The Great European Drug Drought: What MFN Means for America
As CANN and ADAP Advocacy shared in a joint statement against Connecticut's HB 6870, we warned legislators against "the base, ethical and economic cheapness of sacrificing tomorrow's lives for today's pennies." The European pharmaceutical access crisis provides concrete evidence of what America could experience under Most Favored Nation (MFN) price negotiations, where patients wait up to 989 days for approved treatments while pharmaceutical innovation migrates to Asia.
The data from Europe reveals a system in distress: only 29% of innovative medicines are fully available through EU reimbursement, down from 42% five years ago. This decline translates into life-threatening delays for patients, with those in Malta waiting nearly three years for new treatments while Germans wait four months, creating a geographic lottery where your passport determines your access to life-saving care.
Engineering a Pharmaceutical Desert
European International Reference Pricing mechanisms create precisely the downward spiral that current MFN executive orders would import to America. Twenty-six of 28 EU states use reference pricing systems, where countries systematically reference each other's prices in an interconnected web that drives pharmaceutical companies out of markets entirely.
The cascade effect reveals how a single policy decision triggers global consequences. Belgium references prices in the Netherlands, Germany, France, and the UK, taking the average to set maximum reimbursement rates. When Lithuania references Belgium's price and negotiates an even lower rate, those reductions automatically flow back through every system that references Lithuanian pricing, and round and round it goes. Research demonstrates that a 10% price reduction in Switzerland forces dozens of countries that reference Swiss prices to demand similar cuts, creating €495.2 million in additional global losses from that single initial reduction.
This interconnected pricing web forces pharmaceutical companies into difficult strategic positions that directly harm patients. For example, when a breakthrough hepatitis C cure could command €50,000+ per treatment in wealthy countries like Germany and France, but Poland negotiates for €15,000, companies face a choice: launch in Poland and watch Germany demand the same low price, or delay the Polish launch to protect higher-value markets. Pharmaceutical companies are compelled to act in the interest of their shareholders, and patients with hepatitis C develop cirrhosis or die waiting while companies and governments play pricing chess across borders.
Countries systematically exploit this system through 'free-riding' behavior, with wealthier nations deliberately referencing poorer countries' prices to secure discounts below their economic capacity. Nations reference varying numbers of other countries when setting drug prices, from as few as four countries (Netherlands) to all other EU countries (Belgium), creating a complex web where no country wants to be the highest price in anyone else's reference basket. One consequence of these pricing games is less investment: studies demonstrate that a 10% price drop in the EU correlates with a 14% decrease in venture capital biomedical funding, showing how European pricing policies directly undermine global pharmaceutical development.
Michiel Peters from the Global Coalition on Aging, who brings EU policy experience to his current advocacy role, warned in our interview that this system creates inevitable consequences: "What you're likely to see is just a smaller total amount of money going into biopharmaceutical research leading to a smaller pipeline of drugs in the future." European governments treat breakthrough medicines as commodities rather than recognizing their unique value, systematically destroying the economic foundation that makes pharmaceutical innovation possible.
Corporate Flight Accelerates Under Pricing Pressure
The reference pricing spiral has triggered an unprecedented corporate exodus from European markets, with major pharmaceutical companies choosing public confrontation over traditional behind-the-scenes negotiations. This shift has been accelerated by Trump Administration threats to implement MFN pricing that would tie U.S. prices to European levels, creating additional pressure for companies to establish pricing precedents that protect their American revenue streams.
Take, for instance, Bristol Myers Squibb's September 2025 announcement. The company declared it would launch Cobenfy at full U.S. pricing ($22,200 annually) in the UK, explicitly threatening to "walk away" if UK authorities refused to recognize the value of the first novel schizophrenia treatment in 70 years. This represents a fundamental shift from accepting European pricing terms to demanding recognition of the value of innovative treatments.
The UK's deteriorating investment climate illustrates how pricing pressures create economically unsustainable market conditions. Under the Voluntary Pricing Agreement, pharmaceutical companies must pay rebates to the NHS when industry sales exceed predetermined growth rates. These repayment rates have escalated beyond reason, from just 5.1% of revenue in 2021 to 26.5% in 2023. Companies must now return more than a quarter of their UK revenue to the government, making market participation economically untenable. Both AbbVie and Eli Lilly withdrew from the agreement entirely in January 2023, with Eli Lilly stating the scheme "has harmed innovation, with costs spiraling out of control."
