A federal antitrust watchdog is already conducting an investigation into and has filed a lawsuit against huge pharmacy middlemen. Now two U.S. senators want the Federal Trade Commission to open a separate investigation into an emerging practice of their even bigger parent companies.
The middlemen are called pharmacy benefit managers or PBMs, and they have long claimed that their size enables them to force drugmakers to lower their prices and create savings for patients. But two of the big-three middlemen have entered into “co-manufacturing” agreements with some of the very drugmakers that are supposedly their adversaries in drug-pricing negotiations.
The health conglomerates that own CVS Caremark and Express Scripts already own businesses that occupy huge swaths of the health care space. The co-manufacturing agreements mean that they’ll extend their tentacles into yet another, and that won’t be good for consumers, said 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’ agreements is that they are a veiled attempt by PBMs to control additional parts of the supply chain which has resulted in additional harm to consumers in the form of fewer drug choices and higher drug costs,” their letter said.
For its part, CVS says that measures such as co-manufacturing agreements have helped it save clients $500 million on immunosuppressive drugs similar to Humira.
The company’s PBM, CVS Caremark, handles drug transactions on behalf of insurers, including Aetna, which CVS Health also owns.
They create networks of pharmacies and they decide how much to reimburse them from the drugs they dispense. And because CVS owns a mail-order pharmacy in addition to the largest retail chain, it determines how much to pay 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. Since the PBMs decide which drugs are covered and by how much, they have enormous leverage to get drugmakers to give them huge, often nontransparent rebates and fees.
The FTC last month sued the big PBMs over their practices in this arena, saying that they forced up insulin list prices starting in 2012. The agency is also engaged in a sweeping “6(b)” investigation of the big PBMs and in July released a scathing interim report saying they appeared to be artificially increasing drug prices and harming patients.
In their letter, Brown and Wyden, both members of the Senate Finance Committee, are asking the FTC to open a separate 6(b) investigation into the co-manufacturing arrangements of CVS Caremark and Express Scripts. They say that with the agreements, the conglomerates don’t seem to be making anything, they’re just taking control of yet another part of the drug supply chain.
The agreements are with companies that make versions of adalimumab, a drug used to treat arthritis that is known under the brand names Humira and Hyrimoz.
The letter by Brown and Wyden included a graphic from a CVS earnings call. It’s in the shape of a heart and it shows that through its vertical integration, a customer with Aetna insurance can have CVS Caremark as a PBM, get adalimumab as a product of a CVS co-manufacturing agreement, get primary care at Oak Street Health, get in-home evaluations from Signify Health, and get meds from a CVS pharmacy. All those companies are subsidiaries of CVS Health.
“This graphic clearly shows the benefits that CVS and its shareholders reap by capturing patients and directing them through the vertically integrated array of CVS subsidiaries,” Wyden and Brown wrote.
Express Scripts didn’t respond to a request for comment, but CVS spokesman David Whitrap said the senators are missing a basic point — that CVS has brought down the cost of adalimumab by preferring lower-cost “biosimilars” to Humira.
“Unlocking the biosimilar market was not easy, and it required many of the tools that CVS Health brings to bear: Caremark’s proven ability to transition patients to more affordable prescription drugs, the will and trust of the businesses that hire us, our investments in (electronic-medical-record) connectivity that drive a better patient and provider experience, the consultative care and product delivery from CVS Specialty Pharmacy, and (drugmaker) Cordavis’ ability to identify biosimilar drugmakers that produce high-quality alternatives at a sustainable supply on which our members can rely,” Whitrap said in an email.
Brown and Wyden, however, suspect that the opposite is the case.
“Vertical integration of PBMs into yet another aspect of the health system intensifies our concerns about the ability of PBMs to markup the cost of biosimilars and steer patients to their higher cost ‘co-manufactured’ products while limiting access to products from non-affiliated manufacturers,” they wrote.
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