Comments to FTC on Business Practices of PBMs and Their Impact on Pharmacies and Consumers

May 25, 2022

Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
Submitted via https://www.regulations.gov

Re: Solicitation for Public Comments on the Business Practices of Pharmacy Benefit Managers and Their Impact on Independent Pharmacies and Consumers (FTC-2022-0015-0001)

Dear Chair Khan and Commissioners:

The National Pharmaceutical Council (NPC) appreciates the opportunity to provide comments to the Federal Trade Commission’s (FTC) Request for Information Solicitation for Public Comments on the Business Practices of Pharmacy Benefit Managers and Their Impact on Independent Pharmacies and Consumers (FTC-2022-0015-0001).

NPC is a health policy research organization dedicated to advancing good evidence and science and fostering an environment in the U.S. that supports medical innovation. NPC is supported by the major U.S. research-based biopharmaceutical companies. We focus on research development, information dissemination, education, and communication of the critical issues of evidence, innovation, and the value of medicines for patients. Our research helps inform important health care policy debates and supports the achievement of the best patient outcomes in the most efficient way possible.

NPC strongly urges the FTC to study the anticompetitive business practices of pharmacy benefit managers (PBMs) and their impact on drug affordability and access. To that end, our comments aim to provide additional insight on PBMs in the following areas:

I. Growing Influence of PBMs in Pharmaceutical Purchasing, Payment and Supply Chain

Through consolidations and integrations, PBMs have increased their market power which has created the potential for practices that may jeopardize drug affordability and patient access.

II. PBM Practices with the Potential to Harm Drug Affordability and Patient Access

A. PBM and Rebate Contracting Entities’ Efforts to Maximize Manufacturer Rebates:

PBM practices to maximize rebates, which may not be shared with employers and patients, can have the potential to impact drug costs and patient out-of-pocket costs.

B. Pharmacy Direct and Indirect Remuneration (DIR) Fees:

DIR fees assessed by PBMs on pharmacies may increase Medicare Part D drug costs and patient out-of-pocket costs.

C. Copay Accumulator and Maximizer Programs:

Copay accumulator and maximizer programs misappropriate copay assistance and place a greater financial burden on patients which can reduce medication adherence and harm patient care. The PBM practice of classifying specialty drugs as “nonessential health benefits” may create access barriers and increase patient out-of-pocket exposure.

D. Patient Steering Toward PBM-Affiliated Pharmacies:

PBMs may engage in practices that have the potential to shift patients away from pharmacies not affiliated with PBMs toward PBM-affiliated pharmacies. This may come at the expense of quality patient care and result in limited care choices for patients, pharmacies, and providers, and disruptions to the patient-provider relationship.

I. Growing Influence of PBMs in Pharmaceutical Purchasing, Payment and Supply Chain

For the majority of their existence, pharmacy benefit managers built pharmacy networks, created formularies, and processed pharmacy claims for their health plan customers. However, PBMs’ control and influence over the medicines patients access and the out-of-pocket prices they pay has grown over time due to consolidations and vertical integration, transforming the market’s structure.

Market consolidation in the PBM industry has accelerated in the last five years, particularly due to the increasing vertical integration of insurers, PBMs, and specialty pharmacies.[1] For example, in 2018, CVS Health acquired Aetna for $69 billion, and Cigna acquired Express Scripts (now Evernorth) for $54 billion. [2,3] Today, over 79% of prescription drug claims are processed by three vertically-integrated companies – CVS Health/Aetna, Cigna/Evernorth, and United/OptumRx each comprised of an insurer, PBM, specialty pharmacy, and other related businesses.[4] We believe these integrations have created massive organizations with greater incentives to maximize profit by exerting their influence and control over patient access, sites of care/dispensing, and pricing. The market dominance of these entities and their opaque financial relationships have created an environment where PBMs may be engaging in business practices driven primarily by financial incentives as opposed to patient interest. Such practices, which we will outline, have created a complex and increasingly opaque environment that creates barriers to patient access.

Given the evolution of the market and the PBM business model, NPC urges the FTC to undertake a rigorous review of the market structure – or structures – in which today’s PBMs function. Specifically, we encourage the FTC to investigate whether PBMs, including PBM-created “rebate contracting entities,” function as gatekeepers and whether the practices of these entities constitute unfair, deceptive, predatory, and anticompetitive acts.

