Dear Chair Lina M. Khan, Commissioners, and Staff:
On behalf of the Board of Directors of the Community Oncology Alliance (“COA”), we are pleased to share information on the United States Federal Trade Commission’s (“FTC”) Solicitation for Public Comments on the Business Practices of Pharmacy Benefit Managers and Their Impact on Independent Pharmacies and Consumers (FTC-2022-0015) (the “RFI”).
COA is an organization dedicated to advocating for the complex care and access needs of patients with cancer and the community oncology practices that serve them.  We are the only nonprofit organization in the United States dedicated solely to independent community oncology practices, which serve the majority of Americans receiving treatment for cancer.  COA’s mission since its grassroots founding close to 20 years ago has been to ensure that patients with cancer receive quality, affordable, accessible, and equitable cancer care in their own communities where they live and work.  We have built a national grassroots network of community oncology practices to enhance the effectiveness and efficiency of cancer care, as well as to advocate for public policies that benefit patients with cancer.  Individuals from all perspectives of the cancer care delivery team – oncologists, administrators, pharmacists, mid-level providers, oncology nurses, patients, and survivors – volunteer their time on a regular basis to lead COA and serve on its committees.
As advocates for patients with cancer and other serious diseases treated in community oncology practices, COA has a strong interest in ensuring that the FTC seriously investigates the negative antitrust and consumer impact of pharmacy benefit managers (“PBMs”).  We have a lot of input to provide to the FTC, but the most important point that we want to make is that horizontal integration among PBMs, coupled with the vertical integration with insurers, has provided PBMs with near-monopolistic control of the United States’ pharmaceutical market.  The top three PBMs – CVS Caremark, Express Scripts, and OptumRx – control 80 percent of all prescription drug claims.[1]  Adding the next three largest PBMs – Humana Pharmacy Solutions, MedImpact Healthcare Systems, and Prime Therapeutics – the top six PBMs control a staggering 96 percent of the country’s prescription drug market.[2]
It does not require rocket science to look at the clear negative implications that unchecked PBM and insurer consolidation has had on patients, physicians, employers, pharmacies, and other businesses across the health care system in this country.  Independent pharmacies are going out of business under oppressive direct and indirect remuneration fees (“DIR Fees”) assessed by PBMs, resulting in pharmacy “deserts” for patients, especially in rural areas.  Vertical integration with mail order pharmacies has allowed PBMs to mandate use of their own pharmacies, resulting in mailed cancer drugs that are delayed, incorrect, unprotected from the elements, and even denied.  Although pharmaceutical companies are fundamentally responsible for increasing drug prices, PBMs are fueling drug prices and costs for Americans through the use of extortive rebates.  PBMs are not interested in the most effective and lowest-cost drugs for patients – they are only motivated by the most profitable drugs to them.  Along with their corporate insurers, PBMs employ utilization management tactics, like restrictive formularies and “fail-first” step therapy, to ensure that the most profitable drugs to them are mandated.  In this letter, we will go into greater detail on these points, as well as others.
In summary, large and vertically integrated monopolistic PBMs are crippling our health care system.  They are not only fueling drug costs for Americans but also placing more barriers to accessible and affordable medical care.  Fortunately, many states are passing legislation to stop PBM abusive behaviors.  Unfortunately, the federal government has not acted in any significant way to curb PBMs but has actually emboldened PBMs and fostered them.  Just recently, the Centers for Medicare & Medicaid Services (“CMS”) failed to meaningfully act to stop oppressive and destructive DIR Fees, opening the door for Express Scripts and CVS to ratchet down reimbursement to pharmacy providers even further.
Unfortunately, the FTC has allowed this massive consolidation among PBMs and insurers, creating a virtual monopoly in the prescription drug market.  Additionally, CMS continues to take a “hands-off” approach to PBMs and their Medicare Part D Plan Sponsors (“Plan Sponsors”) – often part of the same vertically-integrated corporation – by allowing PBMs to hide behind the Medicare Part D “non-interference clause.”  The Federal government must act immediately to stop the PBM/insurer complex that is destroying our health care system.
Background and Focus of this Letter
Within many community oncology practices, in-house pharmacies provide oral and infused drugs prescribed by the practice physicians, which are used to treat cancer, as well as cancer-related conditions.  In the last decade, in-house pharmacies have emerged as a vital component in the quest to provide patients with high-quality, high-value, and convenient, personalized cancer care.  This is driven by the increasing number of cancer drugs that are available in oral formulation versus infusible, estimated to be approaching 40 percent of all cancer drug therapies.  The benefit of in-house pharmacies and dispensing facilities has become even more evident with this increase in the number of new oral cancer drugs coming to market and the rise of third-party specialty pharmacies, whose use is increasingly required by payers and PBMs.[3] COA strongly supports and encourages the use of physician in-office dispensing and/or pharmacies for patients with cancer as an integral part of modern, patient-centered, coordinated, safer, high-quality cancer care.[4]
Many of the comments in this letter are featured in a series of detailed reports COA has commissioned from the industry experts at the law firm of Frier Levitt.  The most recent report, Pharmacy Benefit Manager Exposé: How PBMs Adversely Impact Cancer Care While Profiting at the Expense of Patients, Providers, Employers, and Taxpayers, was released in February of this year and is both cited here, as well as included as an attachment to this comment letter.[5]  It provides a comprehensive examination of the most pervasive and abusive PBM tactics, highlighting the adverse impact PBMs have on patients, providers, and health care payers (including Medicare, Medicaid, employers, and taxpayers).
COA thanks the FTC, commissioners, and staff for finally turning your attention to the problems and pitfalls with PBMs in the U.S. health care system.  Unfortunately, we fear this attention might be “too little, too late.”  Providers, patients, and self-funded employers have long realized that the vertical integration between payers-PBMs-providers would spell disaster for quality and freedom of choice.  If the FTC is truly serious about addressing the broken PBM marketplace, dramatic and urgent action will be necessary to curtail their wide-ranging abuse of power.
Fundamentally, COA believes that the FTC must dramatically enhance oversight and revise antitrust guidance defining impermissible vertical integration and self-serving practices which could, at the very least, curb the most blatant PBM anti-competitive behavior.  As you will see in this RFI response, it is critical that regulators at the FTC take much-needed and overdue action to rein in the unchecked power of PBMs.
PBMs Are Increasingly Consolidated and Stifle Competition
Contracted by insurance carriers to negotiate on their behalf with pharmaceutical companies, PBMs are “middlemen” corporations that have quietly become a gargantuan and unavoidable part of our nation’s health care system.  Today, America’s consumers are at the mercy of a PBM marketplace that has become unacceptably consolidated and anti-competitive.
As we will detail in this RFI response, PBMs make up an oligopoly of rich, vertically integrated conglomerates that routinely prey on health care practices, providers, and their patients.  PBMs have done this by overwhelmingly abusing their responsibility to protect Americans from this country’s drug pricing crisis, and exploiting the opacity throughout the nation’s drug supply chain to enrich themselves  by fueling drug costs for Americans.
