The pharmacy benefit manager (PBM) sector is uncompetitive, with four PBMs dominating the national market and even greater concentration on the state level, says a new report from the American Medical Association (AMA).
PBMs negotiate prescription drug prices with manufacturers on behalf of insurance companies and receive rebates in exchange for including the manufacturers’ products in the formulary of covered drugs. PBMs are supposed to use rebates to lower costs for patients, but research shows they use their market power to profit while making drugs costlier.
How concentrated are they? In 2021, 68% of the PBM market was dominated by the four largest PBMs: Express Scripts, OptumRx, CVS Health (owner of CVS Caremark and Aetna Pharmacy Management), and Prime Therapeutics, says the AMA research.
Statewide concentration is even greater. For example, in Michigan, Express Scripts controls 89% of the PBM market.
Vertical integration—when insurers own the PBMs, giving them even more leverage over drug prices—is common: 70% of all people with commercial drug insurance are covered by an integrated insurer-PBM, says the report.
Can legislation help? Several BIO-supported proposals in the Senate and House seek to bring transparency to PBMs to rein in drug prices.
What they’re saying: “The effects of less competition and more vertical integration in the PBM industry deserve regulatory scrutiny as a check against anticompetitive business practices that harm patients by raising drug prices, lowering quality, reducing choice, and stifling innovation,” says AMA President Jesse M. Ehrenfeld.