The cumulative effect is a pharmaceutical industry in retreat. Novartis CEO Vas Narasimhan warned that "30 to 40 percent of cancer drugs are delayed or not launched on the European market at all," with this proportion expected to increase as pricing pressures intensify. The UK has fallen from 4th to 98th place in overall pharmaceutical trade balance since 2010, reflecting the systematic hollowing out of European pharmaceutical markets under aggressive pricing policies.
The Cost of Withheld Access
Behind these policy failures are people whose lives depend on accessing breakthrough treatments, but who find themselves trapped in bureaucratic systems that prioritize budget control over medical necessity. Take Estonian cancer patient Kadri Tennosaar for example. She required €20,000 for three months of Enhertu treatment for metastatic breast cancer. Despite the European Medicines Agency (EMA) approving Enhertu in January 2021, Estonia's government refused reimbursement, forcing her to seek treatment through charity. Her situation illustrates how European "universal healthcare" systems systematically exclude the treatments patients need most.
Romania has developed an even more troubling solution: systematic reliance on court orders for cancer treatment access. Over 1,000 people received medications through legal action in 2023, with courts consistently ruling in favor of patients seeking approved treatments. This judicial intervention effectively acknowledges that Romania's formal reimbursement system fails to provide medically necessary care, forcing dying patients into litigation to access drugs their doctors have prescribed and European regulators have approved.
The system's fundamental contradictions become clear when European patients living under universal healthcare systems resort to American-style fundraising for medical care. As Peters observed in our interview, "European patients will still start a GoFundMe to get an innovative treatment in the US because…if you're dying of a rare disease you're not going to wait 600 days." That 600-day figure represents the average time from regulatory approval to patient availability across EU countries. That’s nearly three years for treatments already deemed safe and effective by European regulators. For patients with aggressive cancers or degenerative diseases, these delays often mean death.
America's IRA Lessons Preview MFN's Future
The Inflation Reduction Act's differential treatment of small molecules versus biologics provides real-time evidence of how pricing policies reshape innovation incentives, offering a preview of MFN's likely effects. Investment in small molecules has declined 70% since September 2021, with the University of Chicago projecting this will result in 188 fewer small molecule treatments over 20 years, leading to 116 million life-years lost.
Small molecules remain particularly critical for neurological diseases like Alzheimer's and Parkinson's, which require blood-brain barrier penetration that biologics cannot achieve. The National Pharmaceutical Council found that 77% of investors report the IRA's "pill penalty" creates a disincentive for small molecule investing, with venture capital flowing overwhelmingly toward biologics. This shift away from small molecules threatens entire categories of medical innovation precisely when aging populations need breakthrough treatments for neurological conditions most.
Meanwhile, China has emerged as the global innovation leader. China's pharmaceutical contribution to the global R&D pipeline has increased from 4% in 2013 to 28% in 2023, surpassing Europe and ranking second only to the United States. From 2019-2023, China led globally with 256 new drug approvals, ahead of the US (243) and EU (191). The funding patterns confirm this shift. China accounts for over 75% of all biotech VC/PE funding in Asia-Pacific since 2019, with late-stage expansion rounds increasing 1.5x from 2019-2024. This demonstrates the systematic migration of pharmaceutical investment toward Asian markets as Western pricing policies make innovation economically unviable in traditional centers of drug development.
MFN: Importing Europe's Failures Through Executive Order
Current MFN executive orders, which have attracted bipartisan Congressional support, would import these European failures directly into American Medicare and Medicaid programs. The fundamental premise, that forcing pharmaceutical companies to accept European prices will reduce costs without affecting innovation, ignores overwhelming evidence of investment withdrawal and patient access failures across Europe.
The United States market accounts for 64% to 78% of worldwide pharmaceutical profits, making the European model economically impossible to replicate without devastating consequences for future drug development. As our previous analysis pointed out, "Europe won't catch up. Neither will China. No other country is prepared to step into the innovation gap the United States represents." Eliminating American profit margins means eliminating the economic foundation that funds global pharmaceutical research.