Traditionally, PBMs have played an important role in the administration of prescription drug programs.  However, over the past 10 years, the PBM marketplace has transformed considerably, and they are no longer just benefit managers.  Changes include both horizontal and vertical integration among health insurance companies, PBMs, chain pharmacies, specialty pharmacies, and long-term care pharmacies.  Today, virtually all the major PBMs have merged with, acquired, or become acquired by health insurers, greatly blurring the lines between insurer and PBM.
Three major players control nearly 80 percent of the total PBM market share by total adjusted claims.  CVS Caremark leads in PBM market share, representing 34 percent of total adjusted claims in 2020, followed by Express Scripts (24 percent) and OptumRx (21 percent).[6]  As a result, this small number of large companies now wield nearly limitless power and influence over the prescription drug market for a staggering 260+ million Americans.
PBMs now have the power to negotiate drug costs, dictate which drugs will be included on plan formularies, and control how those drugs are dispensed.  Oftentimes, patients with cancer are required to receive drugs through PBM-owned or affiliated specialty and mail order pharmacies, where they can suffer serious, sometimes dangerous, and even deadly outcomes as a result of medication delays and/or denials.
The rapid vertical and horizontal consolidation of the PBM and health insurance industry shows how a limited number of corporations now wield an outsized level of control and influence in the prescription drug coverage marketplace.  Fewer payers spells harm to patients, especially patients with cancer.  These integrated companies have greater abilities to control the nature and direction of patients’ care, including what type of care/drugs they receive, from whom they receive it, and in what setting they are treated.  The level of PBM intrusion into patient care borders on the practice of medicine by these PBMs and health insurance conglomerates.
PBM consolidation also results in harm to plan sponsors, especially employers sponsoring health plans, who have fewer choices based on decreased competition.  This hits America’s small employers the hardest, who lack the overall leverage and resources to either demand competitive rebates or restructure entrenched PBM practices.  Fewer payers also exponentially increase the importance of network access for providers.  Exclusion from a single PBM with a market share of 35 percent means that the provider loses out on a major portion of the patient population.
COA Comments on the FTC RFI
In this letter, COA will provide specific comments, concerns, and recommendations on the following topic areas in the RFI:

  • The impact of PBM rebates and fees on net drug prices to patients, employers, and other payers.
  • The impact of PBM rebates and fees on formulary design and patients’ ability to access prescribed medications without endangering their health, creating unnecessary delays, or imposing administrative burdens for patients or prescribers.
  • Whether patients are being forced to substitute different prescription drugs to maximize PBM rebates and fees.
  • PBMs’ use of potentially unfair, deceptive, or anti-competitive contract terms and all related practices when calculating pharmacy reimbursements and disbursements, including the use of Average Wholesale Price, Wholesale Acquisition Cost, Maximum Allowable Cost, and Usual and Customary Pricing, as well as all types of clawbacks, fees, discounts, and performance metrics, such as Direct and Indirect Remuneration, Generic Effective Rate, Brand Effective Rate, Dispense Fee Effective Rate, and all other similar provisions.
  • PBMs’ use of other potentially unfair, deceptive, or anti-competitive practices, including audit provisions; pharmacy network design and exclusions; use of gag clauses, confidentiality clauses, and non-disparagement clauses; and other potentially unfair provisions.
  • -,PBMs’ use of methods to steer patients away from unaffiliated pharmacies and methods of distribution and toward PBM-affiliated specialty, mail order, and retail pharmacies.
  • PBMs’ policies and practices related to specialty drugs and pharmacies, including criteria for designating specialty drugs, reimbursements to specialty pharmacies, practices for encouraging the use of PBM-affiliated specialty pharmacies, and practices relating to dispensing high-cost specialty drugs over alternatives.
  • Potential conflicts of interest and anti-competitive effects arising from horizontal and vertical consolidation of PBMs with insurance companies, specialty pharmacies, and providers.

The impact of PBM rebates and fees on net drug prices to patients, employers, and other payers
PBMs rebates and fees exacerbate the problem of high drug prices for patients, employers, and other payers.  Over the years, PBMs have helped build a complex, secretive drug supply chain that hides the true cost of drugs.  Rather than eliminate the costly arbitrage within the supply chain, PBMs have co-opted and embraced it, exacerbating the very problem of high drug prices that they are supposed to control.
At the same time, PBMs have recognized the tremendous financial windfall that can be had through vertical integration.  This has led them to buy or build their own mail order and specialty pharmacies, steering patients away from independent community pharmacies and medical practices to their wholly owned or affiliated pharmacy facilities where they can retain the inflated prices (and profits) they themselves are responsible for creating.
The perverse result is that PBMs have abandoned their initial reason for lowering drug prices, instead extracting greater and greater rebates and fees from everyone in the system and even letting higher-priced drugs “buy” their way onto their clients’ formularies via rebates that the PBMs mostly retain.  Indeed, PBMs have an incentive to favor high-priced drugs on their formularies over drugs that are more cost-effective because rebates are often calculated as a percentage of the manufacturer’s list price.  They then set up affiliated entities, known as rebate aggregators, to further obfuscate the flow of pharmaceutical manufacturer dollars, retaining a larger portion of their clients’ rebates, and leaving patients on high deductible plans exposed to drugs with exploitative list prices.   The result is that patients pay more for their drugs based off  artificially inflated list prices and the PBMs’ clients have higher prescription drug costs.
PBM Formulary Rebates and Impact on Drug Prices (aka the growing Gross-to-Net Bubble)
Among the different sources of revenue, the most prolific by far is in the form of rebates from pharmaceutical manufacturers that PBMs extract in exchange for placing the manufacturer’s drug(s) on a plan sponsor’s formulary or encouraging utilization of the manufacturer’s drug(s).  This is something the FTC covered in its 2005 report on PBM ownership of mail order pharmacies.[7]  Rebates are mostly used for high-cost, brand-name prescription drugs where there are interchangeable products and aim to incentivize PBMs to include pharmaceutical manufacturers’ drugs on plan sponsors’ formularies and to obtain preferred tier placement.[8]   In some instances, PBMs purposely misclassify generic drugs as brand drugs to charge higher prices to plan sponsors, which ultimately generates higher rebate revenue.[9]
While drug prices are too high, ironically, the growing number and scale of rebates is the primary fuel for today’s high drug prices.  The truth is that PBMs have a vested interest in having drug prices remain high and extracting rebates off these high prices.  PBM formularies tend to favor drugs that offer higher rebates over similar drugs with lower net costs and lower rebates.[10]
Industry expert Adam J. Fein, PhD (Drug Channels) has coined the term “gross-to-net bubble” to characterize the dollar difference between sales at brand-name drugs’ list prices and their sales at net prices after rebates, discounts, and other reductions.  He estimates that in 2021, the total value of gross-to-net reductions for patent-protected, brand-name drugs was $204 billion, up by $49 billion (+32 percent) compared with the 2017 figure.[11]
The gross-to-net bubble for drug prices matters because studies have clearly shown that PBM rebates extracted from drug manufacturers drive up the drug spending of plan sponsors, including Medicare and Medicaid.  One study from the USC Leonard D. Schaeffer Center for Health Policy & Economics found that a $1 increase in rebates is associated with a $1.17 increase in list price.[12]  Simply put, there is no free lunch – every dollar in “rebates” or “fees” that PBMs extract from manufacturers is accounted for by higher drug list prices.
