The FTC, Express Scripts, and the High Cost of Lower Copays
Nearly 17 months after the Federal Trade Commission filed suit against the nation’s three largest pharmacy benefit managers (PBMs), the agency has reached a settlement with one of them: Express Scripts. The complaint alleged that PBMs harmed competition and patients by inflating insulin prices.
PBMs negotiate drug prices with pharmaceutical manufacturers and pharmacies on behalf of private health plans and public programs, such as Medicare and Medicaid. They leverage pooled purchasing power across dozens of plans to secure discounts and determine which drugs appear on plan formularies, as well as their order of preference. CVS Caremark, Express Scripts, and Optum Rx—the PBMs named in the FTC’s complaint—are vertically integrated with major insurers: Aetna, Cigna, and UnitedHealth Group, respectively. Together, they account for roughly 80% of U.S. prescription volume.
Health plans that lack vertical integration with a PBM can still access this negotiating leverage by contracting with one of the large PBMs. Although some PBMs charge flat administrative fees, compensation typically depends on manufacturer rebates tied to formulary placement. That structure can “steer” patients toward higher-rebated drugs over lower-priced competitors.