The projected consequences align with European experience. The CMS Office of the Actuary projected that 9%-19% of drugs would be inaccessible under the 2020 MFN proposal because manufacturers would not sell products at MFN prices, with the American Society of Clinical Oncology's analysis indicating that up to 19% of Medicare beneficiaries would lose access to care. These projections mirror current European realities, where patients routinely face treatment delays, denials, and geographic access barriers under government-controlled pricing systems.
Innovation is Access
For people living with HIV, cancer, rare diseases, and other life-threatening conditions, access to novel treatments represents the difference between survival and suffering. European pricing policies demonstrate that short-term cost savings achieved through price controls create long-term access barriers that cost far more in human suffering and economic burden than the original pharmaceutical investments.
The European experience reveals a brutal truth: government-controlled pricing systematically eliminates the treatments patients need most. Estonian cancer patients rely on charity. Romanian patients require court orders. European patients start GoFundMe campaigns to access treatments readily available in America. These policies have transformed medical innovation into a geographic lottery where your passport determines your survival prospects.
U.S. MFN policies follow the same flawed logic, promising immediate savings while systematically destroying the economic foundation that makes future cures possible. The 70% collapse in small molecule research since the IRA, combined with China's emergence as the global innovation leader, proves that pricing policies have consequences extending far beyond budget spreadsheets into the fundamental question of which countries will develop tomorrow's treatments, if they are developed at all.
Europe's pharmaceutical desert offers a preview of America's future under MFN: innovation migrating eastward, patients waiting years for approved treatments, and governments prioritizing short-term savings over long-term survival. America faces a hard choice: maintain our position as the country where breakthrough treatments emerge and are accessed first, or follow Europe's path toward innovation rationing and access lotteries. That future remains avoidable, but only if we choose innovation over rationing, access over austerity, and tomorrow's cures over today's pennies.
FTC Exposes PBM Price Gouging of Specialty Generic Drugs
The Federal Trade Commission's (FTC) second interim staff report confirms what patient advocates have long suspected: the three largest pharmacy benefit managers (PBM)—CVS Caremark, Express Scripts, and OptumRx—are systematically price-gouging specialty generic drugs, putting profits over patient access to life-saving medications. The report documents how these PBMs abuse their market power to generate billions in excess revenue at the expense of people who rely on these medications to survive.
This comprehensive analysis examines 51 specialty generic drugs—a significant expansion from the two drugs analyzed in the FTC's July 2024 report. The findings are damning: PBM-affiliated pharmacies extracted over $7.3 billion in revenue above estimated acquisition costs for these medications between 2017-2022, with this excess revenue growing at a staggering 42% annual rate. This is not market efficiency—it's profiteering.
The report's unanimous approval by FTC commissioners, including incoming Chair Andrew Ferguson, reflects the undeniable nature of these abusive practices. The evidence shows PBMs are deliberately inflating costs for medications that treat HIV, cancer, multiple sclerosis, and other serious conditions, creating unnecessary barriers to care while padding their own profits. For those of us fighting to protect access to care, this report provides irrefutable evidence that PBM reform cannot wait. The breadth and depth of documented abuses demand immediate action to stop practices that threaten both patient health outcomes and public health goals.
Key Findings: Systematic Price Gouging and Patient Steering
The FTC's analysis exposes a deliberate pattern of excessive markups on specialty generic medications that would be illegal in most other industries. A staggering 63% of specialty generic drugs dispensed by PBM-affiliated pharmacies for commercial health plan members were marked up more than 100% over acquisition costs between 2020 and 2022. Even more egregious, PBMs marked up 22% of these medications by more than 1,000%—an indefensible practice when dealing with life-saving medications.
These markups weren't random—they targeted critical medications across multiple therapeutic categories where patients have few alternatives:
Cancer treatments: $3.3 billion in excess revenue (44% of total)
Multiple sclerosis medications: $1.8 billion (25%)
Transplant medications: $824 million (11%)
HIV medications: $521 million (8%)
Pulmonary hypertension treatments: $432 million (7%)
The investigation also uncovered clear evidence of patient steering. While PBM-affiliated pharmacies filled 44% of commercial specialty generic prescriptions overall during 2020-2022, they commandeered 72% of prescriptions for drugs marked up more than $1,000 per prescription. This disparity reveals how PBMs systematically funnel high-profit prescriptions to their own pharmacies.
