What did the FTC's 2024 PBM report say about plan sponsors?

The FTC released its 'Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies' interim staff report in July 2024. Key findings relevant to plan sponsors:

1. Vertical integration concentrates power. The three largest PBMs (CVS Caremark, Express Scripts, OptumRx) collectively process roughly 80% of US prescription claims and are each owned by or affiliated with major insurers and pharmacy chains. This concentration limits plan-side leverage in contract negotiations.

2. Spread pricing extracts substantial margin on generics. The FTC documented specific cases where PBMs billed plans 5-10x the acquisition cost on common generic drugs, with the spread retained as PBM revenue.

3. Rebate practices steer utilization toward higher-priced brands. Manufacturer rebate guarantees create incentives for PBMs to maintain brand-tier placement on drugs even when generics with equivalent clinical profile are available at far lower acquisition cost.

4. Specialty pharmacy markup is opaque. PBM-owned specialty pharmacies often dispense high-cost drugs at markups that aren't disclosed in plan contracts. Plans typically can't audit the markup without external claims analysis.

The full report recommended several plan-sponsor protections: pass-through pricing structures, transparency reporting per molecule, contract right to mid-year tier moves on generic-rich drugs, and explicit specialty pharmacy markup disclosure.