Warren and Hawley Want to Break Up Big Medicine. Here's What the Bill Actually Does.

On February 10, 2026, Sen. Elizabeth Warren (D-Mass.) and Sen. Josh Hawley (R-Mo.) introduced the Break Up Big Medicine Act, a bipartisan bill that would force the structural separation of healthcare conglomerates that simultaneously own insurance companies, pharmacy benefit managers (PBMs), pharmacies, physician practices, and drug wholesalers. The political pairing is unusual: a progressive Democrat and a populist Republican, finding common ground on the idea that a handful of corporate giants have rigged the healthcare supply chain in their own favor. The bill arrives as both parties scramble to address healthcare affordability ahead of the 2026 midterm elections, and just days after President Trump signed an appropriations package containing new PBM transparency rules and issued executive orders directing agencies to "reevaluate the role of middlemen" in prescription drug pricing. The political will to confront healthcare consolidation is clearly building. The question is whether this bill meets the moment.

What the Bill Does

The Break Up Big Medicine Act draws its inspiration from the Glass-Steagall Act of 1933, which separated commercial and investment banking after the financial system's collapse during the Great Depression. Applied to healthcare, the principle is the same: entities that are supposed to be bargaining competitively with one another should not be owned by the same parent company.

The bill establishes two core prohibitions. First, it bars any person or entity from simultaneously owning or controlling a medical provider or management services organization (MSO) and an insurance company or PBM. Second, it bars common ownership of a provider or MSO and a prescription drug or medical device wholesaler. Companies in violation would have one year to divest. Those who miss divestiture milestones would face automatic penalties, including 10% of profits transferred into escrow on a monthly basis and, eventually, a court-appointed divestiture trustee with authority to force asset sales. Revenue from seized profits would be deposited into a fund created by the Federal Trade Commission (FTC) and distributed to serve the healthcare needs of harmed communities.

An MSO is an entity that contracts with a medical provider to furnish administrative and business services such as payroll, payer contracting, billing and collection, coding, IT, and patient scheduling. While MSOs do not technically practice medicine, they have become the primary vehicle through which corporate entities, including insurers and private equity firms, exert operational control over physician practices without appearing on paper as the owner. The bill's explicit inclusion of MSOs is a recognition that corporate control of healthcare delivery does not require direct ownership; it can be achieved through the back office.

The enforcement architecture is broad. The FTC, the Department of Justice (DOJ) Antitrust Division, the Department of Health and Human Services (HHS) Inspector General, state attorneys general, and private citizens can all bring civil actions. The private right of action provision allows treble damages (a legal remedy where a court triples the amount of actual, compensatory damages awarded to a prevailing plaintiff), attorney's fees, and equitable relief. The FTC and DOJ would also retain forward-looking authority to review and block future transactions that would re-create the prohibited conflicts of interest.

The bill's definition of "provider" is notably expansive: it includes pharmacies (both in-patient and outpatient), physician practices, ambulatory surgery centers, urgent care centers, post-acute care facilities, home-health providers, and hospitals. This means the legislation reaches well beyond PBM-owned pharmacies to encompass the full range of insurer-owned care delivery.

The Problem It Targets

The scale of vertical integration in U.S. healthcare is difficult to overstate. Three PBMs, CVS Caremark, Express Scripts, and OptumRx, manage nearly 80% of prescription drug claims for roughly 270 million people. Each is owned by a company that also operates a health insurance plan, physician offices, and pharmacies. Three drug wholesalers control 98% of U.S. drug distribution. As of 2023, UnitedHealth Group, through its Optum subsidiary, controls approximately 10% of all American physicians, making it the single largest employer of doctors in the country. Nearly 80% of physicians now work for a corporate parent, and since 2019, nearly 4,000 independent pharmacies have closed.

The evidence on what this consolidation does to costs and quality is damning. RAND Corporation testimony to the U.S. House of Representatives found that vertical integration of hospitals or health systems with physician practices does not lower spending and does not improve quality of care. Instead, it shifts care to higher-cost settings and increases payment rates through greater negotiating power. Hospital-physician vertical integration has been associated with 10 to 14% price increases for physician services. A Commonwealth Fund analysis found vertical consolidation associated with 14% higher physician prices and 10-20% higher total spending per patient.

The FTC itself has found that vertically integrated PBMs have both the ability and incentive to steer business to their own affiliated pharmacies, reducing competition and increasing prescription drug costs. PBMs engage in spread pricing, charging health plans more for a drug than they reimburse pharmacies and keeping the difference, while simultaneously reducing reimbursements to independent pharmacies to drive them out of business.

The conflicts run deeper. As Wendell Potter detailed in Healthcare Uncovered, the joint ownership of insurance companies, PBMs, provider organizations, and pharmacies allows parent companies to game the Affordable Care Act's (ACA's) medical loss ratio (MLR) requirement. The ACA mandates that insurers spend 80-85% of premium dollars on medical care. When an insurer owns the PBM, the provider group, or the pharmacy, it can count internal payments to those entities as "medical care" for MLR purposes, even though those payments are self-dealing. This accounting maneuver converts premium dollars to profits at a rate Congress never intended.

Antitrust enforcement has proven inadequate to the task. From 2000 to 2020, only 13 mergers out of 1,164 were challenged by the FTC. As Erin Fuse Brown, professor at Brown University's School of Public Health, noted during a recent KFF Health Wonk Shop panel, antitrust enforcement has largely looked the other way on vertical consolidation, and even when agencies have attempted to bring cases, they have struggled to convince courts that vertical mergers pose a competitive risk.