Beyond these markup practices, PBMs extracted an additional $1.4 billion through spread pricing—billing plan sponsors more than they reimburse pharmacies for medications. Most of this spread pricing revenue (97%) came from commercial prescriptions filled at unaffiliated pharmacies—a clear demonstration of how PBMs exploit their market position to profit from competing pharmacies while simultaneously steering patients to their own dispensing operations. This dual strategy of profiting from independent pharmacies while actively working to put them out of business reveals the anti-competitive impact of vertical integration in the pharmacy sector.
These practices have become central to PBM business models. Operating income from PBM-affiliated pharmacy dispensing of these specialty generic drugs accounted for 12% of their parent healthcare conglomerates' relevant business segment operating income in 2021, up from less than 8% just two years earlier. The top 10 specialty generic drugs alone represented nearly 11% of this operating income.
This isn't a case of a few isolated pricing anomalies. The FTC's analysis reveals a systematic campaign to extract maximum profit from medications people need to survive. These practices have become a major profit center for vertically integrated PBMs, deliberately trading patient access for corporate profits.
The Human Cost: Exploiting HIV Care Access
The FTC's findings expose how PBMs are actively undermining decades of progress in HIV care and prevention. PBMs extracted $521 million in excess revenue from HIV medications alone—representing 8% of total excess revenue despite these drugs comprising a smaller portion of prescriptions. This targeted exploitation of HIV medications reveals a calculated strategy to profit from a vulnerable population.
The FTC report documents troubling markup patterns affecting every level of HIV treatment. Take lamivudine (generic Epivir) as an example - PBM-affiliated pharmacies marked up this essential medication by 168-197% compared to acquisition costs. This level of markup isn't unique to lamivudine but represents a systematic practice affecting the full spectrum of HIV medications, from single-drug therapies to combination treatments. For people living with HIV who often require multiple medications as part of their treatment regimen, these markups create compounding barriers to care access.
Beyond the pricing abuse, PBM steering practices actively disrupt HIV care by forcing people living with HIV away from specialized pharmacies that understand their needs. These community pharmacies provide essential services that PBM-owned pharmacies often fail to match:
Experienced HIV medication counseling
Critical adherence support
Care coordination with HIV specialists
Navigation of assistance programs
Culturally competent care
For Medicare Part D beneficiaries living with HIV, the situation is particularly egregious. Despite "any willing pharmacy" protections meant to preserve patient choice, PBMs use discriminatory reimbursement practices to force independent pharmacies to either accept unsustainable payment rates or abandon their patients. This deliberately undermines pharmacies serving communities most impacted by HIV.
PrEP Profiteering
The FTC report reveals perhaps the most cynical PBM practice yet: marking up generic PrEP by over 1,000% above acquisition costs. This price gouging of HIV prevention medication directly sabotages public health efforts to end the HIV epidemic. In an era when expanding PrEP access is critical to preventing HIV transmission, PBMs are creating artificial barriers to a medication that should be becoming more affordable through generic availability.
While the Affordable Care Act requires most private insurance plans to cover PrEP without cost-sharing (for now), PBM markup practices drive up overall healthcare costs through inflated plan sponsor payments. This leads to higher premiums that can make insurance itself unaffordable for many people who need PrEP coverage.
The forced migration to PBM-owned pharmacies compounds the damage by separating people from community pharmacies that have developed comprehensive PrEP care programs. These specialized pharmacies don't just dispense medication - they provide an integrated set of essential services including regular HIV testing, STI screening coordination, adherence support and counseling, benefits navigation, and ongoing coordination with healthcare providers. PBM-owned pharmacies typically lack these specialized services, creating gaps in PrEP care that can affect both initiation and adherence. By disrupting these established care relationships, PBM steering practices threaten the comprehensive support system that helps keep people engaged in PrEP care. The FTC's findings prove that PBM practices are actively working against HIV prevention goals by creating unnecessary barriers to PrEP access and fragmenting PrEP care delivery.
