The three largest pharmacy benefit managers (PBMs) are unflinching in the face of a new Federal Trade Commission interim report Tuesday outlining the intricacies of the US healthcare system — and blaming PBMs for higher drug prices.

"Their outsized influence comes not only from the expansion of their traditional, middlemen administrative services in processing patients’ pharmacy prescription claims, but also from decades of consolidation and vertical integration across the healthcare delivery system," said FTC Chair Lina Khan in the 73-page report.

Per the FTC, in 2000 there were more than two dozen independent players in the PBM market. By 2021, only the current "Big Three" remained: CVS's (CVS) Caremark, UnitedHealth Group's (UNH) Optum Rx, and Cigna's (CI) Express Scripts. Shares of all three were unaffected by the report.

In the report, the FTC highlighted that the top three PBMs processed nearly 80% of about 6.6 billion prescriptions dispensed by US pharmacies in 2023. And PBM revenues have increased as a percentage of national spend, jumping from 14% in 2016, or $456 billion, to 22%, or more than $1 trillion, in 2023.

"Today, if the Big 3 PBMs were standalone companies, each would rank among the 40 largest companies in the United States by revenue," according to the report.

"Given the current level of consolidation, pharmacists, health insurers, and drug manufacturers often have little choice but to interact with the large, dominant PBMs when distributing certain drugs," the FTC said.

No action

The companies, no surprise, weren't keen on the idea of future regulation.

"Any suggestions from the FTC about policies that limit the use of PBM negotiating tools would instead reward the pharmaceutical industry, leaving American businesses and patients at the mercy of the prices drugmakers set," CVS said in a statement to Yahoo Finance.

Cigna, meanwhile, said the company had cooperated with the FTC's requests and provided millions of documents.

"These biased conclusions will do nothing to address the rising prices of prescription medications ... we look forward to addressing the blatant inaccuracies in the Commission’s initial report," Cigna said, also in a statement to Yahoo Finance.

Navitus, a PBM owned by Catholic nonprofit health system SSM Health and Costco (COST), is just one of many smaller PBMs hoping to fight the status quo. CEO David Fields compared the "Big Three" to Big Tobacco in terms of the harm done to the American public.

"Much like Big Tobacco, these PBMs will continue their harmful practices until they are forced to change. Reform is urgently needed to ensure ALL PBMs prioritize patient health and affordability in their practices, and to build trust again with a more transparent and accountable healthcare system," Fields told Yahoo Finance in a statement.

Analysts also weighed in. JPMorgan's Lisa Gill said in a note to clients that the report's findings "fall short of any charges against the PBMs." She also added that the report doesn't offer any empirical evidence linking PBM consolidation and higher drug prices.

Her comments echo the dissenting statement from one of the FTC's commissioners, Melissa Holyoak, who said that the report "was plagued by process irregularities and ... leaves us without a better understanding of the competition concerns surrounding PBMs or how consumers are impacted by PBM practices."

Prior to her time at the FTC, Holyoak was Utah Solicitor General and was involved in the state's efforts to file suit against Eli Lilly (LLY), Novo Nordisk (NVO), and Sanofi (SNY) for allegedly inflating the price of insulin.

"To assert that market conditions have changed is one thing—but to ignore the 2005 Report without conducting a new empirical analysis of market conditions or explaining why the findings, conclusions, and empirical work no longer apply is a different matter entirely," Holyoak said.

The 2005 report was a look at the industry that concluded that the PBM environment was competitive — but at a time when there were still more than two dozen PBMs in the market.

In its final report, the FTC is looking to provide an update, reflecting the transformation the market has undergone in the past 20 years.

The agency did not include any recommendations for antitrust law enforcement in the interim report, but noted that "PBM and brand pharmaceutical rebating practices ... urgently warrant further scrutiny and potential regulation."

Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.

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