PBM ‘regulatory noise’ continues as FTC deepens inquiry into middlemen

FTC’s probe is focused on "shedding light" on several PBM practices

As part of its ongoing inquiry into pharmacy benefit managers, or PBMs, and their impact on the accessibility and affordability of prescription drugs, the Federal Trade Commission issued orders to companies affiliated with CVS Caremark (CVS), Express Scripts, and Prime Therapeutics. Commenting on the news, Stephens noted that “PBM regulatory noise continues” and reminded investors that the FTC’s ongoing inquiry has been underway since June of last year, when it issued similar compulsory orders seeking information from the six largest PBMs, including Cigna (CI), UnitedHealth (UNH), and Humana (HUM), within the firm’s coverage universe.

COMPULSORY ORDERS: As part of its ongoing inquiry into PBMs and their impact on the accessibility and affordability of prescription drugs, the FTC announced it has issued compulsory orders to two group purchasing organizations, or GPOs, that negotiate drug rebates on behalf of other PBMs. The compulsory orders will require these entities to provide information and records on their business practices.

Having previously issued compulsory orders to the six largest PBMs in the U.S. healthcare industry, the FTC also issued two additional orders to Zinc Health Services, and Ascent Health Services. As part of its ongoing inquiry, the FTC issued similar compulsory orders on June 6, 2022 to the six largest PBMs, namely CVS Caremark; Express Scripts; OptumRx; Humana Pharmacy Solutions; Prime Therapeutics; and MedImpact Healthcare Systems.

The FTC’s inquiry is aimed at shedding light on several PBM practices, including charging fees and clawbacks to unaffiliated pharmacies; steering patients towards PBM-owned pharmacies; potentially unfair auditing of unaffiliated pharmacies; the use of complicated and opaque pharmacy reimbursement methods; and negotiating rebates and fees with drug manufacturers that may skew the formulary incentives and impact the costs of prescription drugs to payers and patients, the FTC said.

PBM NOISE CONTINUES: Following the news, Stephens told investors that, “It feels like almost every day recently we have published a note discussing ongoing regulatory scrutiny of the PBMs.” The firm would remind investors that the FTC’s ongoing inquiry into the PBM business model has already been underway since June 6, 2022, when it issued similar compulsory orders seeking information from the six largest PBMs. The FTC’s PBM probe is focused on "shedding light" on several PBM practices, including rebates, clawbacks, patient steering, and other reimbursement practices.

PRICE ACTION: In Thursday morning trading, shares of Cigna have dropped almost 3% to $255.48, while CVS and Humana stock have slipped about 2% to $68.31 and $510.60, respectively.