Political Landscape: Reform Momentum Meets Industry Resistance
The unanimous FTC commissioner support for the second interim report, including incoming FTC Chair Andrew Ferguson's concurring statement, reflects the undeniable nature of PBM abuses. President Trump's rhetoric about "knocking out the middleman" suggests potential executive branch support for reform, but previous promises of action on drug pricing require skeptical assessment.
The December 2024 failure of comprehensive PBM reform legislation reveals the industry's continued influence over the legislative process. Despite bipartisan support, PBMs and their allies successfully stripped crucial reforms from the federal funding bill that would have:
Required pass-through of all rebates to Medicare sponsors and group health plans
Prohibited excessive billing of Medicaid programs
Mandated transparency in drug spending practices
Protected patient choice in pharmacy selection
Current legislative proposals like the PBM Act, introduced by Senators Warren and Hawley, target the fundamental problem of vertical integration by prohibiting joint ownership of PBMs and pharmacies. This structural approach directly addresses the conflicts of interest documented in the FTC report.
While narrow Republican majorities in Congress create opportunities for bipartisan action, the PBM industry's demonstrated ability to derail reform efforts demands sustained advocacy pressure. The challenge isn't finding solutions—it's overcoming industry resistance to implementing them.
State-Level Response: Why Price Controls Miss the Mark
The FTC's detailed analysis of PBM practices provides compelling evidence for why Prescription Drug Affordability Boards (PDABs) are fundamentally misaligned with addressing drug affordability issues. The report documents that PBM-affiliated pharmacies generated over $7.3 billion in revenue above estimated acquisition costs on specialty generic drugs—a problem that stems from markup practices and vertical integration rather than base drug prices.
Take, for example, the pulmonary hypertension drug tadalafil (generic Adcirca). The FTC found that in 2022, while pharmacies purchased the drug at an average cost of $27, PBMs marked it up by $2,079, resulting in a reimbursement rate of $2,106 for a 30-day supply—a markup exceeding 7,700%. A PDAB focusing on upper payment limits would fail to address these markup practices or the steering mechanisms that drive prescriptions to PBM-affiliated pharmacies where such markups occur.
Similarly, the report's findings on multiple sclerosis medications illustrate the inadequacy of the PDAB approach. For dimethyl fumarate (generic Tecfidera), PBMs marked up the drug by $3,753 over its $177 acquisition cost—a 2,100% increase. This markup occurred through PBM practices that PDABs have no authority to regulate or control.
The FTC's analysis of spread pricing further undermines the PDAB model. PBMs generated approximately $1.4 billion through spread pricing on these specialty generic drugs, with 97% coming from commercial claims. PDABs, focused on manufacturer prices rather than PBM practices, would do nothing to address this significant source of cost inflation.
Moreover, PDABs could exacerbate existing market distortions. The report documents that PBM-affiliated pharmacies already handle 72% of prescriptions for drugs marked up more than $1,000 per prescription, despite filling only 44% of commercial specialty generic prescriptions overall. Adding PDAB-imposed price controls could result in pharmacy under-reimbursement. This would be financially detrimental, disproportionately so for independent pharmacies, resulting in pharmacy closures. Pharmacy closures would only increase the market concentration of PBM-affiliated pharmacies. Additionally, a PDAB-imposed Upper Payment Limit (UPL) could lead a PBM to enforce utilization management policies which would increase practitioners' administrative burden.
The evidence demands solutions that directly address PBM pricing practices, vertical integration, and market consolidation—not ineffective state-level price control boards that may actually strengthen PBMs' market position while failing to protect patient interests.
The Path Forward: Ending PBM Abuse
The FTC's comprehensive report demands immediate legislative action to dismantle PBM practices that systematically undermine patient care and inflate healthcare costs. Based on the documented evidence, reform must target three critical areas:
Dismantling Anti-Patient Practices
Prohibit PBMs from forcing patients into proprietary pharmacy networks
Ban exclusionary network designs that restrict patient choice
Eliminate spread pricing mechanisms
Terminate retroactive pharmacy reimbursement clawbacks
Prevent prescription steering practices that disrupt established care relationships
Establishing Real Accountability
Create federal oversight with clear investigative and enforcement powers
Mandate comprehensive transparency in PBM revenue streams
Implement rigorous contract review processes for health plans
Develop meaningful penalties for violations that harm patient care
Protecting Specialized Care
Guarantee patient pharmacy selection autonomy
Preserve continuity of care for chronic condition management
Safeguard community pharmacies providing specialized services
Ensure access to providers with deep therapeutic expertise
Protect pharmacies serving vulnerable and marginalized communities
The FTC's findings provide irrefutable evidence of systematic abuse. Ineffective approaches like Prescription Drug Affordability Boards (PDABs) and industry self-regulation have failed. Federal legislation with clear enforcement mechanisms is the only path to stopping these harmful practices and protecting patient access to care.
