FTC Report Finds Big Three PBM Mark Ups for Specialty Generics Generated Billions
CVS Caremark, Express Scripts, OptumRx made more than $7.3 billion in revenue, with markups as high as thousands of percent.
The latest staff report from the FTC revealed that CVS Caremark Express Scripts, and OptumRx (OptumRx) also known as the “Big 3” pharmacy benefit managers (PBMs)—hiked up the prices of various specialty generic drugs that were dispensed at their affiliated pharmacies by as much as thousands of percent, resulting in them (and their affiliated pharmacies) making more than $7.3 billion in excess revenue when measured alongside the national average drug acquisition cost, or NADAC.1,2
The report examined 51 specialty generic drugs—including 882 total National Drug Codes (NDCS) that were dispensed from 2017 to 2022, for members of commercial health plans and Medicare Part D prescription drug plans that were managed by the Big 3. NDCs are universal identifiers for all human drugs. The report also noted that these revenues were accumulating while patient, employer, and other healthcare plan sponsor payments for drugs were rising yearly.
“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,” said FTC Chair Lina M. Khan. “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.”
FTC’s latest deep dive builds off an original July 2024 report,3 which had uncovered that pharmacies that were affiliated with the Big 3 had received 68% of the dispensing revenue amassed by specialty drugs in 2023, a boost from the 54% figure in 2016. The latest report analyzed a broader set of specialty generic drugs—as opposed to two specialty generic drugs analyzed in the July 2024 report—and determined that the Big 3 PBMs impose significant markups on a wide array of specialty generic drugs.
Other key findings of the report included:
- From 2017-2021, PBM-affiliated pharmacy dispensing revenue in excess of NADAC rose at a compound annual growth rate of 42%. In that timeframe, the top 10 specialty generic drugs generated $6.2 billion of dispensing revenue in excess of NADAC, representing 85% of the total.
- Several drug categories, including oncology, had drugs that were marked up over 1000%. For example, Capecitabine—a branded form of Xeloda for the treatment of breast and colorectal cancer—experienced a 3,289% markup in 2021.3
- These PBMs accumulated an estimated $1.4 billion worth of income from spread pricing on these specialty generic drugs, which is when they bill their plan sponsor clients more than they reimburse pharmacies.
References
1. Specialty Generic Drugs: A Growing Profit Center for Vertically Integrated Pharmacy Benefit Managers. Federal Trade Commission. January 14, 2025. Accessed January 16, 2025. https://www.ftc.gov/system/files/ftc_gov/pdf/PBM-6b-Second-Interim-Staff-Report.pdf
2. FTC Releases Second Interim Staff Report on Prescription Drug Middlemen. Federal Trade Commission. January 14, 2025. Accessed January 16, 2025. https://www.ftc.gov/news-events/news/press-releases/2025/01/ftc-releases-second-interim-staff-report-prescription-drug-middlemen
3. Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies. Federal Trade Commission. July 9, 2024. Accessed January 16, 2025. https://www.ftc.gov/system/files/ftc_gov/pdf/pharmacy-benefit-managers-staff-report.pdf
4. FTC Releases Interim Staff Report on Prescription Drug Middlemen. Federal Trade Commission. July 9, 2024. Accessed January 16, 2025. https://www.ftc.gov/news-events/news/press-releases/2024/07/ftc-releases-interim-staff-report-prescription-drug-middlemen