II. PBM Practices with the Potential to Harm Drug Affordability and Patient Access

A. PBM and Rebate Contracting Entities’ Efforts to Maximize Manufacturer Rebates

In the current system, rebates are a primary source of dollars flowing from manufacturers to PBMs. PBMs assert that rebates allow for differential and competitive pricing of drugs.[5] In many cases, this differential pricing is the result of negotiation between PBMs and manufacturers, who may negotiate favorable formulary placement and other coverage terms in exchange for higher rebates.[6]

There is a growing disconnect between the list and net price of drug products (also known as the “gross-to-net bubble”), which is driven primarily by PBM capture of revenue and self-dealing practices. These savings typically are not being passed along to patients at the point of sale. Indeed, health plan benefit design changes like higher deductibles and coinsurance –without appropriate sharing of rebates – have resulted in higher patient out-of-pocket costs, despite the lower net prices, creating financial barriers that reduce patient adherence to needed medications.[7]

PBMs adopt confusing and complex arrangements and have invented and now employ rebate contracting entities (e.g., Ascent Health Services, Zinc, and Emisar owned by ESI, CVS, and OptumRx, respectively) that may reduce transparency and preclude plan sponsors from viewing rebates that might otherwise be subject to some level of sharing.[8]

B. Pharmacy Direct and Indirect Remuneration (DIR) Fees

Under Medicare Part D, the compensation received by PBMs after the point-of-sale that changes the final cost of the drug for the payer, or the price paid to the pharmacy for the drug, is referred to as Direct and Indirect Remuneration (DIR). The term “DIR fees” has been adopted outside of Medicare policy to refer to the post-point-of-sale fees assessed by PBMs on network pharmacy providers in Medicare and commercial insurance programs. DIR fees, also referred to as pharmacy clawbacks, encompass a wide variety of fees including “pay to play” fees for network participation, periodic reimbursement reconciliations, and pharmacy performance fees.

Medicare pharmacy DIR fees have grown more than 107,400% between 2010 and 2020 [9], increasing patients’ cost-sharing because patient out-of-pocket costs are based on drug list prices at the point-of-sale that do not reflect the after-the-fact price adjustment in DIR fees. These financial barriers potentially reduce adherence and increase patient discontinuation.

C. Copay Accumulator and Maximizer Programs

Another PBM business practice we view as harmful to patients is the use of copay accumulator and maximizer programs. In both programs, a PBM or its vendor blocks copay assistance offered by manufacturers or other third parties, including non-profits, from being applied toward the patient’s deductible and maximum out-of-pocket (MOOP) limit.[10] In copay accumulator programs, the copay card is applied until its maximum value is reached, at which point the patient’s out-of-pocket costs begin counting toward their annual deductible and out-of-pocket maximum.[11] For copay maximizer programs, the patient’s cost-sharing requirement is altered so that the maximum value of the manufacturer’s assistance is applied in equal amounts throughout the year.[12] These practices expose patients to greater (and often unexpected) out-of-pocket costs.

To implement copay maximizer programs for specialty drugs, PBMs engage in another problematic practice – the classification of specialty drugs included on a plan formulary as “nonessential health benefits” (non-EHB). By classifying specialty drugs as non-EHB, PBMs believe that the annual out-of-pocket maximum required under the Affordable Care Act no longer applies.[13] However, the Centers for Medicare & Medicaid Services (CMS) has stated that if a payer “is covering drugs beyond the number of drugs covered by the [EHB] benchmark, all of these drugs are EHB” and cost sharing paid for drugs properly classed as EHB “must count toward the annual limitation on cost sharing.” [14] This PBM practice defies CMS’ admonition and ultimately increases patient out-of-pocket costs.[15]

The financial barrier for patients created by these programs has been shown to lower treatment adherence, which can lead to avoidable side effects and negative impacts on patient health.[16] Studies have shown that patients impacted by copay accumulator programs fill their prescriptions 1.5 fewer times than patients who are not impacted by such programs, with over 75% of patients impacted by copay accumulator programs stating their medication adherence will be reduced because of the program.[17] Nonadherence to medications can have fatal consequences, with nonadherence accounting for 10% of hospitalizations and 125,000 deaths each year.[18]

In addition, patients have very little transparency into these programs and how they apply manufacturer assistance. As copay maximizer programs use the maximum value of copay cards to adjust patient out-of-pocket costs throughout the year, patients do not have access to how plans and PBMs apply this copay assistance and structure out-of-pocket costs for impacted drugs. The use of copay accumulator and maximizer programs generally is not disclosed at an appropriate level of detail and clarity in the patient’s Summary of Benefits and Coverage, on the Health Insurance Marketplace, or elsewhere, which can result in significant confusion and unexpected out-of-pocket costs for patients. While increased transparency would protect patients by allowing them to understand how manufacturer assistance will impact their care,[19] PBMs implement these programs in a manner that is hidden from patients, manufacturers, and other parties.