PBM rebate practices also greatly impact the ability for patients and payers to realize tremendous savings by using lower-cost biosimilars instead of their higher-cost reference products.  As just one data point, the HHS Office of Inspector General (“OIG”) recently noted that Medicare Part D spending on biologics with available biosimilars in 2019, could have decreased spending by $84 million, or 18 percent, if all biosimilars had been used as frequently as the most used biosimilars.  Additionally, Medicare beneficiaries’ out-of-pocket costs could have decreased by $1.8 million, or 12 percent.[13]  PBM rebate games have encouraged biologic manufacturers to erect “rebate walls” or “rebate traps” where PBMs prefer the higher-cost, branded biologics that offer higher rebates, over cheaper biosimilar alternatives.  This means that not all plan formularies cover available biosimilars, and those that do rarely encourage their use.  Not only does this reduce the use and cost savings of biosimilars, but it also stifles biosimilar development and market competition.[14]  This is an issue the FTC should know well, as the agency issued a report on the subject of rebate walls to Congress in May of 2021.[15]  COA believes that secretive PBM biosimilar rebate practices represent a clear and existential threat to the promise and potential of biosimilars.  These destructive practices will have a long-lasting impact on the future of health care and competitive drug development, particularly in oncology.[16]
Patient Impact of PBM Rebates and Fees
The impact of PBM rebates and fees on net drug prices to patients, regardless of their insurance, is an increase to the overall cost of drugs and out-of-pocket expenses.  Even for patients with insurance, rebates ultimately increase costs to the patient for the benefit of PBMs and health insurers.
At the point of sale, patient copays are based on a percentage of the higher, undiscounted list price negotiated between the pharmacy and the plan or PBM.  Patients do not receive any of the benefit in the form of lower prescription costs from PBM rebates or fees.  For Medicare Part D patients, they are even paying on the entire, undiscounted list price when they are within the catastrophic reinsurance phase, raising out-of-pocket costs by thousands of dollars.[17]
Employers and Employer Health Plans Impact of PBM Rebates and Fees
The impact of PBM rebates and fees on plan sponsors, including self-funded employer health plans, similarly serves to drive up prescription drug spending.  Through ambiguous contractual terms that recast price concessions under murky terms such as “rebate administration fees,” “bona fide service fees,” and “specialty pharmacy discounts/fees,” PBMs avoid having to share monies received from manufacturers with plan sponsors.[18]
PBM Copay Accumulators and Maximizers
Many patients struggle to meet their deductible and pay the copays for the high-cost drugs they need to treat serious, sometimes life-threatening, illnesses like cancer.  To help offset these costs – especially in the oncology drug market, where copayments can range in the thousands of dollars – drug manufacturers have created copay discount cards to reduce the net out-of-pocket amount to a figure that is more affordable to many patients.
Manufacturers’ copay support payments have been growing at double-digit rates, along with the adoption of benefit designs that favor deductible and coinsurance spending.  For example, PBMs sometimes intentionally use higher than normal copay amounts for new, expensive products, when they do not have the leverage to negotiate rebates (e.g., new-to-market cancer medications).  These artificially high copays lead to manufacturers’ predictable response to bringing their innovative new drugs to market by resorting to copay coupon programs, which are a form of “back door” rebates to the PBMs.  Manufacturers are estimated to have spent $15 billion on these programs in 2019 alone, according to a Drug Channels Institute analysis.[19]  Almost half of all patients with cancer are commercially insured (not on Medicare or Medicaid) and can use these cards to help pay insurance deductibles, copays, and/or coinsurance to reduce out-of-pocket drug costs.
However, beginning in 2018, several large insurance companies and PBMs began to implement a nefarious new set of schemes called “copay accumulator programs.”[20]  Under copay accumulator programs, the insurance plan or PBM prevents the value of copay assistance cards or coupons from counting towards the beneficiary’s deductible or out-of-pocket maximum.[21]  Normally, the contributions from the drug manufacturer’s copay card would not only help offset the patient’s copay at the point of sale but would count toward fulfilling the patient’s out-of-pocket obligations (i.e., the deductible and out-of-pocket maximum).  Thus, after several fills of a high-cost specialty medication, the deductible would be exhausted, and the patient’s out-of-pocket would be lowered to a more affordable amount.  This is important because many drug manufacturers’ copay coupon programs have annual limits or caps, preventing patients from receiving unlimited copayment assistance.  Without copay accumulator programs, patients are more easily able to afford their prescriptions throughout the whole year.
Patients (unlike PBMs, insurers, and plan sponsors) do not get to share in the benefit of manufacturer rebates and price concessions.  This means that – particularly in the case of deductibles or coinsurance – patients are paying a copay based on an already inflated price (e.g., if a patient pays a 20 percent coinsurance on $100, for which there’s been a post point of sale rebate of 40 percent, the patient’s coinsurance has been inflated by $8, or 50 percent).
These programs have been called a variety of things by different entities, including “Out-of-Pocket Protection Programs” (Express Scripts), “True Accumulation” (CVS Caremark), and “Coupon Adjustment: Benefit Plan Protection Program” (UnitedHealthcare).[22]  However, the main thrust has been to place financial roadblocks in the way of patients receiving necessary care, with dubious savings being realized by plan sponsors.
Another related concept that has emerged in response to the negative patient impact from accumulators is that of “copay maximizer programs.”  Like copay accumulator programs, copay maximizer programs are designed to allow payers to “extract the full value of the manufacturer’s copay support,” but in reality, swap the “financial cliff” that the patients face under accumulator programs, in favor of a slow and steady drain on resources, without any marked benefits to the patient.[23]
Worse yet, to the extent that maximizer programs do actually deliver copay savings to the patient, it invariably comes with underhanded restrictions, obligating the patient to obtain the prescription exclusively from the PBM-owned or affiliated pharmacy and allowing PBM subsidiaries to reap additional revenue.[24]  PBMs have created “secretive and independent private companies” to operate these specialty drug maximizer programs, who sometimes take fees equal to 25 percent of the manufacturer’s copay support program.[25]
In each of these scenarios, however, the patient is either forced to go over the “financial cliff” in the middle of the year (when their copays skyrocket) and risk drug abandonment or is forced to utilize a PBM-owned or affiliated pharmacy with limited real financial benefits (or face exorbitant out-of-pocket costs).
