On June 7, 2022, the Federal Trade Commission (FTC) announced that it would conduct an inquiry into the competitive impact of contracting and other business practices of pharmacy benefit managers (PBMs), including their effects on access to and affordability of prescription drugs.  As part of the inquiry, which is similar to FTC inquiries into other aspects of the health care industry, the FTC issued orders under Section 6(b) of the FTC Act requiring the six largest PBMs to provide information and records to the Commission. 

The five FTC commissioners voted unanimously on June 6, 2022 to conduct the study and issue the Section 6(b) orders.  According to the FTC mission statement, Section 6(b) “enables [the FTC] to conduct wide-ranging studies that do not have a specific law enforcement purpose.” 

In February, an earlier proposed review of PBMs failed to receive approval on a 2-2 party-line vote, with the two Republican Commissioners, Noah J. Phillips and Christine S. Wilson, voting against the proposed study. Commissioner Alvaro Bedoya was confirmed by the Senate in May, giving Democrats three seats on the Commission. 

Commissioners Phillips and Wilson issued a statement indicating that they had voted to approve the current inquiry because it has a different scope than the previously proposed study, including relationships between PBMs and both pharmacies and pharmaceutical manufacturers, “including, critically, how those practices might impact out-of-pocket costs for consumers.”

The FTC stated that its inquiry will examine PBMs’ role as middlemen who are hired by health plans to negotiate rebates and fees with drug manufacturers, create drug formularies and related policies, and reimburse pharmacies for patients’ prescriptions.  The Commission said that PBMs “often have enormous influence on which drugs are prescribed to patients, which pharmacies patients can use, and how much patients ultimately pay at the pharmacy counter.”  Chair Linda M. Khan stated that the FTC had received complaints about PBM practices from patients and professionals across the healthcare system, several of which the inquiry will examine.    

The FTC announcement states that the PBM practices which it intends to evaluate include:

  • Fees and clawbacks charged to unaffiliated pharmacies;
  • Methods to steer patients towards PBM-owned pharmacies;
  • Potentially unfair audits of independent pharmacies;
  • Complicated and opaque methods to determine pharmacy reimbursement;
  • The prevalence of prior authorizations and other administrative restrictions;
  • The use of specialty drug lists and surrounding specialty drug policies; and
  • The impact of rebates and fees from drug manufacturers on formulary design and the costs of prescription drugs to payers and patients.

The FTC released the form of the order that the PBMs will receive, which requires extensive disclosures.  Responses are due to the FTC within 90 days of receipt. 

Inquiry follows public request for information

The inquiry follows a solicitation for public comment on PBM business practices that the FTC issued on February 24, 2022, after the earlier proposed study was not approved.  That solicitation asked for public input on many of the same issues noted above, as well as “[p]otential conflicts of interest and anticompetitive effects arising from horizontal and vertical consolidation of PBMs with insurance companies, specialty pharmacies, and providers.”

The solicitation for comment generated more than 24,000 comments by its deadline of May 25, 2022, from a wide range of individuals and organizations.  The FTC indicated its inquiry would “build on the significant public record developed in response” to its request for comment.

Results of inquiry unclear

It is not clear what the inquiry will find, or exactly what the FTC will do with its findings.  While the statement of Commissioner Rebecca Kelly Slaughter stated that she looked forward to “the report the Commission will share with the public on the results of this investigation,” the statement of Commissioners Phillips and Wilson said only that “we look forward to reviewing the results and working with our colleagues as we consider how best to share what we learn with the public.”  Chair Khan stated that the inquiry “will seek to assist policymakers in determining whether Americans would benefit from reforms to this critical industry.”  

Reed Smith with continue to track developments related to this inquiry and its potential implications. If you have any questions about this please contact the health care lawyers at Reed Smith.