The second report expands on the first report’s analysis by exploring a broader subset of specialty generic drugs using additional data obtained in the course of its study.
On January 14, 2025, the Federal Trade Commission (FTC) issued its second interim report addressing abuses by pharmacy benefit managers (PBMs) that disadvantage independent pharmacies and raise the costs of healthcare for patients.
The report, entitled “Specialty Generic Drugs: A Growing Profit Center for Vertically Integrated Pharmacy Benefit Managers,” is the second interim report released by the FTC since launching its landmark 6(b) study in June 2022.
The second interim report focuses on PBMs increasing the cost of specialty generic drugs, such as those that treat cancer, HIV and other serious, rare and chronic illnesses. The FTC’s first interim report in part analyzed how PBMs marked up the cost of two cancer drugs by thousands of percentage points and then reimbursed their affiliated (PBM-owned) pharmacies hundreds of millions of dollars annually in excess of the cancer drug’s acquisition cost. The second report expands on the first report’s analysis by exploring a broader subset of specialty generic drugs using additional data obtained in the course of its study.
The report found that PBMs earn several billion dollars annually from increasing the cost of specialty generic drugs by dispensing them through affiliated pharmacies. Of the specialty generic drugs the FTC analyzed, PBMs marked up nearly two-thirds of them by more than 100 percent. PBMs marked up the cost of over one in five specialty generic drugs by over 1,000 percent. The report also finds evidence that PBMs steer patients with highly profitable medications toward affiliated pharmacies more aggressively than for patients with less profitable medications.
The report emphasizes the importance of a select few, expensive drugs to PBM profits. Just the top 10 specialty generic drugs alone accounted for 11 percent of aggregated operating income for healthcare conglomerates’ PBM and pharmacy business segments in 2021.
In light of these increased costs, both patients and plan sponsors are paying more for these specialty drugs. PBMs generate additional revenue by charging plan sponsors more for the prescription than was reimbursed to pharmacies. Copays for patients taking these drugs has also rapidly grown over the period examined by the FTC.
The FTC concluded by urging legislative reforms to address drug pricing and steering practices and advising plan sponsors to be aware of the large markups members are paying for critical medications. In a comment, FTC Chair Lina Khan encouraged the FTC to “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.”
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