Furthermore, many employers and plan sponsors do not even know what they are getting or whether such copay accumulator/maximizer programs have been instituted.  This is especially alarming considering the secretive operations of copay maximizer programs, where the prescription is typically required to be filled at the PBM-owned or affiliated pharmacy, and related or affiliated companies take up to 25 percent of the copayment assistance made available by the manufacturer.
For example, with Express Scripts’ SaveOnSP program, a commercial plan sponsor declares specialty drugs to be “non-essential health benefits,” making them covered by the plan, but not subject to out-of-pocket maximums mandated by the Affordable Care Act.[26]  In turn, the patients’ out-of-pocket costs are set to the maximum annual value of a manufacturer’s copay coupon program.  For instance, a program with a total value of $20,000 in copayment support would require a patient to pay $20,000 annually for their drugs without regard to the plan’s out-of-pocket maximums.  Thereafter, to avoid these inflated costs, the beneficiaries must enroll separately in the SaveOnSP program and have their prescriptions filled exclusively by Express Scripts’ Accredo specialty pharmacy.  SaveOnSP then charges a fee equal to 25 percent of the copayment support, or $5,000, in the above example.  This is in addition to the profit generated by Express Scripts’ wholly owned pharmacy by filling the prescription.
PBM Rebate Aggregators and Overseas Subsidiaries
The FTC needs to be aware of the growing practice of PBM rebate aggregators and their overseas subsidiaries.  As the American public and plan sponsors have become more aware of the nature and extent of PBM rebate games, they have begun demanding that all or nearly all rebates negotiated on their behalf be fully reported and passed-through.  In response, PBMs have increasingly begun to “delegate” the collection of manufacturer rebates to “rebate aggregators,” which are often owned by or affiliated with the PBMs, without seeking authorization from plan sponsors and without telling plan sponsors.[27]  Sometimes referred to as “rebate GPOs,” these mysterious entities include Ascent Health Services, a Switzerland-based GPO that Express Scripts launched in 2019; Zinc, a contracting entity launched by CVS Health in the summer of 2020; and Emisar Pharma Services, an Ireland-based entity recently rolled out by OptumRx.  Even some of the major PBMs are contracting with other major PBMs’ rebate aggregators for the collection of manufacturer rebates (for example, in the case of OptumRx contracting with Express Scripts for purposes of rebate aggregation for public employee plans).[28]
The impact of PBM rebates and fees on formulary design and patients’ ability to access prescribed medications without endangering their health, creating unnecessary delays, or imposing administrative burdens for patients or prescribers.
Whether patients are being forced to substitute different prescription drugs to maximize PBM rebates and fees.
PBM Prior Authorization and Step Therapy Burdens
As the FTC might be aware, providers have long complained of utilization management efforts from insurers and PBMs that unnecessarily delay or deny patients their needed medications.[29]. [30]  Indeed, increasingly, prior authorization imposes burdens and inefficiencies upon oncology practices.  The Council for Affordable Quality Healthcare reports that the cost for providers to manually generate a prior authorization increased from $6.61 in 2018 to $10.92 in 2019, while the payer cost for the same transaction decreased from $3.50 in 2018 to $3.32 in 2019.[31]
A 2020 study published by the American Medical Association reported that physicians and their staff spend two full business days per week completing prior authorizations, with 40 percent of physicians having staff who work exclusively on prior authorizations.[32]  Given the volume of high-cost cancer drugs, it is likely that even more time is spent by oncology practices.  Providers raise legitimate concerns about delays in care, with 28 percent of physicians saying prior authorizations have led to serious adverse events.[33]
PBM rebates and fees often result in these middlemen inserting themselves between the physicians and their patients, violating the doctor-patient relationship.  This is particularly apparent with step therapy, prior authorization, and other utilization management protocols.
In many cases, patients with cancer will no longer have guaranteed access to potentially life-saving drugs.  Instead, they will be subjected by PBMs to “fail-first” step therapy and formulary restrictions that potentially prevent them from receiving the best, evidence-based therapies that their trained physicians prescribe as a first-line cancer treatment.  Many times, these practices favor not the least expensive medication but the most profitable one for the PBM.
“Fail-first” step therapy for cancer treatment is a dangerous step toward middlemen – health plans and PBMs who are often one and the same – not oncologists, dictating which treatments patients with cancer can or cannot receive.  This process subjects patients with cancer to delays and even denials of the evidence-based, individualized treatments that their oncologist prescribes.
“Fail-first” step therapy requirements are most often driven by financial interests from PBM rebates and fees, not by patients’ medical needs.  This can leave patients at the whim of middlemen who are making treatment decisions to maximize profits rather than to maximize patient outcomes and well-being.
For patients with cancer, “fail-first” step therapy can not only delay the delivery of the care prescribed by their oncologists but also leaves patients facing this life-threatening disease without access to the most immediate and life-saving treatments.  Beyond just delayed treatment, the result of “fail-first” step therapy can also mean increased disease activity, disability, and in some cases, irreversible disease progression.  Although any “fail-first” step therapy requirement may attempt built-in protections and an appeals process for patients who are stopped from getting the most immediate and appropriate cancer treatment, navigating those hurdles while dealing with cancer can be agonizing to patients and their providers, and is an unnecessary, cruel, and sometimes even deadly burden.
COA and affiliated specialty providers have met with and presented CMS and Congress with multiple, clear instances of patient harm due to “fail-first” step therapy, including but not limited to, patients becoming legally blind, long-term hospitalizations, infections, increased disease activity, and disability.[34]
An example of the harm that “fail-first” step therapy can have on patients with cancer is seen in denosumab, a drug used to prevent skeletal-related events, such as fractures, in patients who have bone metastases or hypercalcemia due to malignancy.[35]  The patient literally must fail in a way that could lead to serious, bone-related complications.  Then, they have to be admitted to the hospital with a broken hip that could have been prevented because the patient didn’t first get the optimal therapy.  Coverage across payers is incredibly varied and arbitrary, and many times, a physician doesn’t know when a patient is going to be subject to a “fail-first” step therapy program until the pharmacy tries to process the prescription.  Because “fail-first” step therapy is a PBM insurer-based product, it takes a very narrow view of what the cost is and doesn’t consider the patient experience.  Many of the “fail-first” step therapy scenarios encountered by oncologists are completely misaligned, and the resulting complications only lead to more cost to the system, not less.
Another example encountered by oncologists and provider staff are misguided double step therapy requirements for chemotherapy-induced nausea drugs or antiemetics.  In some cases, patients with cancer must fail twice, vomiting violently, before the PBM or insurer will cover the more effective, brand anti-nausea drug.  These policies are inconsistent with national treatment guidelines that do not recommend that patients should be required to fail one of these inferior agents before receiving the other.[36]  Furthermore, the drugs in this specific example were at a low price point and played a significant role in the treatment and quality of life for patients with cancer receiving chemotherapy.  COA has encountered this specific example, and fought it, in several states, notably Tennessee, through the PBM Magellan and Blue Cross Blue Shield of Tennessee.