The Promise for Patients and Providers

If enacted, the bill could address several of the structural conflicts of interest that drive up costs and limit patient choice. Forced separation of PBMs from their affiliated pharmacies could create a more level playing field for independent pharmacies, which currently compete against entities that also control their reimbursement rates. For people living with chronic conditions who rely on specialty medications, the current system means that the company deciding what drug is covered, how much the patient pays, and which pharmacy fills the prescription can be the same company. Breaking those links could open real competition in both pricing and access.

The bill would also force the divestiture of insurer-owned physician practices, a development that could restore meaningful clinical autonomy for physicians and potentially slow the trend of care being steered toward affiliated, higher-cost settings. Consolidation has already narrowed provider choice for patients across the country. Hospital consolidation from 1998 to 2021 resulted in 1,887 mergers and reduced the number of hospitals nationwide by about 25%. The GAO reported that rural hospital closures force residents to travel roughly 20 miles farther for common inpatient services and about 40 miles farther for less common services. When consolidated systems close facilities or eliminate services that rarely turn a profit, such as maternity wards, primary care clinics, and emergency departments, patients in underserved and rural communities face fewer doctors, longer wait times, and greater distances to travel for care. For low-income patients who may lack access to paid time off, reliable transportation, or affordable child care, those distances can mean the difference between receiving care and going without. Reducing the financial incentive for insurers to steer patients exclusively to affiliated providers could, over time, help preserve a broader range of care options in the communities that need them most.

The bill's expansive definition of "provider" and its inclusion of MSOs is significant: it closes the backdoor through which corporate entities use management services agreements to exert de facto control over physician practices without technically owning them. The private right of action with treble damages gives patients and affected parties a meaningful tool to hold companies accountable, something traditional antitrust enforcement has failed to do at scale.

The Pitfalls

The bill's ambition is also its vulnerability. A one-year divestiture timeline for restructuring trillion-dollar companies like UnitedHealth Group, CVS Health, and Cigna is aggressive by any measure. The logistics of unwinding these conglomerates, separating data systems, reassigning contracts, re-establishing independent management structures, present real operational risk. Corey Katz, a partner at Bates White Economic Consulting, cautioned during the KFF panel that policymakers should be careful of unintended consequences because the linkages in these systems are complex, and breaking them can produce adverse outcomes that were not anticipated. He pointed to the Haven joint venture between JP Morgan, Amazon, and Berkshire Hathaway, which sought to make healthcare more efficient and collapsed within five years, as evidence that restructuring healthcare delivery is harder than it appears.

Industry has already signaled opposition. CVS Health Group president David Joyner pushed back on the characterization of the system as market concentration at a House hearing in January, describing the integrated model as one that "works really well for the consumer." Evidence would seem to suggest otherwise, but Mr. Joyner is certainly welcome to his opinion.

The bill also has notable gaps. It does not address hospital-to-hospital horizontal mergers, which remain a primary driver of higher prices in local markets. It does not address private equity acquisitions of physician practices, which a GAO analysis found can lead to 4-16% increases in commercial insurance spending depending on the specialty. And it does not address the payment system incentives, particularly the persistent site-of-care payment differentials where Medicare pays two to four times more for identical outpatient procedures performed in a hospital setting versus a physician's office, that create the financial motivation for consolidation in the first place. Fuse Brown acknowledged that structural separation is a "blunt instrument" but argued that we have reached the point where antitrust tools have proven insufficient and bolder approaches are warranted.

What This Means for People Living with Chronic Conditions

For people living with HIV and other chronic conditions, pharmacy access is a persistent concern. The current vertically integrated system can dictate which pharmacy fills a prescription, what drugs appear on a formulary, and what a patient pays out of pocket. PBM-driven patient steering limits access to specialty pharmacies and 340B providers that play a critical role in serving people who are most affected by healthcare costs. Consolidation also disproportionately impacts communities of color, who, as the Commonwealth Fund noted, are more likely to face medical debt, are more vulnerable to increased costs, and are more likely to bear the brunt of the often cruel business practices that consolidation enables.

Separating PBMs from their captive pharmacies could expand real pharmacy choice for patients. But poorly managed divestiture could also temporarily destabilize specialty pharmacy networks or disrupt care coordination for people who depend on uninterrupted medication access. The details of how divestiture is structured and monitored will matter as much as the principle behind it.

Looking Forward

The Break Up Big Medicine Act faces long odds in a divided Congress. But its bipartisan sponsorship reflects a genuine shift in the political calculus around healthcare consolidation, one that cuts across party lines and ideological camps. Whether or not the bill advances, it establishes a policy framework that advocates, policymakers, and the public can build on.

We should watch closely for how recently enacted PBM transparency rules interact with these structural proposals, how state-level merger review and health equity impact assessments continue to evolve, and whether the FTC and DOJ use existing authority to pursue vertical consolidation cases more aggressively. We should also urge our elected representatives to support the bill and, critically, to demand that any restructuring of the healthcare system be evaluated for its impact on patient access, affordability, and health equity. Structural separation is a necessary conversation. Making sure the people most affected by consolidation are centered in that conversation is our responsibility.

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:

1. 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.

2. 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.

3. 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:

1. Stay Informed: Follow developments in PBM regulation and reform efforts.

2. Research Legislation: Contact your representatives to inquire about pending legislation.

3. Engage with Advocacy Groups: Support organizations like PUTT (www.truthrx.org) and the HIV+Hepatitis Policy Institute (www.hivhep.org).

4. 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.