Quick summary
• The Federal Trade Commission (FTC) released a report showing that pharmacy benefit managers (PBMs) marked up specialty generic drug prices by up to 7,736 percent between 2017 and 2022.
• The three largest PBMs—Caremark, Express Scripts, and OptumRx—generated more than $7.3 billion in revenue from inflated markups during that period.
• PBMs reimbursed their affiliated pharmacies significantly higher than unaffiliated ones for specialty drugs used to treat cancer, heart disease, and HIV.
• For a pulmonary hypertension drug, tadalafil, PBMs purchased it at an average cost of $27 but reimbursed their pharmacies $2,106 for a 30-day supply.
• The report highlights that PBMs are profiting at the expense of patients and health plan sponsors, driving up healthcare costs across the system.
• Critics, including FTC Chair Lina Khan, argue that PBMs’ practices inflate drug prices and harm patient access to affordable medications.
• PBMs have dismissed the report as misleading, claiming their practices lower overall drug costs for patients and plan sponsors.
As the U.S. healthcare system grapples with rising drug prices, a new report from the Federal Trade Commission (FTC) reveals how pharmacy benefit managers (PBMs) are significantly driving up costs for life-saving medications. The report sheds light on massive price markups by the three largest PBMs—CVS Health’s Caremark Rx, Cigna’s Express Scripts, and UnitedHealth Group’s OptumRx—raising urgent calls for reform from policymakers and patient advocates.
The FTC’s second interim staff report, published Tuesday, focuses on the manipulative pricing practices of PBMs concerning specialty generic drugs. It highlights the staggering profits these middlemen are making by inflating the prices of critical medications, often at the expense of patients, independent pharmacies, and healthcare plan sponsors.
Between 2020 and 2022, the report found that the Big Three PBMs marked up prices for specialty generic drugs dispensed through their affiliated pharmacies by hundreds—and sometimes thousands—of percent. In one of the most shocking examples, pharmacies purchased the pulmonary hypertension drug tadalafil (generic Adcirca) for an average of $27 in 2022, but PBMs marked up the drug by an average of $2,079, charging patients $2,106 for a 30-day supply. That amounts to an astronomical markup of 7,736 percent.
“For the pulmonary hypertension drug tadalafil, pharmacies purchased the drug at an average of $27 in 2022, yet the Big Three PBMs marked up the drug by $2,079 and paid their affiliated pharmacies $2,106, on average, for a 30-day supply of the medication on commercial claims,” the report notes.
The FTC report reveals that 63 of specialty generic drugs analyzed were reimbursed at rates more than 100% higher than the estimated acquisition costs, and 22 percent were marked up by over 1,000 percent.
“The FTC’s second interim report lays bare the blatant profiteering by PBM giants,” said Emma Freer, senior policy analyst for healthcare at the American Economic Liberties Project. “By steering prescriptions for the most expensive specialty generic drugs to their own pharmacies, PBMs are raking in billions in excess revenue—$7.3 billion over just five years—while squeezing independent pharmacies and leaving patients and health plan sponsors with skyrocketing costs.”
The report shows that between 2017 and 2022, PBMs and their affiliated specialty pharmacies generated more than $7.3 billion in revenue from dispensing drugs at marked-up prices. This revenue came from reimbursing their own pharmacies at rates significantly higher than the estimated acquisition costs of the drugs.
“The Big Three PBMs netted such significant revenues all while patient, employer, and other healthcare plan sponsor payments for drugs steadily increased annually,” the FTC stated.
PBM representatives have dismissed the report’s findings as misleading and have defended their practices. Greg Lopes, spokesperson for the Pharmaceutical Care Management Association, a PBM lobbying group, claimed the report failed to account for the broader prescription drug supply chain.
“It’s clear this report again fails to consider the entirety of the prescription drug supply chain and makes sweeping assertions about the role of PBMs disconnected from a full appreciation of their critical cost-saving role for employers, unions, taxpayers, and patients,” Lopes said.
OptumRx, one of the Big Three PBMs, argued that it helps reduce drug costs. “Optum is lowering the cost of specialty medications, which comprises half of all drug expenditures, and providing clinical expertise, programs, and support for patients with complex and rare conditions,” the company stated, adding that it helped eligible patients save $1.3 billion in 2024, with a median out-of-pocket payment of $5.
Caremark, the PBM arm of CVS Health, claimed the FTC cherry-picked data. “The agency cherry-picked specialty generic outliers,” Caremark said in a statement. “It is inappropriate and misleading to draw broad conclusions.”
Express Scripts, part of Cigna, also criticized the report. “Nothing in the FTC’s report addresses the underlying cause of increasing drug prices or helps employers, unions, and municipalities keep prescription benefits affordable for their members,” the company stated.
The FTC’s findings have intensified calls for legislative action to regulate PBMs and increase transparency. The Pharmacy Benefit Manager Transparency Act of 2023, introduced by U.S. Senators Maria Cantwell (D-Wash.) and Chuck Grassley (R-Iowa), aims to address PBM practices that inflate drug prices.
The bill, which has the backing of AARP, seeks to require PBMs to disclose pricing information and pass rebates to health plan sponsors. Advocates argue that the current PBM system allows for exploitative practices that hurt patients and independent pharmacies.
“The FTC staff’s second interim report finds that the three major pharmacy benefit managers hiked costs for a wide range of lifesaving drugs, including medications to treat heart disease and cancer,” FTC Chair Lina Khan said in a statement. “The FTC should keep using its tools to investigate practices that may inflate drug costs, squeeze independent pharmacies, and deprive Americans of affordable, accessible healthcare—and should act swiftly to stop any illegal conduct.”
However, Khan’s tenure as FTC chair is coming to an end with the upcoming inauguration of President-elect Donald Trump, who has appointed Andrew Ferguson as the next FTC chair. Advocates are concerned that the agency’s focus on PBMs could shift under new leadership.
The FTC launched its investigation into PBM practices in 2022. Last July, the agency released an initial report highlighting how the Big Three PBMs have consolidated power in the industry, processing nearly 80% of the approximately 6.6 billion prescriptions filled in the U.S. in 2023.
Following the first report, the FTC sued Caremark, Express Scripts, and OptumRx for allegedly inflating insulin list prices through anticompetitive practices.
Healthcare advocates argue that the FTC report is a clear indication of the urgent need for regulatory action. Emma Freer of the American Economic Liberties Project emphasized that policymakers must act swiftly to dismantle the exploitative schemes employed by PBMs.
“This report is a call to action for policymakers to dismantle these exploitative schemes, outlaw the rebate system driving up prices, and restore fairness and affordability to the U.S. healthcare system,” Freer said.
Hannah Garden-Monheit, Director of the FTC Office of Policy Planning, warned that the problem of PBM price inflation is growing at an alarming rate. “There is an urgent need for policymakers to address it,” she stated.
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