FTC Dismisses Anti-PBM Allegations as “Without Merit

(Washington, DC)—In an unanimous ruling today, the Federal Trade Commission (FTC) has found that PBM mail-service pharmacies offer large employers, unions, and health insurers lower prescription drug prices than the retail pharmacy industry’s chain drugstores and mail-service pharmacies and, in doing so, has validated â?? once and for all â?? the value that pharmacy benefit management can provide to consumers, purchasers, and the health system overall, the Pharmaceutical Care Management Association (PCMA) said today. PCMA is the national association representing America’s pharmacy benefit managers (PBMs).

“The Federal Trade Commission’s unanimous finding today that PBM-owned mail-service pharmacies provide lower drug prices than drugstores and mail-service pharmacies owned by retail chains confirms what other government and industry data â?? including the Congressional Budget Office, the Government Accountability Office, PricewaterhouseCoopers, the Harvard Business School, and the Lewin Group â?? have successively shown since 2002,” said PCMA President Mark Merritt. “Once and for all, this report gives a green light to policymakers and purchasers to embrace the PBM mail-service pharmacy option for seniors, the disabled, and working families.”

In conducting its report, the FTC examined 26 PBM contracts with plan sponsors as well as data from retail pharmacies. Among the key findings from the FTC report:

�¼ For large PBMs, average total prices in 2002 and 2003 at PBM-owned mail-order pharmacies typically were lower than retail-owned mail-service pharmacies and chain drugstores.

Ã?¼ The FTC flatly calls “without merit” the retail pharmacy industry’s charge that PBMs are engaging in “self-dealing” when they both administer the pharmacy benefits for a client as well as sell drugs to the client’s members via the PBM’s own mail-order pharmacy.

Ã?¼ Throughout the report, the FTC repeatedly notes that PBMs’ interests
are aligned with those of its employer and health-plan customers.

�¼ For a common basket of drugs dispensed in one month with the same-size prescriptions, mail prices were lower than retail prices at both large PBMs and retailer-owned PBMs.

Ã?¼ Pharmaceutical manufacturers’ payments to PBMs are appropriate and responsive to the competitive marketplace: “manufacturers readily raised and lowered allowance levels for each of their drug products as competition developed in the drug’s therapeutic class,” with higher allowance levels for drugs on restrictive formularies.

Section 110 of the Medicare Modernization Act (MMA) required the FTC to conduct the study to determine whether group health plans using “integrated” PBMs incur higher costs than plans using “non-integrated” mail-service pharmacies and/or retail pharmacies. During the Medicare prescription drug debate in Congress in 2003, retail pharmacies â?? relying on a retail industry-funded study by a group called LECG — sought to prohibit Medicare prescription-drug plan sponsors from being able to offer plans with a “captive” mail-service pharmacy benefit. As a compromise, the Medicare conferees agreed to an FTC study to examine this issue in further detail. The FTC voted unanimously, 4-0, to accept the findings in the report.

This new FTC report comes on the heels of new research commissioned by PCMA and conducted by the Lewin Group finding that mail-service pharmacies provide savings of 10 percent compared to retail pharmacies based on a review of the published evidence. According to Lewin, at its current level of market penetration, mail-service will save the health care system $78.9 billion in drug expenditures from 2006-2015. This includes $44.3 billion for Medicare and $34.6 billion for the commercial sector. If all prescriptions that could appropriately be filled through mail-service were filled through mail-service, Lewin estimates that drug expenditures would be reduced by an additional $99 billion from 2006-2015. This includes $42.2 billion for Medicare and $56.8 billion for the commercial sector. The cumulative savings that mail-service pharmacies could provide the health system during the next ten years amounts to $177.9 billion, based on existing and potential mail-service market penetration. The complete Lewin study, “Mail-Service Pharmacy Savings: A Ten-Year Outlook for Public and Private Healthcare Purchasers,” is available on PCMA’s website at www.pcmanet.org.

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The Pharmaceutical Care Management Association (PCMA) is the national trade association representing America’s pharmaceutical benefit managers (PBMs). PCMA member companies provide pharmaceutical care management services to more than 200 million Americans.

Contact Information:
Phil Blando
202-207-3614