In a comprehensive 71-page report released Tuesday, the Federal Trade Commission (FTC) sharply criticized pharmacy benefit managers (PBMs) for their role in inflating drug costs and squeezing independent pharmacies. The study represents a significant shift under FTC Chair Lina Khan, signaling increased scrutiny of powerful intermediaries.
PBMs such as CVS Health’s Caremark, Cigna’s Express Scripts, and UnitedHealth Group’s Optum Rx, collectively handle around 80% of prescriptions in the United States. These companies negotiate prices with drug manufacturers, pay pharmacies, and decide which drugs are available to patients and at what cost. Originally intended to save money for employers, government programs, and patients, critics argue that PBMs have increasingly driven up drug costs through consolidation and control over medication distribution.
FTC Chair Lina Khan highlighted the severe impact of PBM practices, stating, “These powerful middlemen can hike the cost of drugs — including overcharging patients for cancer drugs.” She further emphasized that PBMs often “squeeze independent pharmacies that many Americans, especially those in rural communities, depend on for essential care.”
The report also drew on findings from a recent New York Times investigation, detailing various ways PBMs allegedly inflate prescription drug costs. The report described the PBMs’ influence as “enormous” and their practices as potentially harmful to Americans. It pointed to PBMs’ affiliated pharmacies, which reportedly overcharge for generic cancer drugs, resulting in nearly $1.6 billion in revenue over less than three years for the three largest PBMs.
Additionally, the FTC scrutinized PBMs’ involvement in deals that block competition in favor of a single product, suggesting that such practices may be illegal due to their anticompetitive nature. These arrangements often involve a drug manufacturer providing large discounts, managed by the PBM and passed back to the employer, in exchange for promoting their product over cheaper alternatives.
The response from the industry was swift and defensive. Justine Sessions, a spokeswoman for Express Scripts, dismissed the FTC’s conclusions as biased, stating, “These biased conclusions will do nothing to address the rising prices of prescription medications driven by the pharmaceutical industry.” David Whitrap, a CVS Caremark spokesman, argued that limiting PBMs’ ability to negotiate would “reward the pharmaceutical industry, leaving American businesses and patients at the mercy of the prices drugmakers set.”
Despite the strong language and detailed findings, the FTC has not yet initiated legal action against PBMs. However, the report may pave the way for formal investigations or lawsuits and could spur legislative efforts to impose stricter regulations on the industry.