Another example of this is the CVS Specialty Expedite Rx program announced toward the end of September 2021.  In the notification faxed to practices, CVS Specialty states they have “streamlined the benefits verification and prior authorization (PA) process by establishing connectivity with your EHR.”  Through this new program, CVS is only allowing expedited approvals to be done when they’re going to CVS’ in-house specialty pharmacy, which creates an unfair advantage for their pharmacy in getting approvals relative to prescriptions dispensed by the practices.  CVS uses this in the context of what should otherwise be “medical” benefit claims and routes them into the specialty pharmacy PBM network (presumably to be filled by CVS Specialty Pharmacy).  COA also believes that this CVS program appears to be yet another anti-competitive move and a violation of the spirit of federal Health Information Exchange (“HIE”) and interoperability goals, harvesting patient health information for gain.  There should be no need for CVS to access practices’ EHR systems and utilize the data.
COA believes that “fail-first” step therapy results in patients with cancer facing unnecessary delays and/or denials in accessing the specific individualized treatments their physician has prescribed.[37] Patients on “fail-first” step therapy are forced to receive potentially inferior or incorrect treatment options that their treating physicians considered and specifically did not prescribe.  “Fail-first” step therapy programs insert third-party middlemen (insurers and PBMs) between patients and their treating physicians.  The intervention by any third party can have a negative impact on patient outcomes, the physician-patient relationship, and the administrative burdens of cancer care, all of which we should be seeking to improve, not worsen.
PBMs’ use of potentially unfair, deceptive, or anti-competitive contract terms and all related practices when calculating pharmacy reimbursements and disbursements, including the use of Average Wholesale Price, Wholesale Acquisition Cost, Maximum Allowable Cost, and Usual and Customary Pricing, as well as all types of clawbacks, fees, discounts, and performance metrics, such as Direct and Indirect Remuneration, Generic Effective Rate, Brand Effective Rate, Dispense Fee Effective Rate and all other similar provisions.
COA encourages the FTC to investigate how PBMs a) demand lower reimbursement rates for drugs that are below pharmacists’ acquisition cost and b) manipulate reimbursement rates to drive business to their owned or corporate-affiliated specialty pharmacies.  Simply put, underpayment increases the market power of PBMs and PBM specialty pharmacies, which simply fuels drug costs for Americans.  PBMs are very good at exploiting loopholes that result in harm to the financial viability of independent pharmacy providers, raise patient drug costs, and create narrower pharmacy networks that limit patient access.
Extortionate PBM DIR Fees
One way in which PBMs have driven up drug costs is with murky DIR Fees charged to independent pharmacy providers who dispense drugs, such as retail and specialty pharmacies and physician-run medical practices that operate retail pharmacies or dispensing facilities (collectively “Pharmacy Providers”).  DIR Fees charged by PBMs to Pharmacy Providers lack any reasonable transparency, threaten their financial viability and, most importantly, increase the cost of drugs to Medicare and its beneficiaries.
The concept of legitimate “direct and indirect reimbursement” or “DIR” is not new to the Medicare Part D program.  However, the business tactic of PBMs recouping DIR Fees of nine percent, and even above list drug prices under the guise of the overly broad term “DIR Fees,” is new.  This practice has even drawn the attention of CMS and Congress because of the drastic financial impact DIR Fees are having on independent retail pharmacies, resulting in “pharmacy deserts” popping up across the country.
DIR Fees have skyrocketed in recent years, subjecting Pharmacy Providers to increasingly high levels of financial risk.  According to CMS, DIR Fees grew 107,400 percent between 2010 and 2020.[38]  An analysis conducted by the National Community Pharmacists Association (“NCPA”) found that PBMs increased DIR Fees by 1,600 percent between 2015-2020, which exceeds any possible increase to administrative costs.[39]  Much of this growth occurred after 2012 when performance-based payment arrangements between prescription drug plan sponsors and independent pharmacy providers became more prevalent.[40]  Additionally, pharmacy DIR Fees in Part D totaled $11.2 billion in 2020, an increase of $2.1 billion from 2019 and an $11 billion increase from 2013.[41]
Especially with cancer and other specialty drugs, DIR Fees are typically based on a percentage of drug list price, which creates an incentive for PBMs to seek increasingly larger amounts of pharmacy price concessions in the form of percentage-based fees, often to the detriment of patients in the form of higher out-of-pocket costs at the point of sale.  For example, a $40,000 high-cost specialty drug prescribed to treat Hepatitis C with a 5.5 percent DIR Fee would result in the PBM clawing back over $2,000 on that one claim.[42]  Research conducted by the law firm Frier Levitt found that, for example, a five percent DIR Fee on a $2,000 specialty drug nets PBMs $100 every time the drug is dispensed.[43]
DIR Fees are also an extreme financial burden for Pharmacy Providers both in their dollar amount and because the amount owed is assessed retrospectively – or “clawed back” – by PBMs.  In many cases, this means the PBM fails to fully compensate Pharmacy Providers for their drug acquisition costs, let alone the professional services required in dispensing medications and managing patients.  This can decrease the net reimbursement rates received by Pharmacy Providers to well below their total acquisition and professional services costs, thereby putting them severely underwater and threatening their ability to continue operating.[44]  In some cases, murky DIR Fees have even subjected Pharmacy Providers to legal risks.[45]
Independent retail pharmacies frequently point to DIR Fees as a major contributing factor in their closures, which most acutely jeopardizes patients in rural and underserved areas who are then forced to travel significant distances to get their medication.  IQVIA estimates that between December 2017 and December 2020, almost 2,200 pharmacies closed nationwide.[46]
According to an analysis by Avalere Health, a pharmacy could see a 47 percent lower margin on average per prescription, and a low-performing pharmacy could see an 81 percent lower margin on average per prescription due to DIR Fees.  Given the high price of many specialty treatments, these DIR Fees often place Pharmacy Providers underwater on each claim, especially those that involve high-touch care management services required by patients with complex medical needs.
Irrelevant and Sham PBM “Quality” Performance Programs
DIR Fees are frequently based on sham “quality” criteria and performance programs that are irrelevant to cancer care and that practices dispensing oral chemotherapy have no ability to contest or negotiate.  Typically, oncology pharmacies are judged on patient adherence to diabetes, hypertension, and cholesterol (statins) medications, all of which are conditions the practices do not treat and are totally irrelevant to the quality of a patient’s cancer care.
