Prescription Drug Pricing and PBM Regulations
Three major companies play a significant role in determining the cost of prescription medications for Americans. Pharmacy benefit management (PBM) firms—specifically Express Scripts, CVS Caremark, and UnitedHealth’s OptumRx—manage about 80% of prescriptions written in the U.S. These PBMs act as intermediaries between doctors and pharmacists, often receiving “kickbacks” from transactions, while quietly steering employers toward pricier plans and utilizing offshore companies to evade oversight from consumers and authorities.
The Federal Trade Commission (FTC) has accused these three companies of inflating drug prices, negatively impacting vulnerable populations.
In February, Express Scripts reached a settlement with the Trump administration’s FTC, agreeing to adopt more transparent practices. For instance, patient costs will now be calculated based on actual drug prices, and there will be a requirement to disclose payments made to consultants that guide employers towards expensive plans. Additionally, data transparency is expected, allowing sponsors to understand the real charges faced by their members. FTC officials estimate these changes could save patients around $7 billion, previously funneled from diabetics, seniors, and working families to benefit high-level PBM executives.
Express Scripts also committed to relocating overseas purchasing arms that PBMs used to escape tax obligations associated with rebate programs. The FTC anticipates that this change could bring back $750 billion in economic activity to the United States, rather than allowing it to flow into international shell companies.
Meanwhile, the other two PBMs have delayed proceedings. On March 23, CVS Caremark sought to momentarily pause the lawsuit while engaging in “settlement discussions.” OptumRx received another extension on April 13, assessing how they could navigate beyond the FTC’s scrutiny, possibly hoping the attention will shift before actions are taken against them.
There are concerns that the FTC should not delay further. CVS Caremark and OptumRx employ strategies similar to those of Express Scripts, including inflated rebate models and evasive maneuvers involving offshore companies. FTC Chairman Andrew Ferguson is aware of this. The day after the settlement, he initiated a dedicated health care task force to address issues like “high prices, reduced quality, limited access, and hindered innovation” stemming from market concentration. In May, the FTC’s consumer protection director criticized the schemes operated by PBMs like Express Scripts for undermining competition and consumer rights.
Despite growing recognition of the unfair practices of PBMs and their detrimental effects on vulnerable Americans, CVS Caremark and OptumRx persist in seeking a more favorable arrangement.
Former President Trump committed to reducing drug prices for overlooked Americans. His FTC has collaborated with other agencies, including the Department of Labor, to push for regulations on PBMs that favor American employers. These measures are positive steps that should persist. There is a clear need for greater accountability and transparency regarding insurance benefits, a cessation of kickbacks that inflate consumer costs, and an end to foreign companies that aim to bypass American laws. Now, with the FTC taking action against firms like CVS and OptumRx, it’s crucial for Congress to make PBM reform a priority by 2026.