Healthcare advocates must sustain pressure on Congress and the new administration to implement comprehensive reforms. The time for incremental compromises has passed. We need decisive action to end PBM practices that prioritize corporate profits over patient health.
FTC Sues Major PBMs for Unfair Practices Affecting Drug Costs
Pharmacy Benefit Managers (PBMs) have long been influential yet often obscure intermediaries in pharmaceutical pricing and distribution. They negotiate drug prices with manufacturers, develop formularies for health plans, and manage pharmacy networks. Today, the three largest—CVS Caremark, Express Scripts, and OptumRx—control about 80% of the market.
On September 20, 2024, the Federal Trade Commission (FTC) filed an administrative complaint against these major PBMs and their affiliated group purchasing organizations (GPOs). The complaint alleges that they engaged in anticompetitive and unfair rebating practices, artificially inflating insulin prices and impairing access to lower-cost alternatives.
The FTC's action marks a critical juncture in the struggle for fair drug pricing and access, emphasizing the need for robust enforcement and comprehensive PBM reform. The outcome could reshape the healthcare industry and significantly impact care across the United States.
The FTC's Case Against PBMs
The FTC alleges that PBMs have engaged in anticompetitive and unfair rebating practices that have artificially inflated the list prices of insulin and other essential medications. Grounded in Section 5 of the Federal Trade Commission Act, which prohibits unfair competition and deceptive practices, the FTC asserts that PBMs' rebate strategies and patient steering harm consumers and competition.
For example, the list price of Humalog, a widely used insulin product, increased from $21 in 1999 to over $274 in 2017—a rise of more than 1,200%. The FTC argues that this dramatic inflation is linked to PBMs' "chase-the-rebate" strategy, where they demand larger rebates from manufacturers in exchange for favorable formulary placement.
Another key aspect of the complaint focuses on patient steering practices. The FTC alleges that PBMs have systematically excluded lower-cost insulin alternatives from their formularies in favor of higher-priced options that generate larger rebates. This practice limits choice and forces many to pay more out-of-pocket for their medications.
Rahul Rao, Deputy Director of the FTC's Bureau of Competition, emphasized: "Millions of Americans with diabetes need insulin to survive, yet for many of these vulnerable patients, their insulin drug costs have skyrocketed over the past decade thanks in part to powerful PBMs and their greed."
The FTC seeks to fundamentally change how PBMs operate. The complaint aims to prohibit PBMs from excluding or disadvantaging lower-cost versions of drugs, prevent them from accepting compensation based on a drug's list price, and stop them from designing benefit plans that base out-of-pocket costs on inflated list prices rather than net costs.
FTC Chair Lina Khan stated, "The FTC's administrative action seeks to put an end to the Big Three PBMs' exploitative conduct and marks an important step in fixing a broken system—a fix that could ripple beyond the insulin market and restore healthy competition to drive down drug prices for consumers."
Impact on People Living with HIV
While the FTC's case primarily focuses on insulin pricing, PBM practices significantly affect people living with HIV (PLWH) and other chronic conditions. Recent cases highlight the challenges faced in accessing affordable medications due to PBM and insurer practices.
In April 2024, CVS Health failed in its latest attempt to dismiss a class action lawsuit alleging discrimination against PLWH by requiring them to receive medications via mail order, limiting access to essential pharmacy services and counseling. U.S. District Judge Edward Chen noted that CVS was on notice that this program could likely discriminate against PLWH, as plaintiffs had repeatedly requested to opt out.
In another case, the U.S. Department of Health and Human Services Office for Civil Rights (OCR) closed a complaint without penalties against Blue Cross Blue Shield of North Carolina (BCBS NC) after the insurer lowered the pricing tier for HIV medications. The original complaint alleged that BCBS NC had placed almost all HIV antiretroviral medications, including generics, on the highest-cost prescription tiers.
