Tackling Monopolistic Practices in Pharmacy Benefits Management: Insights from FTC Chair Lina Khan

In a recent appearance on CBS This Morning, Lina Khan, the Chair of the Federal Trade Commission (FTC), reiterated her concerns about anti-competitive practices prevalent in various sectors, including Pharmacy Benefits Management (PBM). She underscores the urgency of the matter, stating, "The concentration of market power in the hands of a few PBMs has far-reaching implications for consumers and the healthcare system as a whole. It stifles competition, limits choice, and drives up costs, ultimately placing undue burdens on patients and taxpayers."

PBM Transparency and Integration Challenges: Pricing and Profit Conflicts

Khan highlights two issues we’ve written about before: transparency and vertical integration. One of her key concerns is the lack of transparency in PBM practices, particularly regarding drug pricing and rebate negotiations. Khan emphasizes, "Opaque pricing mechanisms and complex rebate arrangements obscure true costs and undermine the ability of consumers to make informed decisions about their healthcare." This opacity not only fuels suspicions of profiteering but also hampers efforts to contain rising healthcare expenditures.

Another concern relates to the vertically integrated nature of the big 3 PBMs, where they have ownership stakes in pharmacies, insurers, or even drug manufacturers. Khan warns, "Vertical integration can distort incentives, leading to practices that prioritize corporate profits over patient well-being." Such arrangements may incentivize steering patients towards in-house services or products, irrespective of their suitability or cost-effectiveness.

Another concern relates to the vertically integrated nature of the big 3 PBMs, where they have ownership stakes in pharmacies, insurers, or even drug manufacturers. Khan warns, "Vertical integration can distort incentives, leading to practices that prioritize corporate profits over patient well-being." Such arrangements may incentivize steering patients towards in-house services or products, irrespective of their suitability or cost-effectiveness.

Champion Fairness in PBM Industry Regulation

Khan's has already taken action aimed at reining in the power of dominant PBMs. In June 2022, the FTC launched an antitrust probe into PBMs. As part of this inquiry, they issued compulsory orders to two group purchasing organizations (GPOs) that negotiate drug rebates on behalf of other PBMs to turn over documents related to their business practices. The Department of Justice, Ohio’s attorney general, and community pharmacies have begun their own inquiries or lawsuits. High-profile antitrust cases involving mergers and acquisitions within the PBM industry have raised alarms about further consolidation.

Khan's insights and recent developments underscore the need for decisive action to address monopolistic practices within the PBM industry. SmithRx has long believed that by promoting transparency, fostering competition, and optimizing for the bottom line of our mainstreet clients, we can advance a healthcare system that prioritizes the needs of patients and fosters innovation. We’re excited to be working towards a future where fairness, transparency, and competition prevail, ensuring that every individual has access to affordable and quality medications.

To show our continued support, we’re excited to join FTC chair Lina Khan and the American Economic Liberties Project at their 2024 Anti-Monopoly Summit on May 21, 2024 in Washington, DC.