In fact, any PBM quality measures tied to adherence with oral cancer drugs are unsuitable for patients with cancer, as their prescriptions are often changed to align with their dosage or therapy.  If providers change their prescribing practices to meet adherence metrics, it could cause patients harm when medications are not stopped after experiencing side effects, potentially violating instructions on drug labels.  Tying adherence to DIR Fees is unsuitable for oncology and urology practices treating patients with cancer because adverse health outcomes tied to oral cancer drugs may lead to short-term discontinuation of a treatment, which is viewed as a lack of adherence by PBMs.  This results in measurements of poor performance and justification for penalties in the form of DIR Fees.[47]
Indeed, the top PBMs use “quality performance” as simply a front to extort DIR Fees from independent pharmacy providers.  This is a rigged game, just like 3-Card Monte, where a pharmacy cannot possibly win.  PBMs overwhelmingly penalize independent pharmacy providers for poor performance versus those few (and we would guess independent pharmacy providers under the same corporate umbrella as the PBMs) that are rewarded for superior performance.
COA encourages the FTC to investigate the impact of these sham quality programs on PBM competition and self-serving behaviors.  These quality programs must a) utilize quality measurements that are both relevant to the pharmacy type being measured and are performance factors that the pharmacy can actually influence and b) offer pharmacies an equal opportunity for a bonus for superior performance and a penalty for poor performance.
COA appreciates the continued attention from both the Biden administration and Congress on the problems associated with the growth in pharmacy DIR Fees and the need for reform.  In 2021, House and Senate legislators introduced the Pharmacy DIR Reform to Reduce Senior Drug Costs Act to require price concessions, payments, and fees that are negotiated with a pharmacy to be included in a drug’s negotiated price (excluding incentive payments) and be provided to patients at the point of sale.[48]  However, unfortunately, CMS recently finalized its final rule that will eventually eliminate retroactive PBM DIR Fees, but not until 2024.[49]  As we will explain in the next section of this letter, CMS did not address any harm that DIR Fees are having on Pharmacy Providers and is clearly abdicating its responsibility to fix this dire situation with DIR Fees.  As we noted in our comment letter to CMS on the proposed rule, PBMs will simply abuse loopholes to blunt the positive impact of the CMS proposal, shifting to other fees and tactics that will continue to artificially raise drug costs for Medicare beneficiaries, forcing pharmacy providers out of business in the process.[50]  Unfortunately, and as we will explain next, that is exactly what has happened.
PBMs Are Maliciously Adapting to Policy and Regulatory Change
As COA warned in our comment letter to CMS on the DIR Fee proposed rule,[51] the top PBMs are already adapting to the change in DIR Fees proposed (now finalized) by CMS.  Case in point, even before CMS finalized its proposed rule, Express Scripts (owned by the health insurer Cigna) released an amendment to its pharmacy contracts for 2023 anticipating that CMS would finalize its proposed rule on DIR Fees.[52]  If the CMS proposal to eliminate retroactive DIR Fees goes into effect, which it will January 1, 2024, Express Scripts would simply substitute outsized “administrative fees” for DIR Fees that further lowers drug reimbursement by eight percent to Pharmacy Providers in conjunction with a sham “quality metrics” program.  By finalizing the change in DIR Fees, but delaying the change to 2024, CMS has given Express Scripts a giant pass to further lower reimbursement to Pharmacy Providers.
The new “Express Scripts Medicare Performance Network” program modifies Express Scripts’ current Broad Part D Network in two ways: 1) it drastically reduces pharmacy reimbursement by up to eight percent up front; and 2) it imposes a mandatory $.75 “bonus pool” fee on every drug claim, which apparently provides some pharmacies, but not all, with the opportunity to earn back all or a portion of those mandatory fees.  The terms of the contract are that providers will be given a base rate of the Average Wholesale Price minus 26.30 percent on all brand drugs.  This is clearly not reasonable or relevant reimbursement, is intolerable to most providers, and likely will result in underwater reimbursement for many medications.
Additionally, under this new Express Scripts program, Pharmacy Provider performance will be assessed (scored) against a network quality program as eligibility for bonus payments, and Pharmacy Providers that do not receive a score in any quality measure will not be eligible to receive performance payments.  For community oncology practices, this is particularly unfair because the Express Scripts quality metrics are irrelevant to oncology, which means that community oncology practices will never be eligible for a “Performance Payment Award” and are essentially being taxed $0.75 per drug claim.  Additionally, Express Scripts states that it will distribute 100 percent of the bonus pool to pharmacy participants, which can include in whole or part Express Scripts’ own mail and specialty pharmacies.
COA provided extensive comments on this new Express Scripts program in a letter to CMS.[53]  We encourage the FTC to review this letter that details how PBMs take advantage of every loophole that CMS provides.
Additionally, COA has just received a new CVS agreement amendment that decreases the reimbursement to Pharmacy Providers between 13-18 percent, given CMS is making changes to DIR Fees.  This just further documents that the top PBMs have incredible market power in doing whatever they want.  They profit in one way or another by providing low-ball reimbursement to Pharmacy Providers or by mandating use of their own pharmacies.  And, if either of these tactics are threatened, their affiliated insurers will threaten to increase health insurance premiums.  This is simply extortion, however you cut it.
Abusive PBM Network Fees
As DIR Fees have come under increasing scrutiny, PBMs have also begun to contrive various administrative fees as “network” fees, allowing PBMs to make pharmacy network access contingent on payment of administrative fees operating under the guise of network fees.  Taken to the extreme, these practices can be extortionary and abusive to Pharmacy Providers.  Additionally, PBMs maintain the ability to charge general compliance fees of up to $500 per day until the PBM determines a pharmacy is sufficiently compliant with the terms and conditions of its contract.  PBMs also extract other “fees” from Pharmacy Providers, such as assessing audit fees up to 20 percent of any discrepancies identified by the PBM or requiring independent pharmacy providers to place $50,000 in escrow as a pre-condition to begin disputes against them.  Once again, the market power of the top PBMs is such that they are virtually untouchable and get away with whatever they want to do.
PBM Violations of Any Willing Provider Law
As the FTC considers the impact of unfair PBM reimbursement to Pharmacy Providers, the agency should consider if the net reimbursement amounts are consistent with the spirit of “reasonable and relevant” contract terms, as required by the federal Any Willing Provider Law (“AWP Law”).
Congress enacted the AWP Law as part of the Social Security Act,, and CMS, through rulemaking, established that Plan Sponsors must contract with any pharmacy that meets the Plan Sponsor’s standard terms and conditions for network participation.[54]  The AWP Law also requires that Plan Sponsors and their PBMs offer a standard contract with “reasonable and relevant” terms and conditions of participation, where any willing pharmacy may access the standard contract and participate as a network pharmacy.[55]  It is increasingly clear that PBM reimbursement rates for Pharmacy Providers are often not “reasonable and relevant.”  COA urges the FTC to further investigate PBM contracts and reimbursement rates as the dominant market powers of the top PBMs are simply “take our terms and conditions, or you don’t participate in our network.”
