The Federal Trade Commission’s settlements with two of the nation’s largest pharmacy benefit managers (PBMs) could change how the companies do business, but they may not do enough to lower prescription drug costs for patients and employers, according to a health law expert at Washington University in St. Louis.
The FTC recently reached agreements with Express Scripts and CVS Caremark after investigating practices it said contributed to higher drug costs, including the use of rebates and other incentives in the insulin market. The settlements impose new requirements on the companies’ drug formularies, pharmacy payments and the way savings are passed along to patients.
Formularies are approved lists of prescription medications covered by a health insurance plan.
The agreements address important concerns but leave significant opportunities for PBMs and their employer customers to work around the new requirements, said Rachel Sachs, the Wiley B. Rutledge Professor of Law at WashU Law, who recently co-authored a piece in the journal Health Affairs with Michael Carrier, a professor of law at Rutgers University, analyzing the settlements.
A PBM is a company that acts as a middleman between health insurance plans and drug manufacturers.
Settlements leave room for workarounds
“The main provisions of the settlement apply only to the PBMs’ main offerings and would have the effect of increasing costs for employers and at least some patients under those offerings, even if they lower costs for other patients,” Sachs said. “However, these provisions do not restrict employers’ ability to adopt other offerings from the PBM that do not contain these restrictions.”
That could limit the settlements’ impact on patients, Sachs said.
Employers may have incentives to select alternative PBM offerings that are not subject to the same requirements, potentially keeping lower premiums while offering fewer protections for patients.
That is particularly important because PBMs play a powerful role in determining which prescription drugs are covered, how much patients pay and how pharmacies are reimbursed, Sachs said.
Biosimilars raise concerns
The settlements do not fully address private label biosimilars, which are a growing issue in the pharmaceutical market, Sachs said.
Biosimilars are lower-cost alternatives to biologic drugs and are intended to increase competition and reduce spending. But major PBMs have begun establishing relationships with manufacturers to develop or market their own biosimilars, creating potential conflicts of interest when PBMs decide which products receive preferred placement on formularies.
Sachs said those arrangements could affect both short-term savings and long-term competition.
A broader challenge for policymakers
The settlements are part of a broader federal effort to scrutinize the role of PBMs, Sachs said.
The agreements demonstrate the challenge of regulating companies that occupy so many positions within the prescription-drug supply chain.
Addressing the practices targeted by the FTC is important, Sachs said, but policymakers also need to consider how PBMs’ business models and growing involvement in the pharmaceutical market affect competition and ultimately the prices paid by both patients and employers.
Sachs and Carrier recently published a longer article in the Yale Journal of Health Policy, Law and Ethics analyzing these private-label arrangements.
