managers (PBMs), revealing that the 3 biggest corporations purposely marked up prices of specialty drugs, according to a release.1
“The FTC staff’s second interim report finds that the 3 major [PBMs] hiked costs for a wide range of life-saving drugs, including medications to treat heart disease and cancer. The FTC should keep using its tools to investigate practices that may inflate drug costs, squeeze independent pharmacies, and deprive Americans of affordable, accessible health care—and should act swiftly to stop any illegal conduct,” said FTC Chair Lina Khan.
Markups led to a 42% increase in compound annual growth rates for PBM-affiliated pharmacies from 2017 to 2021. | image credit: SecondSide / stock.adobe.com
While the Commission’s investigation officially began in June 2022, it wasn’t until July 2024 that it released any of its findings. This is when the FTC released its first interim staff report, which showed that the 3 largest PBMs—CVS Caremark, Express Scripts, and Optum Rx— administered benefits for nearly 80 percent of the approximately 6.6 billion prescriptions dispensed by U.S. pharmacies in 2023.2
READ MORE: Senators Call on FTC to Release Second PBM Report
The FTC’s second report is a continuation of its investigation, diving deeper into PBMs’ control of the specialty drug market and the immense profits that they have garnered as a result. “The latest report analyzes a broader set of specialty generic drugs compared [with] 2 specialty generic drugs analyzed in the July 2024 report and finds that the Big 3 PBMs impose significant markups on a wide array of specialty generic drugs,” wrote the FTC.1
The focus of the Commission’s second staff report was on all specialty generics dispensed in the US from 2017 to 2022. More specifically, the report only explored prescriptions for beneficiaries of commercial or Medicare Part D health plans managed by the “Big 3” PBMs. The report included an analysis of 51 specialty generics, including drugs to treat conditions like multiple sclerosis, leukemia, and renal disease.
First touching on PBMs’ ability to markup their specialty drugs, the FTC found that the Big 3 were increasing prices by hundreds of thousands of percent. Meanwhile, nearly every specialty generic was reimbursed higher for pharmacies owned by a Big 3 PBM, compared with other pharmacy businesses.1 These markups led to a 42% increase in compound annual growth rates for PBM-affiliated pharmacies from 2017 to 2021, leading to $7.3 billion in shared revenue.
Next, the FTC highlighted yet another tactic allowing the Big 3 to yield such high profits. “A larger, disproportionate share of commercial prescriptions for specialty generic drugs marked up more than $1000 per prescription were dispensed by the Big 3 PBMs’ affiliated pharmacies compared with unaffiliated pharmacies,” continued the release.1 “Dispensing patterns suggest that the Big 3 PBMs may be steering highly profitable prescriptions to their own affiliated pharmacies (and away from unaffiliated pharmacies).”
The staff found further evidence of PBMs’ spread pricing tactics, which is the Big 3 billing plan sponsor clients more than they reimburse pharmacies for specialty drugs. Finally, they also found a 21% increase in compound annual growth rates for commercial claims and up to a 15% increase for Medicare Part D claims, highlighting a significant rise in overall patient spending for specialty drugs.
The Commission's hearing also spurred announcements from pharmacy advocacy groups that have been on the front lines of fighting for PBM reform. Of those organizations, the National Community Pharmacists Association (NCPA) and its CEO B. Douglas Hoey, PharmD, MBA, have been especially vocal toward policymakers.
“Patients would be well served if these so-called specialty drugs were able to be dispensed by their preferred community pharmacy. Instead, however, for the PBMs’ financial gain, patients’ choice is oftentimes limited to PBM-owned mail-order pharmacies and their care is unfortunately disrupted. This is just the latest obvious signal to policymakers that they must pass PBM reform that would include paying for prescriptions based on the cost of the drug plus a transparent pharmacist professional dispensing fee," said Hoey in an NCPA news release.3
The Commission’s investigation into the Big 3 PBMs is ongoing as it works with industry leaders and government officials to further understand the issue and identify any illegal PBM practices. While the FTC has gradually released reports on its investigation over the past few years, pharmacies, patients, and any individual impacted by PBM control are hoping for government action in the near future.
“FTC staff have found that the Big 3 PBMs are charging enormous markups on dozens of life-saving drugs. We also found that this problem is growing at an alarming rate, which means there is an urgent need for policymakers to address it,” concluded Director of the FTC’s Office of Policy Planning Hannah Garden-Monheit.1
READ MORE: How the Big 3 PBMs Utilize Various Market Strategies
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