While BCBS NC changed its formulary, the lack of penalties raises concerns about enforcement and accountability. Carl Schmid, executive director of the HIV+Hepatitis Policy Institute, expressed disappointment: "It was incredibly disheartening and deeply concerning to see them let the state's largest insurer get away with such blatant discrimination."
These cases illustrate how PBM practices and insurer policies create significant barriers to care for people living with HIV. High out-of-pocket costs, restricted pharmacy access, and discriminatory formulary designs can lead to medication non-adherence, resulting in adverse health outcomes and increased healthcare costs in the long term.
In North Carolina, about 37,000 people are living with HIV, with Black people representing 58% of new HIV diagnoses despite being only 22% of the state's population. Nationally, according to the Centers for Disease Control and Prevention (CDC), approximately 1.2 million people in the United States are living with HIV. PBM practices that inflate drug costs or limit access exacerbate these disparities and hinder efforts to end the HIV epidemic.
PBM Practices Under Scrutiny
The FTC's complaint has brought controversial PBM practices into sharp focus, highlighting concerns long raised by patients, healthcare providers, and policymakers.
The FTC's interim staff report reveals that PBMs often prioritize higher rebates over lower net prices, leading to exclusion of lower-cost alternatives and driving up drug prices—a practice known as "rebate walls." Patient steering directs consumers to PBM-owned pharmacies, limiting choice and disadvantaging independent pharmacies.
A Congressional hearing in July 2024 further exposed these issues. PBM executives faced tough questioning about their role in rising prescription drug costs. Lawmakers pressed the executives on how PBMs have monopolized the pharmaceutical marketplace and pushed anticompetitive policies that undermine local pharmacies and harm patients.
Representative Virginia Foxx (R-N.C.) highlighted the lack of transparency, questioning PBM executives about the pass-through of rebates and fees to plan sponsors. The executives' responses did little to clarify the complex and opaque financial flows within the PBM industry.
PBMs defend their practices as necessary for managing drug costs. Phil Blando, Executive Director for Corporate Communications at CVS Caremark, stated, "We work to negotiate the lowest net cost for drugs... driving better health outcomes and lower out-of-pocket costs for consumers." However, critics argue that these claimed benefits are not reflected in patient experiences or overall drug pricing trends.
Real-World Impact on Patients and Pharmacies
Jeremy G. Counts, PharmD, a spokesperson for Pharmacists United for Truth and Transparency (PUTT), explains that the vertical integration of the Big Three PBMs allows them to limit access through restrictive networks, under-reimbursement, and aggressive patient steering. These practices harm independent pharmacies and jeopardize health by disrupting continuity of care.
Restrictive Networks and Steering: PBMs often require patients to use their own pharmacies, frequently through mail order, misleading them into believing they have no other options. Even when plans allow the use of independent pharmacies, PBMs make it tedious to opt out, effectively limiting choice.
Under-Reimbursement and Clawbacks: Independent pharmacies that serve patients despite low reimbursements face financial strain. PBMs may pay below cost or use fees and recoupment methods to claw back margins, forcing some pharmacies to turn away patients.
Barriers to Medication Access: PBMs impose onerous prior authorization processes for medications that do not provide them with high rebates, delaying care and increasing costs. Counts notes that this has become a deadly issue in oncology care.
Aggressive Patient Pursuit: For profitable medications, PBMs aggressively pursue patients and their prescriptions, sometimes transferring prescriptions without permission or shipping medications without their knowledge.
These practices not only harm independent pharmacies but also jeopardize health by disrupting access to necessary medications.
Healthcare consultant Rita Numerof calls the FTC's investigation a "pivotal moment" in reforming the industry to serve patients' best interests.
The Need for Enforcement
The lack of punitive action in cases like the BCBS NC complaint raises concerns about the effectiveness of current enforcement mechanisms. Carl Schmid of the HIV+Hepatitis Policy Institute pointed out, "Without action to improve federal and state regulation, oversight, and enforcement, such discriminatory practices will continue." The BCBS NC case demonstrates that while policy changes can be achieved through advocacy and complaints, there is often little consequence for discriminatory practices.
