Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Are pharmacy benefit managers writing competition out of the script?, (Nov 18, 2015)

By Bryant Storm, J.D.

The House of Representatives Subcommittee on Regulatory Reform, Commercial and Antitrust Law conducted a hearing on the state of competition in the health care pharmacy marketplace on November 17. The hearing, which was the third in a series on competition in health care, focused specifically on the state of competition in the pharmacy benefit manager (PBM) and pharmacy marketplaces. The hearing witnesses included representatives of PBMs, pharmacies, and an antitrust expert. Witness testimony ranged from suggesting that competition among PBMs and pharmacies is adequate to the suggestion that a lack of antitrust enforcement among PBMs has resulted in an anticompetitive atmosphere that is costly and harmful to patients as well as independent pharmacies.

PBMs and pharmacies. PBMs oversee and administer prescription drug benefits for 247 million Americans by negotiating prices for prescription drugs with manufacturers and wholesalers. PBMs also negotiate with pharmacies to determine which pharmacies will participate in networks and the amount that pharmacies will receive in the transaction. Pharmacies play a critical role by purchasing prescription drugs and serving as the direct connection between consumers and pharmaceuticals.

Hearing witnesses included Amy Bricker, a licensed pharmacist and the Vice President of Retail Contracting & Strategy at the nation’s largest PBM, Express Scripts. Bricker testified that, although Express Scripts provides services to 86 million Americans, the PBM marketplace is “extremely competitive” due to dozens of national and regional PBMs that offer payers competing services and products. Additionally, Bricker asserted that the large scale of a PBM like Express Scripts allows for negotiating power than can be used to negotiate discounts from drug manufacturers and pharmacies, which lower costs for patients. Bricker also argued that competition is acceptable in the pharmacy marketplace because of the success of independent pharmacies.

Natalie Pons, Senior Vice President and Assistant General Counsel at CVS Health, reiterated many of Bricker’s points and suggested that competition among PBMs is strong because there are over 30 PBMs in the marketplace. In her testimony, Pons cited a 2011 study which found that “PBMs will save plan sponsors and consumers almost $2 trillion, or nearly 35 percent, between 2012 and 2021 when compared with prescription drug expenditures made without pharmacy benefit management.”

David Balto, an antitrust attorney and former enforcer for both the Department of Justice and FTC, testified that PBMs are one of the least regulated sectors of the health care system, which leads to a lack of transparency, limited choice, and conflicts of interest. Warning that the FTC has “practically abandoned enforcement against PBMs,” Balto asserted that three companies—ExpressScripts, CVSHealth (CVS Caremark) and OptumRx—control 80 percent of the PBM marketplace. The result, according to Balto, is that costs are not controlled and profits of PBMs are increasing at a rapid pace—“exceeding $6 billion annually.” To address the problem, Balto recommended that: (1) the FTC nonenforcement be reversed, (2) efforts be made to increase transparency, (3) legislation be passed to address PBM networks that restrict patient choice, and (4) the FTC and DOJ investigate PBM practices that increase PBM profit and limit patient assistance and access.

Independent pharmacy perspective. Bradley Arthur, the owner of two independent pharmacies, testified that community pharmacies play an integral role in the health care system by helping to mitigate the “$290 billion annual cost of treating patients that do not adhere to their medication regimen.” However, Arthur asserted that independent pharmacies are harmed by the state of the PBM market. Arthur expressed some of the same concerns raised by Balto and argued that the growth of large PBMs has resulted in a market where, for many purposes, there are only three PBMs to choose from. The problem is particularly acute for community pharmacies, like the two run by Arthur, which lack the power to negotiate effectively with large PBMs.

Companies: ExpressScripts; CVSHealth; CVS Caremark; OptumRx

News: Antitrust