After years of pleading, the Federal Trade Commission on Tuesday voted to investigate the practices of some of the nation’s largest companies. They’re accused of using their dominance in myriad sectors of the health care space to drive up costs, drive out competition and reap profits.
Four of the six companies to be investigated have huge contracts with the Ohio Department of Medicaid and two of them have been accused of wrongdoing in the Buckeye State.
The commission, or the FTC, is supposed to promote competition by stopping practices by large companies that are intended to stifle it. After deadlocking in February, the commissioners voted 5-0 Tuesday to mount the probe. This comes after the U.S. Senate last month confirmed a third Democratic nominee to the commission, breaking the deadlock.
The probe will specifically focus on pharmacy benefit managers, or PBMs.
“Although many people have never heard of pharmacy benefit managers, these powerful middlemen have enormous influence over the U.S. prescription drug system,” commission Chair Lina M. Khan said in a statement. “This study will shine a light on these companies’ practices and their impact on pharmacies, payers, doctors, and patients.”
PBMs contract with insurers to handle prescription benefits. They determine what drugs are covered and negotiate rebates with drugmakers in exchange for covering their products. They also contract with pharmacies and determine how much to reimburse them for the drugs they dispense.
PBMs have claimed that they’re saving money for consumers and taxpayers, but the biggest three jointly control more than 70% of the marketplace and each is owned by a corporation that also owns a top-ten insurer. In addition, the corporations own their own pharmacies and some even own doctors’ offices.
“The largest pharmacy benefits managers are now vertically integrated with the largest health insurance companies and wholly owned mail order and specialty pharmacies,” the FTC statement said.
CVS Caremark, OptumRx, Inc., Express Scripts, Inc., Humana Inc., Prime Therapeutics LLC, and MedImpact Healthcare Systems, Inc. are the PBMs subject to the federal probe.
CVS Caremark is owned by CVS Health. OptumRx is owned UnitedHealth Group and Express Scripts is owned by Cigna. Each does big business with the Ohio state government and by revenue, they’re the fourth, fifth and 12th-largest corporations in the United States, respectively.
In addition to owning the largest PBM, the third-largest insurer (Aetna), and a mail-order pharmacy, CVS also owns the nation’s largest retail pharmacy chain. That means that the largest PBM is determining reimbursements both for its own stores and its competitors.
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