The federal antitrust authority is already investigating the matter and has filed a lawsuit against the huge pharmaceutical intermediaries. Now two U.S. senators want the Federal Trade Commission to launch a separate investigation into the emerging practice by their even larger parent companies.
The intermediaries are called pharmacy benefit managers, or PBMs, and have long argued that their size allows them to force drugmakers to lower prices and create savings for patients. However, two of the gigantic three intermediaries have entered into “co-production” agreements with some drugmakers who are allegedly their opponents in drug price negotiations.
The healthcare conglomerates that own CVS Caremark and Express Scripts already own companies that occupy huge swathes of the healthcare space. Co-production agreements mean they will expand their reach further, which won’t be good for consumers, according to a letter sent to the FTC last week by two Democratic senators, Sherrod Brown of Ohio and Ron Wyden of Oregon. .
“The concern with these ‘co-manufacturing’ arrangements is that they represent a veiled attempt by PBMs to control additional parts of the supply chain, resulting in additional harm to consumers in the form of fewer drug choices and higher drug costs,” they said in the letter.
For its part, CVS says that measures such as co-manufacturing agreements have helped its customers save $500 million on immunosuppressant drugs similar to Humira.
The company’s PBM, CVS Caremark, handles drug transactions on behalf of insurers including Aetna, which is also owned by CVS Health.
They create chains of pharmacies and decide themselves how much they should be reimbursed for the medicines they dispense. And because CVS owns a mail-order pharmacy in addition to the largest retail chain, it determines how much it pays itself and its competitors – an arrangement in which the company’s critics see an inherent conflict.
CVS Caremark, Express Scripts and a third PBM, OptumRx, control access to about 80% of people whose prescriptions are covered by insurance. Because PBMs decide which drugs are covered and at what rates, they have enormous leverage to get drugmakers to give them huge, often muddy rebates and fees.
Last month, the FTC sued immense PBMs over their practices in this area, alleging that it did forced an enhance in the list prices of insulin starting in 2012. The agency is also involved in a wide-ranging “6(b)” investigation into immense PBMs, and in July it released a scathing interim report saying they appear to be artificially increasing drug prices and harming patients.
In their letter, Brown and Wyden, members of the Senate Finance Committee, ask the FTC to launch a separate investigation under Sec. 6 letter (b) on the joint production arrangements for CVS Caremark and Express Scripts. They say that thanks to the agreements, the conglomerates do nothing but take control of another part of the drug supply chain.
The deals are with companies that produce versions of adalimumab, a drug used to treat arthritis, known under the brand names Humira and Hyrimoz.
A recipe for trouble: Pennsylvania pharmacists say PBMs are causing pharmacies to close
Brown and Wyden’s letter included a graphic depicting a CVS earnings call. It’s heart-shaped and shows that with vertical integration, a customer with Aetna insurance can have CVS Caremark as a PBM, get adalimumab as a product of CVS’s co-manufacturing agreement, get primary care from Oak Street Health, get at-home assessments from Signify Health, and buy medications at the pharmacy CVS. All of these companies are subsidiaries of CVS Health.
“This graphic clearly demonstrates the benefits that CVS and its shareholders derive by capturing and directing patients through CVS’s vertically integrated array of subsidiaries,” Wyden and Brown wrote.
Express Scripts did not respond to a request for comment, but CVS spokesman David Whitrap said the senators were missing a fundamental point – that CVS had lowered the cost of adalimumab in favor of cheaper “biosimilars” over Humira.
“Unlocking the biosimilar market was not straightforward and required many of the tools that CVS Health leverages: Caremark’s proven ability to transition patients to lower-cost prescription drugs, the will and trust of the companies that employ us, our investments in (electronic health records) that provide better the patient and provider experience, consultative care and product delivery from CVS Specialty Pharmacy, and (drug maker) Cordavis’ ability to identify biosimilar manufacturers producing high-quality alternatives with a sustainable supply that our members can rely on,” Whitrap said in an email .
Brown and Wyden, however, suspect the opposite is true.
“The vertical integration of PBMs into yet another aspect of the health care system heightens our concerns about PBMs’ ability to mark up the costs of biosimilars and steer patients to their more expensive ‘co-manufactured’ products, while limiting access to products from unaffiliated manufacturers,” they wrote.
Ohio Capital Journal is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. The Ohio Capital Journal maintains editorial independence. If you have any questions, please contact editor David Dewitt: [email protected]. Follow the Ohio Capital Journal at Facebook AND X.
