FTC finds PBMs make billions in profit from marking up cancer, other critical generic drugs

The three largest Pharmacy Benefit Managers (PBMs) continue to abuse the health care system, significantly marking up a wide range of lifesaving medicines according to a new report from the Federal Trade Commission (FTC).

This report, which the commission voted unanimously to release, expands on a previous FTC report based on the agency’s two-year investigation into PBMs. The FTC’s findings build on mounting evidence that middlemen and other entities that don’t make medicines are using medicines as a profit center at the expense of patients.

Here are four key findings from the report:

• PBMs mark up medicines dispensed at the pharmacies they own by up to thousands of percent.
  • A large share of these markups were for lifesaving treatments for cancer, HIV and other conditions.
  • The report found that 63% of the specialty generic drugs dispensed by PBM-affiliated pharmacies were marked up by more than 100%, and 22% had markups over 1,000%.
• PBMs and their parent companies make billions in profit from these mark ups.
  • The steep markups charged by the PBMs resulted in a significant share of their parent company’s profits. From 2017 to 2022, PBMs received $8.7 billion in revenue from markups and spread pricing.
  • Markups account for 12% of their parent companies’ income, up from less than 8% two years earlier.

• PBMs increase costs for patients, employers, and other stakeholders.
  • The three largest PBMs are driving profit from the markups while raising costs - which steadily increased annually - for patients, employers and other stakeholders.

• Current PBM business models.
  • “We also found that this problem is growing at an alarming rate, which means there is an urgent need for policymakers to address it,” said Hannah Garden-Monheit, Director of the FTC’s Office of Policy Planning.
  • Specialty generic drug pricing and steering practices should receive further scrutiny, and plan sponsors should be aware that they and their members are paying the PBMs and their affiliated pharmacies significant markups for critical medications.

The report’s findings further illuminate the rampant abuse within the health care system by middlemen and others. A new report from Berkeley Research Group found that half of every dollar spent on medicines goes to those that do not make medicines. Among non-manufacturers, middlemen pocketed the most and are the largest factor driving medicine spending increases.

As policymakers continue to look for ways to address rising health care costs and spending on medicines, they must realign incentives in the market that allow PBMs and others to put profits ahead of patients.