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The Ongoing Journey to Access & Affordability: The Rise of PBMs, Evolution of GPOs, and FTC Inquiries

The Ongoing Journey to Access & Affordability: The Rise of PBMs, Evolution of GPOs, and FTC Inquiries

PBMs and GPOs are currently facing FTC inquiries into their business practices that impact drug pricing and access. This post reviews the nuances between these two types of organizations and why they're in the FTC hot seat.

Last June, the Federal Trade Commission (FTC) announced an inquiry into the six largest pharmacy benefit managers (PBMs) - CVS Caremark, Express Scripts, OptumRX, Humana, Prime Therapeutics, and MedImpact Healthcare Systems. Then, in mid-May, came another announcement about how the inquiry has been expanded to include Zinc Health Services, and Ascent Health Services. Broadly, these inquiries aim to scrutinize the business practices of PBMs - specifically, reviewing information and records regarding their business practices and how they affect formulary design and, ultimately, the cost of drugs.

In their inquiry, the FTC is looking at several PBM practices, specifically:

  1. The fees and clawbacks PBMs charge unaffiliated pharmacies

  2. Methods employed to steer patients toward PBM-owned pharmacies

  3. Practices of auditing unaffiliated pharmacies unfairly

  4. Their complicated and unclear reimbursement methods

  5. Negotiation practices (including rebates and fees) with drug manufacturers that skew formulary incentives and directly impact costs of drugs to payers and patients

For those in the healthcare industry, this inquiry is welcome - forward progress in addressing the issues around rising costs and strict utilization restrictions placed on patients. To better understand this, let's briefly review PBMs.

PBMs are third-party companies that are intermediaries between health insurers, pharmacies, and pharmaceutical manufacturers. These companies initially emerged in the 1970s and gained significant influence with the evolution of managed care through the 1990s. They manage prescription drug benefits on behalf of health insurers, Medicare Part D drug plans, large employers, and other payers by negotiating drug pricing with manufacturers. Through these negotiations, they establish formularies (lists of approved drugs), develop cost-sharing structures, process claims, and create pharmacy networks (including mail-order and specialty pharmacies).

Technically, PBMs are supposed to be controlling drug spend - by reducing drug costs through negotiations. Like many things in healthcare, the issue is complexity - PBMs have complex rebate and reimbursement systems that ultimately do not help patients and healthcare providers. Patients end up with higher out-of-pocket costs, while healthcare providers are limited in what drugs they can prescribe to their patients. Furthermore, PBMs have faced claims that their practices are detrimental to patient affordability - favoring higher-priced drugs for financial gain.

Zinc Health Services and Ascent Health Services (from the latest update to the FTC inquiry) are both identified as group purchasing organizations (GPOs). GPOs emerged much earlier than PBMs in the early 20th century. The first GPO was established in 1910 by a group of hospitals in New York. (Here's a history of the evolution of GPOs if you're interested.) These entities are created to pool the purchasing power of multiple healthcare providers - including hospitals, nursing homes, and clinics - to negotiate discounts and favorable terms with suppliers and manufacturers of medical products and services. Multiple organizations' combined purchasing power and volume can help secure better pricing, streamline procurement processes, and enhance supply chain efficiencies. Similar to PBMs, in theory, GPOs are supposed to reduce costs, improve access to medical supplies, and promote quality and standardization in healthcare purchasing. In recent years, these organizations have been criticized for limiting competition and choice, potentially resulting in higher costs to patients.

So what now? Between the drug provisions outlined in the IRA (check out our earlier blog post here) and these FTC inquiries into PBMs - it will be interesting to see how the healthcare landscape evolves, but these are just pieces of the puzzle. In the meantime, the most important thing is to have a wraparound strategy that considers all relevant market access stakeholders, including PBMs and GPOs.

Have you seen our 360° Approach to Access? We strongly believe in a wraparound market access strategy and, most importantly, developing stakeholder-specific value stories.


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