Huge health conglomerates have another reason to worry that their business model might be disrupted. On a visit to Columbus Monday, one of the country’s top antitrust watchdogs said her agency is taking a hard look at the businesses and their practices.
Doha Mekki, the No. 2 official in the U.S. Justice Department’s Antitrust Division, said her agency is investigating whether it should take action in the health care space generally, and specifically about insurance middlemen known as pharmacy benefit managers.
“Hearing about the depth of this problem is eye-opening for all of us, and it’s also confirmatory,” Mekki said.
Mekki’s agency is one of two major federal antitrust enforcers. The other, the Federal Trade Commission, is already conducting a major investigation of pharmacy benefit managers and is suing over their pricing practices regarding insulin.
She was speaking just after a roundtable discussion held by the American Economic Liberties Project, a group that advocates for policies to address “today’s crisis of concentrated economic power.”
Participants in the roundtable talked about how they believe pharmacy benefit managers are driving community pharmacies out of business, making medicine more expensive, and in some cases making people a lot sicker.
When it comes to concentrated economic power, it seems hard to top pharmacy benefit managers, or PBMs, and their corporate parents — each of which is among the 15 largest companies by revenue in the United States.
PBMs represent insurers in drug transactions, and they decide which medicines will be covered.
And, because just three PBMs control access to about 80% of insured patients, they have enormous leverage to extract ever-bigger rebates from drugmakers. That’s a practice that’s been shown to increase costs for many consumers at the pharmacy counter.
Because PBMs’ parent companies are increasingly “vertically integrated,” they’re big players in numerous parts of the health delivery chain in ways that could create conflicts of interest. For example, the big-three PBMs are the dominant middlemen in drug transactions, and they’re each part of a company that also owns a top-10 insurer. So they could try to get better deals for their sister insurance companies than for their competitors.
The big PBMs also determine how much to reimburse pharmacies that dispense drugs they buy from wholesalers. Because the PBMs control access to so many insured patients, independent pharmacies say they have no choice but to accept whatever contract terms they’re offered.
“They say, ‘We will contract with you if we can pay you whatever we want,’” said Benjamin Jolley, a Salt Lake City pharmacist who works with the Economic Liberties Project.
At the same time the companies that own PBMs decide how much to reimburse pharmacies, they also compete with them.
Each of the big three — CVS, United Health and Cigna/Express Scripts — owns mail-order pharmacies and CVS also owns the nation’s largest retail chain. In other words, the health conglomerates can decide how much to pay their own pharmacies and those of their competitors.
Low reimbursements have been blamed for a wave of closures in community pharmacies, and now reimbursements and tough retail conditions are contributing to closures of thousands of stores belonging to big chains as well. Experts fear that the closures will hit the poor and the elderly hardest by making it almost impossible for them to talk face-to-face with a health care professional about their medicines and chronic conditions like diabetes and high blood pressure.
In an interview after Monday’s roundtable, Mekki of the Justice Department said that she couldn’t discuss what her agency might do about PBMs and the companies that own them. But she said that what she’s learned so far seems reminiscent of practices in other industries that the Antitrust Division has acted against.
“One of the most consequential things we’ve done at the Justice Department is to think harder about the middleman economy,” she said. “Sometimes that means financial services like our Visa case. Sometimes it means ticketing, like our Ticketmaster case. It appears that many similar dynamics are at play in the pharmaceutical benefit industry.”
In the Visa case, Mekki’s department is suing, accusing the company of using its dominance of debit-card infrastructure to crowd out competition and raise consumer costs. The Justice Department is also suing to break up the merger of Ticketmaster and Live Nation on claims that the company is using its dominance in entertainment ticketing, venues and promotion to charge patrons more and pay artists less.
Those actions and those by the FTC are part of a newly invigorated approach to antitrust enforcement that has been moribund since the 1980s. Mekki said the Antitrust Division early this year started a health care task force to try to get a handle on anticompetitive practices in that sector.
The idea “comes from the recognition that siloing our health care antitrust effort is not cutting it anymore,” she said. “The economy is more consolidated, more integrated than it’s ever been.”
Just as she came to Ohio to hear from stakeholders about PBMs, Mekki said she and her colleagues want to hear from consumers.
“We are constantly in listening mode and if anybody out there has information about monopolization, collusion in all corners of the health care industry, from nurses to hospitals to pharmacies… we are interested and we want to hear from you,” Mekki said.
She added that her office and the FTC have different resources and capabilities, so they confer and work not to duplicate efforts. Making a probe of the health care space especially hopeful is that it has the support of officials across the political spectrum, Mekki said.
“We’re heartened that there is bipartisan — nonpartisan, really — interest in these issues,” she said. “Health care is so important. There’s nothing more personal than the care that we get for ourselves, for our families, and it’s now 20% of U.S. GDP for a reason. We spend a lot of public dollars on these issues and we need to be focused on how this money is moving around in the industry.”
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