Spread Pricing to Pad PBM Profits
Spread pricing occurs when PBMs charge plan sponsors one price for the cost of a patient’s drug, while reimbursing the dispensing pharmacy a lower rate, and pocketing the difference, or the “spread,” for themselves.[56]  This practice has recently come to light in the Medicaid context, where PBMs manage benefits for state Medicaid Managed Care Organizations (“MCOs”) and where state governments have uncovered immense spreads in drug claims for Medicaid beneficiaries.
A particularly egregious example of spread pricing can be seen in a January 2020 study published by 3Axis Advisors, which found significant steering of high-cost specialty drugs by Florida’s Medicaid MCOs to pharmacies the PBMs either own or are corporate affiliates.[57]  This resulted in staggering drug overpricing by these MCOs, particularly on generic specialty medications.  One drug studied, the oral leukemia treatment, generic Gleevec (imatinib mesylate), saw its true acquisition cost decline precipitously; however, Florida’s largest MCO did not pass the savings on to the state but instead pocketed egregious profits in their affiliated pharmacies.[58] In a similar study, the Ohio Department of Medicaid showed PBMs grabbing $223.7 million in hidden pricing spreads within the Medicaid managed care program from Q2 2017 to Q1 2018, accounting for 8.8 percent of overall (pre-rebate) spending on prescription drugs.[59]  The spread is typically the highest on specialty medications, such as oral oncolytics.  In short, PBMs are keeping more and more revenue from health care costs to the detriment of others in the health care space.
Ultimately, spread pricing practices reveal how PBMs are vertically integrated enterprises that control vast swathes of the drug supply chain in creating an anti-competitive marketplace, ultimately driving up the cost of drugs to public health programs and, ultimately, to patients.  Spread pricing harms patients by increasing premiums and drug prices.[60]  As with many other PBM pricing strategies, spread pricing has the perverse tendency to drive drug prices up, as the higher the overall drug cost is, the greater the opportunity for the PBM to earn a larger spread.  In the context of generic drugs, where patients expect to realize the greatest pricing relief, spread pricing artificially increases the cost of such drugs, thus negating such price relief.[61]
Effective Rate Reconciliation
COA encourages the FTC to investigate PBM concepts of Generic Effective Rate (“GER”), Brand Effective Rate (“BER”), and Dispensing Fee Effective Rate (“DFER”) to essentially reprice drugs and  claw back pharmacy reimbursements.[62]  Because effective rate reconciliation is done retrospectively and on a network level basis, it is tantamount to giving PBMs unbridled discretion as to how they will pay a given pharmacy, and still technically be in compliance with the reimbursement terms of the agreement.
Because of its after-the-fact assessment applied across an entire network of Pharmacy Providers, effective rate reconciliation allows PBMs to circumvent Maximum Allowable Cost (“MAC”) laws enacted by many states and the ability of independent pharmacy providers to challenge underwater reimbursements on generic prescriptions.
DFER is the newest PBM effective rate reconciliation concept, allowing a PBM to pay one dispensing fee at the point of sale, and afterward claw back a portion of this dispensing fee down to the contractually specified DFER.  This particularly pernicious type of effective rate reconciliation undermines the cost-plus, pass-through contracts that many state Medicaid programs are contemplating, or moving to, in response to outrage over spread pricing.  DFERs allow the PBM to pass through the state-mandated dispensing fee, only to claw it back after the fact, without the state’s knowledge.
PBMs’ use of other potentially unfair, deceptive, or anti-competitive practices, including audit provisions; pharmacy network design and exclusions; use of gag clauses, confidentiality clauses, and non-disparagement clauses; and other potentially unfair provisions.
We reiterate that the PBM market is essentially an oligopoly, with three major corporations controlling nearly 80 percent of total PBM market share.  CVS Caremark represented 34 percent of total adjusted claims in 2020, followed by Express Scripts (24 percent) and OptumRx (21 percent).[63]  Because of this, patients cannot freely choose a provider based on their personal health care decisions, as opposed to the mandates of their PBM.
Vertical integration among insurers and PBMs has created an anti-competitive environment, where prescription drug plan sponsors, PBMs, and retail and specialty pharmacies are vertically integrated under a single corporate structure.  Indeed today, each of the three major PBMs share common ownership with a major insurer and, in turn, with a  mail order and/or specialty pharmacy.  These vertical, integrated relationships allow the PBMs to control the pharmaceutical supply chain and erect superficial barriers to entry through narrow networks that restrict or even outright exclude entire classes of potential Pharmacy Providers, such as oncology and urology practices.
This is particularly pronounced in the context of cancer care, where the introduction of new oncology therapies over the past several years, specifically oral treatments for cancer and related conditions, presents new challenges for patients, plan sponsors, and providers alike.  PBMs have been attracted to oncology because the new oral cancer medications can be extremely expensive which presents tremendous profit potential.[64]  As a result, PBMs have attempted to use their market size and leverage to limit dispensing of oral oncolytics through certain specialty and/or  mail order pharmacies, most often their own or affiliated pharmacies.[65]
PBM Network Exclusions and Restrictions
PBMs use several different tactics to maintain their control over where patients receive their care.  The first and foremost of these is creating restricted networks, blocking access to any provider that is not affiliated with their PBM.  In these instances, the PBM will contend that the network is “closed” or that there is no “network,” and thus, Pharmacy Providers are not even given the opportunity to apply for network admission.  This occurs more frequently in the commercial insurance space involving employer-sponsored plans but can also involve Medicaid managed care programs, where the PBM will require patients to receive their cancer medication only from the PBM’s wholly owned or affiliated pharmacy.  For example, in recent years, CVS Caremark refused to admit 35 independent pharmacy providers into its network even though they were willing to meet their terms and conditions.[66]
A related, but slight variation of this tactic is to restrict access to certain classes of providers (e.g., retail pharmacies) while excluding wholesale and other classes of providers (e.g., dispensing physician practices).  Like wholesale network exclusion, these practices disadvantage vital providers while allowing PBM-owned or affiliated pharmacies to capture a greater share of prescription volume.
Even in instances where a PBM nominally allows independent community oncology pharmacies to apply for network participation, the PBM can still place other barriers in the way of providers being able to service their patients by imposing onerous credentialing processes.  For a community oncology practice to serve patients within a PBM’s network, PBMs require that the provider adheres to specific and extremely burdensome credentialing requirements, including the requirement that the provider maintains certain accreditations.  These conditions are made even more onerous when PBMs delay the review of credentialing applications (seemingly with the intention to avoid admitting these providers), enact credentialing applications with terms and conditions designed to keep out providers (rather than ensuring the quality of providers), or allow participation but at rates so low that reimbursement may not even cover the acquisition costs of drugs.  These obstructionist policies harm patients, degrade the quality of prescribers, and benefit only PBMs, who are incentivized to continue these illegitimate practices.
