FTC Fires Warning Shot at Drug Middlemen Over Rebates, Fees

The Federal Trade Commission (FTC) voted unanimously Thursday to increase scrutiny of pharmacy benefit managers that act as middlemen between drug companies and consumers in a renewed effort to combat soaring healthcare costs and drug prices.

The five-member commission, including two Republican commissioners, voted to increase scrutiny of discounts that pharmaceutical middlemen seek from drug companies to ensure their products are covered by the pharmacy benefit manager (PBM).

FTC Chair Lina Khan said in an open meeting the FTC would study to see if rebates sought by middlemen reduced competition, ultimately leading to higher drug prices.

“The FTC has also determined that commercial bribery practices, commonly referred to as kickbacks, constitute an unfair method of competition,” she added.

The three biggest PBMs are UnitedHealth Group Inc’s Optum unit, CVS Health Corp’s CVS Caremark and Cigna Corp’s Express Scripts. PBMs decide what drugs will be covered by health insurance plans and negotiate prices with manufacturers.

An official with the PBM industry said the goal of the companies was to “control costs and lower costs,” and pointed to the drug companies as the cause of sometimes spectacular price rises for insulin and other medicines.

The FTC expressed particular concern about insulin, which was first produced synthetically in the 1970s and which some 8 million American diabetics rely on. The price of insulin had risen 300% in the past two decades, with the list price of a one-year supply now costing nearly $6,000.