Scrutiny on pharmacy benefit managers (PBMs) has just been ratcheted up considerably. The Federal Trade Commission (FTC) announced on June 7 the launch of its investigation into PBM practices, targeting the largest players. This investigation comes at an extremely crucial time for the biosimilar industry, as manufacturers prepare to negotiate with these same PBMs for coverage of adalimumab biosimilars.
The PBMs are the chief purchasers of medications for commercial plans and Medicare part D members. They negotiate drug pricing contracts with drug manufacturers for the vast majority of the insured population in the US. They are another unique feature of global health systems: No other advanced country allows private middlemen to serve such a role.
A 90-Day Deadline
The FTC will send “compulsory orders” to CVS Caremark; Express Scripts, Inc.; OptumRx, Inc.; Humana Inc.; Prime Therapeutics LLC; and MedImpact Healthcare Systems, Inc., who purchase medications and make pharmacy coverage decisions for approximately 90% of the commercial and Medicare part D insured population.
According to the FTC, these PBMs will be compelled to “provide information and records regarding their business practices,” which are notoriously opaque. The investigation will focus on how these PBMs affect access and affordability of prescription drugs. The FTC’s deadline for compliance will be 90 days from issuance of the orders.
“Although many people have never heard of pharmacy benefit managers, these powerful middlemen have enormous influence over the U.S. prescription drug system,” stated Federal Trade Commission Chair Lina M. Khan in the FTC’s release. “This study will shine a light on these companies’ practices and their impact on pharmacies, payers, doctors, and patients.”
How Do Net Prices and Rebate Contracts Buy Coverage?
At the center of the FTC investigation of PBMs is the PBMs’ encouragement of rebates to negotiate low net prices, and how this results in barriers to coverage of other drugs. For example, a PBM may allow a drug manufacturer exclusive formulary coverage for their drug if the rebates offered are sufficiently attractive.
This is potentially a huge obstacle for makers of adalimumab biosimilars. AbbVie passes millions of dollars in rebates to PBMs at present in exchange for Humira® coverage. Biosimilar manufacturers who seek PBM coverage must contend with the PBM’s lost or reduced Humira rebates if their biosimilar is to be covered exclusively or at parity with the reference product. Further, how are these rebates passed along to payers and ultimately to patients?
The Influence of PBMs
“In these roles,” says the FTC, “[PBMs] often have enormous influence on which drugs are prescribed to patients, which pharmacies patients can use, and how much patients ultimately pay at the pharmacy counter. Many of these functions depend on highly complicated, opaque contractual relationships that are difficult or impossible to understand for patients and independent businesses across the prescription drug system.”
In addition to the impact of rebates, the FTC will also review practices that involve the PBM’s relationship with the pharmacy network, including reimbursement; their use of prior authorization and other administrative tools to manage access, and the PBM’s specialty drug policies.
This inquiry is the next step in the FTC’s request for information about PBMs issued in February (and elicited 24,000 public comments). It is not known when the FTC’s investigation will conclude or whether it will immediately impact the negotiations for the multitude of adalimumab biosimilars to be launched in 2023. However, this inquiry may begin to pry open the lockbox on PBM practices. There will certainly be more to report on these developments.