FTC Report Highlights Prescription Drug Price Markups by PBMs

The Federal Trade Commission (FTC) has released a second interim staff report spotlighting sharp price markups by the nation’s 3 largest pharmacy benefit managers (PBMs): Caremark, Express Scripts, and Optum Rx.¹

According to the report, these PBMs imposed markups by hundreds or even thousands of percent on specialty generic drugs used to treat cancer, HIV, and other serious conditions, yielding over $7.3 billion in excess revenue between 2017 and 2022.

Building off the report from July 2024, the latest investigation also revealed that PBM-affiliated pharmacies not only charged significantly more for these specialty drugs but also disproportionately dispensed prescriptions with markups exceeding $1,000 each.

FTC building | Image credit: Andriy Blokhin – stock.adobe.com

“We also found that this problem is growing at an alarming rate, which means there is an urgent need for policymakers to address it,” added Hannah Garden-Monheit, JD, director of the FTC’s office of policy planning, in a news release.

Key Findings and Industry Impact

The report details that PBM-affiliated pharmacies generated $7.3 billion in revenue above the drugs' estimated acquisition costs, with the top 10 specialty generic drugs accounting for $6.2 billion of that amount. Revenue from these markups increased at a staggering compound annual growth rate of 42% between 2017 and 2021.

The FTC also noted that PBMs earned an additional $1.4 billion in spread pricing, where they billed plan sponsors more than the amount reimbursed to pharmacies. This practice has further driven up costs for plan sponsors and patients, whose combined spending on specialty generic drugs rose significantly during the study period. In 2021 alone, plan sponsors paid $4.8 billion for these drugs, while patients spent $297 million in cost-sharing, with overall spending growing by double-digit annual rates for both commercial and Medicare Part D plans.

The findings underscore the growing influence of specialty generic drugs on the financial health of PBMs and their parent companies. In 2021, operating income from these drugs accounted for 12% of the aggregated operating income of the business segments tied to PBM and pharmacy operations for the parent health care conglomerates.

In response to the staff report, B. Douglas Hoey, RPh, MBA, CEO of the National Community Pharmacists Association, issued a statement calling out the 3 aforementioned PBMs for steering patients towards PBM-affiliated specialty pharmacies and reimbursing their own pharmacies more than independent ones.²

“This exploitative behavior is bad for taxpayers who subsidize Medicare prescription coverage but the FTC report found that commercial employers are getting hosed even worse,” Hoey said. “It’s no wonder employees are questioning why their employers are listening to insurance brokers who often recommend one of the giant PBMs.”

Hoey also noted how greatly patients would benefit if they could access specialty medications through their preferred community pharmacies. However, he added that in many cases, PBMs prioritize their financial interests by limiting patients' options to PBM-owned mail-order pharmacies, leading to disruptions in care.

“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,” Hoey added. “PBM reform legislation would save taxpayers $5 billion. Legislation that would do just those things was nearly passed last month. Congressional leaders should see this second interim report as an imperative to action.”

With the rising costs of prescription drugs remaining a top concern for patients, employers, and health systems, the FTC’s findings add momentum to the push for greater transparency and regulatory oversight in the PBM industry.¹

“The FTC should keep using its tools to investigate practices that may inflate drug costs, squeeze independent pharmacies, and deprive Americans of affordable, accessible healthcare—and should act swiftly to stop any illegal conduct,” said Lina M. Khan, JD, FTC chair.

References

1. FTC releases second interim staff report on prescription drug middlemen. News release. FTC. January 14, 2025. Accessed January 14, 2025. https://www.ftc.gov/news-events/news/press-releases/2025/01/ftc-releases-second-interim-staff-report-prescription-drug-middlemen
2. New FTC report on PBMs shows wild profiteering and self-dealing, underscores urgency of PBM reform. News release. National Community Pharmacists Association. January 14, 2025. Accessed January 14, 2025.