Counts emphasizes that "PBMs are masters at derailing legislative attempts to rein them in." He argues that FTC enforcement is critical, as PBMs often ignore laws unless compelled to comply. Counts asserts that attacking the problem from multiple fronts is essential, and FTC action provides immediate and targeted intervention.
PBM Response and Industry Perspective
In response to mounting scrutiny, PBM executives have defended their practices. During the July 2024 Congressional hearing, leaders from CVS Caremark, Express Scripts, and OptumRx maintained that they do not engage in patient steering or discriminatory practices. They argued that PBMs play a crucial role in negotiating lower drug prices and improving healthcare affordability.
David Joyner, president of CVS Caremark, stated, "We're making health care more affordable and accessible for the millions of people we serve every day."
However, these assertions have been met with skepticism. The House Committee on Oversight and Accountability, led by Chairman James Comer (R-Ky.), has accused PBM executives of making statements that contradict findings about self-benefitting practices.
Legislative Efforts: The Pharmacists Fight Back Act
In addition to regulatory actions by the FTC, legislative initiatives are crucial for comprehensive reform. The Pharmacists Fight Back Act (H.R. 9096), introduced by Representatives Jake Auchincloss (D-MA) and Diana Harshbarger (R-TN), aims to:
Establish Standard Pharmacy Reimbursement:
Proposes a reimbursement model based on the National Average Drug Acquisition Cost (NADAC) plus a state dispensing fee and an additional 2%. This model prevents underpayment to independent pharmacies and curbs price gouging by PBM-owned pharmacies.
Prohibit Predatory PBM Tactics:
Seeks to ban practices such as steering patients to PBM-owned pharmacies, exclusionary network designs, retroactive fees, spread pricing, and reimbursement clawbacks.
Mandate Rebate Transparency and Application:
Requires that 80% of all PBM-negotiated rebates and fees reduce patients' out-of-pocket costs, with the remaining 20% lowering insurance premiums.
Counts stresses the urgency of passing this legislation to save pharmacies and reduce drug pricing: "Its immediate passage is critical to stopping the pharmacy closure and drug pricing crisis in this country."
Potential Outcomes and Industry Impact
If successful, the FTC's action could reshape the pharmaceutical industry by forcing PBMs to prioritize lower net drug prices, benefiting patients with more affordable medications and increased pharmacy choice. A ruling against PBMs could set a legal precedent, opening the door for further regulatory action or private lawsuits against PBMs and other healthcare intermediaries.
Independent pharmacies stand to benefit considerably from potential reforms. If the FTC's action results in more transparent pricing practices and limitations on patient steering, these businesses may be better able to compete with PBM-owned pharmacies.
However, given PBMs' significant resources and influence, changes may be hard-fought and take time to implement. There is the possibility that PBMs may find new ways to maintain their market position and profitability.
Impact on Independent Pharmacies
Independent pharmacies are closing at an alarming rate—nine per day, with 2,275 closures so far in 2024. This trend reduces access to personalized care and diminishes competition, further consolidating PBMs' market power.
Counts conducted a study in Virginia, matching pharmacy closures against openings using data from the Virginia Board of Pharmacy. He found that "community pharmacies are closing at twice the rate they are opening, and this rate is accelerating." Without significant reform, including FTC enforcement and the passage of H.R. 9096, the pharmacy infrastructure in the United States will continue to erode.
Conclusion and Call to Action
The FTC's actions, along with legislative efforts like the Pharmacists Fight Back Act, are critical steps toward creating a fairer pharmaceutical industry that prioritizes access and affordability.
We urge readers to:
Stay Informed: Follow developments in PBM regulation and reform efforts.
Research Legislation: Contact your representatives to inquire about pending legislation.
Engage with Advocacy Groups: Support organizations like PUTT (www.truthrx.org) and the HIV+Hepatitis Policy Institute (www.hivhep.org).
Share Experiences: Raise awareness by sharing your experiences with PBM practices. PUTT is collecting stories to highlight the real-world impact of PBM practices. Visit their PBM Horror Stories page to share your story anonymously.
Collective action is essential to ensure meaningful and lasting change in drug pricing and access. The FTC's action is a significant step, but it's up to all of us to ensure this momentum leads to a more transparent, equitable, and patient-centered healthcare system in the United States.