D. Patient Steering Toward PBM-Affiliated Pharmacies

Patient steering by PBMs from pharmacies unaffiliated with the PBM and toward PBM-affiliated pharmacies is another anti-competitive practice harming patient care.[20] As mentioned previously, the top three PBMs (CVS Health, Express Scripts, and OptumRX) process over 79% of prescription claims. These PBMs have similar characteristics: common ownership with a major insurer and a relationship with a mail-order and/or specialty pharmacy, leading to vertical integration and supply chain control.[21] The consolidations and integrations of these entities has left physicians, patients, and pharmacies with limited choices and more barriers to care.

PBMs have used numerous tactics to steer patients toward PBM-affiliated pharmacies. For example, PBMs engage in a practice called prescription trolling which involves two denials of a prescription claim by the PBM: first, the PBM denies a claim by saying a prior authorization is required; then, when a prior authorization is submitted, the PBM denies the claim again and says the medication must be filled at a PBM-owned pharmacy. [22] This steers patients toward the PBM-affiliated pharmacy. While practices like these are considered non-allowable by CMS, they may continue to occur and delay patient access to medication.[23]

PBMs have also used exclusionary tactics with physicians and pharmacies to shift patients away from unaffiliated pharmacies. Some PBMs have dropped unaffiliated pharmacies (i.e., competitors) from the network without cause and terminated relationships with existing pharmacies or prevented new pharmacies from entering the PBM’s network.[24] For pharmacies that do remain, some PBMs create excessive auditing practices, such as requesting thousands of pages of documentation to verify a claim, which increases the administrative burden for pharmacies and providers.[25]

These tactics reduce competition in the marketplace and have the potential to create disruptions in patient care, jeopardizing pharmacy monitoring, and clinical management, leading to poor patient outcomes. Patient steering ultimately interrupts the patient-provider relationship and reduces patient access to care.

Conclusion

Due to significant PBM market changes, the financial relationships and incentives for PBMs and other entities in the drug supply chain have become more complex and less transparent. Furthermore, PBMs are able to leverage their position in the market as gatekeepers and engage in anticompetitive activities that maximize profits at the expense of access and drug affordability, ultimately harming patients.
We strongly urge the FTC to undertake an in-depth investigation of PBMs – including their increasing vertical integration and market power, their evolving market structure and the interplay between their various lines of business, and their anticompetitive practices – to shed light on these practices and protect patients. NPC appreciates the opportunity to comment on this RFI and looks forward to the additional work the FTC plans on this topic. We are happy to discuss these comments if helpful and provide any further detail you request.

