On June 7, 2022, the Federal Trade Commission (“FTC”) announced that it would launch an inquiry into the business practices of the nation’s six largest pharmacy benefit managers (“PBMs”). The inquiry will investigate the impact of vertically integrated PBMs on the access and affordability of prescription drugs. This news comes at a time when PBM practices are under increased scrutiny by both federal and state actors, as the country tries to gain further control over the ever-increasing prices of prescription drugs. While federal legislators have tried in recent years to address public concerns with PBM activities with laws addressing rebates in particular, those efforts have stalled without being signed into law. Since this inquiry could signal an alternative path to addressing these concerns, interested parties should pay close attention to further developments.


PBMs contract with health plans to manage prescription drug benefits for health plan members. They provide services such as negotiating rebates with drug manufacturers, managing networks of participating pharmacies and controlling prescription drug utilization and costs by creating drug formularies and related policies. In short, PBMs play a significant role in prescription drug coverage and payment in America.

Historically, PBMs have been relatively unregulated, particularly at the federal level. However, as the rising, and often non-transparent, cost of prescription drugs throughout the country has become a national concern, PBMs have come under renewed political pressure and scrutiny. Following the U.S. Supreme Court’s 2020 decision in Rutledge v. Pharmaceutical Care Management Association, in which the Court held that an Arkansas law regulating PBMs was not preempted by ERISA, many states have enacted laws specifically regulating PBMs and PBM practices. These laws have included provisions addressing PBM rebate models, 340B drug discount program discrimination and PBM licensure requirements.[1]

To date, there has been limited federal action targeted at the PBM industry, although legislation was recently introduced in the U.S. Senate that would (among other measures): i) Prohibit PBM pricing practices such as “spread pricing” and pharmacy clawbacks, ii) Require PBMs to file an annual report with the FTC, and iii) Incentivize transparent PBM practices. In February 2022, the FTC launched a public docket to collect comments on the impact of PBMs and their practices. While the FTC didn’t have the votes at that time to open a probe into PBMs, it subsequently received more than 24,000 comments from industry stakeholders on PBM practices.

The FTC Inquiry

On June 7, the FTC changed course and voted in a 5-0 decision to conduct a study of PBMs’ business practices.[2] As part of the inquiry, the FTC issued an Order to File a Special Report to the country’s six largest PBMs: CVS Caremark, Express Scripts, Inc., OptumRx, Inc., Humana Inc., Prime Therapeutics, LLC and MedImpact Healthcare Systems, Inc. The order gives these PBMs 90 days to provide specific information regarding their business practices. The FTC hopes the responses shed light on the following PBM practices that have drawn scrutiny:

  • Fees and clawbacks charged to unaffiliated pharmacies;
  • Methods to steer patients towards PBM-owned pharmacies;
  • Potentially unfair audits of independent pharmacies;
  • Complicated and opaque methods to determine pharmacy reimbursement;
  • The prevalence of prior authorizations and other administrative restrictions;
  • The use of specialty drug lists and surrounding specialty drug policies; and
  • The impact of rebates and fees from drug manufacturers on formulary design and the costs of prescription drugs to payers and patients.

In addition to pharmaceutical pricing concerns, the inquiry is likely in response to the FTC’s general move under the Biden administration toward stricter scrutiny of vertically integrated organizations and highly concentrated markets. The PBM industry has experienced years of consolidation and vertical integration. For example, five of the six PBMs that are included in the FTC inquiry are part of vertically integrated organizations which jointly operate health insurers, pharmacies and care delivery companies. The national PBM market is also highly concentrated, as evidenced by the fact that the largest three PBMs— CVS Caremark, Express Scripts and OptumRx—now account for 80% of the total PBM market.[3]

According to FTC Chair, Lina Khan, the overall goal of the investigation is to “examine several of the most common complaints about PBMs and [to] seek to assist policymakers in determining whether Americans would benefit from reforms to this critical industry.”

Practical Takeaways

The FTC’s June 7 decision signals that PBMs are now in the regulatory sights of both federal and state lawmakers. In particular, the topics the FTC will be investigating as part of its inquiry mirror what many states have already begun to regulate with new state PBM legislation: pharmacy clawbacks and fees, steering of patients to PBM-owned or affiliated pharmacies, pharmacy audit practices and greater transparency with rebates and pricing methodologies. All affected industry stakeholders – including health plans, PBMs, pharmacies and manufacturers – should take notice of these developments as new legislation, regulations and agency actions continue to impact prescription drug benefits and pricing. In addition to analyzing applicable legal issues, stakeholders may also consider alerting their advocacy team members for assistance with legislative opportunities and developments.