A New Policy Report from the American Economic Liberties Project Catalogues the Harmful Effects of Pharmacy Benefit Managers on Patients and Pharmacists

Washington D.C. — On the heels of the Federal Trade Commission’s recently announced 6(b) study of pharmacy benefit mangers (PBMs), the American Economic Liberties Project today released a critical new explainer: The Pharmacy Benefit Mafia: The Secret Health Care Monopolies Jacking Up Drug Prices and Abusing Patients and Pharmacists. Designed to catalogue the ways PBMs wield their power to exploit patients, pharmacists, doctors and our government, the brief details PBMs’ abusive business practices, their history of skirting regulation, and how the FTC’s recent efforts can put power back into the hands of patients and pharmacists.

“Pharmacy benefit managers (PBMs) have been able to abuse their market power for far too long,” said Zach Freed, Advocacy and Outreach Manager at the American Economic Liberties Project. “Operating as unnecessary corporate middlemen, PBMs use unfair negotiating tactics to siphon money from community pharmacies and erode patient care. They get kickbacks from drug companies in the form of rebates, which drive up the price of essential medicines like insulin. This is a life and death matter for communities without pharmacy care and patients with chronic conditions. We are encouraged by the FTC’s bold and necessary action to rein in PBM abuse.”

If you’ve never heard of Pharmacy Benefit Managers, you’re not alone. PBMs were originally created to simply process drug claims for health insurance companies, but today they do much more. They bargain with pharmaceutical companies to determine drug prices, decide which drugs are covered by insurance, decide which pharmacies are in and out of a health insurer’s network, and decide how much you, the pharmacy, and your insurance company must pay for a drug. On top of this, they own pharmacies of their own, and they manage pharmaceutical benefits for government programs like Medicare Part D and Medicaid.

The PBM industry is highly consolidated, with the top three – Caremark, Express Scripts, and OptumRx – managing 80% of drug claims in the United States. This gives them enormous leverage over drug prices, patient choice, and independent pharmacies. The “big three” are also vertically integrated into the largest health insurance companies — Aetna, Cigna, and UnitedHealth Group. Their concentrated power gives them enormous leverage and incentive to self-deal in a way that harms patients, doctors, and independent pharmacies.

Until recently, the Federal Trade Commission enabled PBMs to become powerful by allowing a series of mergers that concentrated power in a small number of players. The agency also produced industry-friendly reports that have been cited by the PBM industry when arguing against regulation. Under Chair Lina Khan’s leadership, the FTC has turned a new corner, beginning work on a new PBM study that will allow the agency to correct the record and help bring in a new chapter where the agency protects fair competition in the pharmaceutical space.

Read “The Pharmacy Benefit Mafia: The Secret Health Care Monopolies Jacking Up Drug Prices and Abusing Patients and Pharmacists,” here.

Learn more about Economic Liberties here.

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 The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.