Sincerely,

John M. O’Brien, PharmD, MPH
President and Chief Executive Officer

----------------------------

[1] Frier Levitt, LLC. Pharmacy Benefit Manager Exposé: How PBMs Adversely Impact Cancer Care While Profiting at the Expense of Patients, Providers, Employers, and Taxpayers. February 2022. Available at: https://communityoncology.org/wp-content/uploads/2022/02/COA_FL_PBM_Expose_2-2022.pdf
[2] Anna Wilde Mathews and Aisha Al-Muslim. CVS Completes $70 Billion Acquisition of Aetna. Wall Street Journal. Nov. 28, 2018. Available at: https://www.wsj.com/articles/cvs-completes-70-billion-acquisition-of-aetna-1543423322
[3] Evan Sweeney. Cigna closes $67B Express Scripts acquisition, promising affordability and choice. Fierce Healthcare. Dec 20, 2018. Available at: https://www.fiercehealthcare.com/payer/cigna-closes-67b-express-scripts-acquisition
[4] Josh Mader. Pharmacy Benefit Managers: Market Landscape and Strategic Imperatives. Health Industries Research. Available here: https://www.hirc.com/system/files/public/MM_PBM%20Landscape_2022.pdf
[5] Aaron Vandervelde and Eleanor Blalock. The pharmaceutical supply chain: gross drug expenditures realized by stakeholders. Berkeley Research Group. 2017. Available at: http://phrma-docs.phrma.org/files/dmfile/The-Pharmaceutical-Supply-Chain-BRG-Report.pdf
[6] Charles Roehrig. The Impact of Prescription Drug Rebates on Health Plans and Consumers. April 2018. Available at: https://altarum.org/sites/default/files/Altarum-Prescription-Drug-Rebate-Report_April-2018.pdf
[7] PhRMA. Commercially-insured patients pay undiscounted list prices for one in five brand prescriptions, accounting for half of out-of-pocket spending on brand medicines. 2017. Available at: https://www.phrma.org/report/commercially-insured-patients-pay-undiscounted-list-prices-for-one-in-five-brand-prescriptions-accounting-for-half-of-out-of-pocket-spending-brand-medicines
[8] Frier Levitt, LLC. Pharmacy Benefit Manager Exposé: How PBMs Adversely Impact Cancer Care While Profiting at the Expense of Patients, Providers, Employers, and Taxpayers. February 2022. Available at: https://communityoncology.org/wp-content/uploads/2022/02/COA_FL_PBM_Expose_2-2022.pdf
[9] Centers for Medicare & Medicaid Services, Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs, 87 Fed. Reg. at 1842 (Jan. 12, 2022).
[10] American Society of Clinical Oncology. Copay Accumulators and Maximizers Policy Brief. January 2021. Available at: https://www.asco.org/sites/new-www.asco.org/files/content-files/advocacy-and-policy/documents/2021-AccumulatorsPolicyBrief.pdf
[11] Ibid.
[12] Ibid.
[13] Peter J. Pitts. Just How ‘Essential’ Are Your Health Benefits? Real Clear Health. November 19, 2021. Available at: https://www.realclearhealth.com/articles/2021/11/19/just_how_essential_are_your_health_benefits_111271.html
[14] Patient Protection and Affordable Care Act, 80 Fed. Reg. 10749, 10817 (Feb. 27, 2015) (codified at 45 C.F.R. pts. 144, 147, 153, 154, 155, 156 and 158).
[15] Adam Fein, PhD. Four Reasons Why PBMs Gain As Maximizers Overtake Copay Accumulators. February 8, 2022. Drug Channels Institute. Available at: https://www.drugchannels.net/2022/02/four-reasons-why-pbms-gain-as.html.
[16] Sherman B, Epstein A, Meissner B, Mittal M. Impact of a Co-pay Accumulator Adjustment Program on Specialty Drug Adherence. Am J Manag Care. 2019;25(7):500-505.
[17] Adam Fein, PhD. Addressing the Rising Impact of Co-Pay Accumulators on Patients. Drug Channels Institute. April 2019. Available at: https://www.drugchannels.net/2019/04/addressing-rising-impact-of-co-pay.html
ConnectiveRx. Seeing accumulator adjustment programs through
patients’ eyes. 2019.Available at:https://www.mmm-online.com/wp-content/uploads/sites/2/2018/09/AccumulatorAdjustmentProgramsThroughPatientsEyes.pdf
[18] Terry Wilcox and Stacey Worthy. How a quiet co-pay rule change could mean massive drug cost increases. Fortune. July 22, 2020. Available at: https://fortune.com/2020/07/22/copay-accumulator-adjustment-programs-coronavirus
[19] NPC. NPC Comments on HHS Notice of Benefit and Payment Parameters for 2023. January 27, 2022. Available at: https://www.npcnow.org/resources/npc-comments-hhs-notice-benefit-and-payment-parameters-2023
[20] Frier Levitt, LLC. Pharmacy Benefit Manager Exposé: How PBMs Adversely Impact Cancer Care While Profiting at the Expense of Patients, Providers, Employers, and Taxpayers. February 2022. Available at: https://communityoncology.org/wp-content/uploads/2022/02/COA_FL_PBM_Expose_2-2022.pdf
[21] Adam Fein, PhD. CVS, Express Scripts, and the Evolution of the PBM Business Model. Drug Channels Institute. Available at: https://www.drugchannels.net/2019/05/cvs-express-scripts-and-evolution-of.html
Brief for Community Oncology Alliance, Inc. et al as Amici C Curiae Supporting Respondents, Rutledge v. Pharm. Care Mgmt, Ass’n., 140 U.S. 812, 2020. https://scholarlycommons.baptisthealth.net/cgi/viewcontent.cgi?article=4573&context=se-all-publications
[22] Frier Levitt, LLC. Pharmacy Benefit Manager Exposé: How PBMs Adversely Impact Cancer Care While Profiting at the Expense of Patients, Providers, Employers, and Taxpayers. February 2022. Available at: https://communityoncology.org/wp-content/uploads/2022/02/COA_FL_PBM_Expose_2-2022.pdf
[23] Frier Levitt, LLC. Hot Topics in Specialty Pharmacy Law. 2017. Available at: https://www.frierlevitt.com/wp-content/uploads/2017/06/Hot-Topics-in-SPRX-Law-Final_PDF.pdf
[24] Bobbie Riley and Tom Suk. Pharmacy credentialing--challenges and opportunities. Drug Store News. August 9, 2017. Available at: https://drugstorenews.com/pharmacy/pharmacy-credentialing-challenges-and-opportunities
[25] Frier Levitt, LLC. Pharmacy Benefit Manager Exposé: How PBMs Adversely Impact Cancer Care While Profiting at the Expense of Patients, Providers, Employers, and Taxpayers. February 2022. Available at: https://communityoncology.org/wp-content/uploads/2022/02/COA_FL_PBM_Expose_2-2022.pdf