A recent Federal Trade Commission report has shed light on the practices of prescription drug middlemen, revealing that they generated nearly $1.6 billion in additional revenue from two cancer drugs in less than three years. This revenue was obtained by directing business to affiliated pharmacies, showcasing the significant influence these middlemen have on the drug supply chain.

The report highlights the impact of vertical integration and market concentration among pharmacy benefit managers (PBMs) in driving up costs for patients. Three major PBMs – CVS Caremark, Express Scripts, and OptumRx – were responsible for processing almost 80% of the approximately 6.6 billion prescriptions dispensed by U.S. pharmacies in 2023.

Through consolidation and integration with health insurers, these companies have been able to pay affiliated pharmacies significantly higher rates than the average acquisition cost of drugs, sometimes up to 40 times higher. The report also points out how PBMs can disadvantage smaller independent pharmacies through steering business away or imposing unfair contract terms.

FTC Chairwoman Lina Khan emphasized the report’s findings, stating that it illustrates how dominant PBMs can inflate drug costs, particularly for critical medications like cancer drugs. The report examined reimbursement rates and dispensing revenue for generic Zytiga and generic Gleevec between 2020 and part of 2022.

In response to the report, CVS Caremark defended the industry, suggesting that limiting PBM negotiating tools would benefit pharmaceutical companies and potentially harm American businesses and patients by subjecting them to higher drug prices.

The report’s revelations are expected to fuel ongoing efforts in Congress to address rising drug costs. Lawmakers are increasingly scrutinizing the practices of PBMs and considering regulatory measures to hold the industry accountable for its impact on healthcare expenses.