Finally, even when a community oncology practice has ultimately been admitted into a PBM’s network, PBMs continue to utilize other tactics to drive patients away from their community oncology practice and toward PBM-owned or affiliated pharmacies.  These include tactics, such as patient slamming and claim hijacking covered elsewhere in this RFI, misleading communications aimed at steering patients to PBM-owned or affiliated pharmacies, and creating incentives for patients (such as lower copays, larger  supply of medication, or free products/services), to utilize preferred PBM-owned or affiliated pharmacies.
PBM network design and exclusions are anti-competitive conduct – pure and simple – where patients are trapped into using one particular provider, not based on the quality of care provided by that provider but based on the financial arrangements and the corporate affiliation between the pharmacy provider and the PBM and/or health insurer.  Overly narrow pharmacy networks run counter to President Biden’s goal of ensuring competition in the prescription drug market discussed in Executive Order 14036 Promoting Competition in the American Economy.[67]  By enforcing provisions that are not “reasonable and relevant” in the network contracts for Pharmacy Providers, PBMs can drive business to mail order and specialty pharmacies in which they have a corporate affiliation or other financial interest.  This effectively creates a market of vertical monopolies to the detriment of independent pharmacy providers and their patients.
Abusive PBM Auditing Practices
PBMs also utilize other tactics, such as abusive auditing practices (e.g., requiring the production of thousands of pages of documentation to support claims billed) and terminating providers without cause or on pretextual bases (e.g., that they only dispense one class of medications).
In 2018, on the very same day on which the Department of Justice gave the merger of CVS and the health insurer Aetna its blessing, the combined company’s CVS Caremark PBM modified its Provider Manual (by way of a 2019 Provider Manual Supplement) by increasing the already legally dubious “audit chargeback” fee by 33 percent.[68]  This increased “audit fee,” incidentally, is not rationally related to the actual cost of provider audits in most cases but is rather a thinly-disguised vehicle to tax Pharmacy Providers within the PBM’s pharmacy network.  This “audit fee” increases CVS Health’s profits, is not turned over to Plan Sponsors, and weakens Pharmacy Providers within the PBM’s pharmacy networks.  While the timing of the increase in the “audit fee” is suspect and plainly indicative of the CVS/Aetna entity’s design for the nation’s health care market, it is also not unusual for a PBM Provider Manual.  PBM Provider Manuals, nearly without exception, are unmodifiable contracts of adhesion, filled to the brim with onerous terms intended to under-reimburse and penalize Pharmacy Providers.
Onerous PBM Contracting Practices
PBMs typically ignore complaints from Pharmacy Providers about disparities in negotiating power through overzealous enforcement of confidentiality provisions.  They also limit the ability of Pharmacy Providers to bring legal disputes, such as arbitrations or litigations, through unreasonably short statutes of limitations, onerous arbitration costs for multiple arbitrators, requirements to post bonds in order to bring an action, and limitations on the scope and nature of permissible discovery, all of which effectively prevent Pharmacy Providers from resolving disputes with PBMs.
PBMs’ use of methods to steer patients away from unaffiliated pharmacies and methods of distribution and toward PBM-affiliated specialty, mail order, and retail pharmacies.
PBMs’ policies and practices related to specialty drugs and pharmacies, including criteria for designating specialty drugs, reimbursements to specialty pharmacies, practices for encouraging the use of PBM-affiliated specialty pharmacies, and practices relating to dispensing high-cost specialty drugs over alternatives.
COA has long collected and reported on real-life patient horror stories in dealing with PBMs and cancer care that capture the suffering experienced at the hands of PBMs due to delayed access to care, denial of coverage, arguments with physicians over proper treatment, and even failure to receive medications.[69]  Community oncology practices have witnessed, firsthand, how such delays can severely impact a patient’s cancer treatment and health, arguably leading in some cases to avoidable death from lack of timely administration of life-saving medications.
Clearly, the most efficient, ethical, and clinically effective means of dispensing medications for patients with cancer is to permit oncologists to dispense using their own in-office pharmacies at the point of care (i.e., the oncologist’s in-office pharmacy or in-office dispensing).  At the site of care, dispensing takes place immediately and the oncologist, who has access to both the patient’s electronic health record and dispensing records, is in the best position to ensure patient compliance with their drug regimen and provide complete coordination of care.  But efficiency and optimized patient outcomes are not a priority for PBMs; maximizing profit is their guiding principle.[70]
The specialty pharmacy industry has dramatically changed over the past few years and is now one of the fastest-growing sources of revenue in the prescription drug marketplace.  PBMs have adopted numerous unfair and unethical tactics to maximize their profits and drive patient traffic away from independent pharmacies.
Patient Switching, Diverting, Trolling, Slamming, and Hijacking
PBMs employ deceitful, underhanded, and potentially illegal tactics to forcibly switch – or “divert” – patient prescriptions to their wholly-owned specialty and mail order pharmacies.  These practices are referred to as “prescription trolling,” “patient slamming,” and “claim hijacking.”  These tactics have taken many forms and play out fairly consistently as Pharmacy Providers have seen a noticeable increase in these practices since the beginning of the year.
With prescription trolling, the PBM-owned or affiliated pharmacy accesses the confidential claims data, and rather than obtaining the patient’s permission to switch pharmacy providers, it directly contacts the patient’s prescriber, seeking to effectuate the switch and stating (often falsely) that the patient has requested or authorized the transfer of the prescription to the PBM-owned pharmacy.  A related concept is patient slamming, which involves the PBM collecting claims information received at the point of sale from Pharmacy Providers submitting prescription claims at the point of sale, then providing that same data to the PBM-owned or affiliated pharmacy for the purpose of soliciting the patient to receive their prescriptions via mail order.  A third tactic, claim hijacking, occurs when, after resubmitting a claim to the PBM after obtaining the necessary prior authorization, the Pharmacy Provider is told that the prescription has already been filled.  Only later does the Pharmacy Provider learn that the PBM-owned or corporate-affiliated pharmacy has, in fact, obtained the prescribing information, filled the prescription, and sent it to the patient, all without having first obtained the actual hardcopy prescription from the physician.  Frequently, the PBM-owned or corporate-affiliated pharmacy frantically contacts the oncologist, seeking to coerce them to authorize a prescription to the PBM pharmacy since it has just filled a medication in the absence of an actual prescription.  These practices are deceptive, misleading, often illegal, and can involve outright harassment of patients and their physicians.
Furthermore, when it comes to patients with cancer, these tactics can introduce substantial risk of patient harm, including death, as lab values often change, or real-time visual observations of the patient will lead the oncologist to conclude that there should be a change in medication and/or dosing.  By interfering unnecessarily, a PBM removes this important safety check and puts patients with cancer at risk.
It should be clearly understood that PBMs frequently receive patients’ clinical information via claims submission and/or prior authorization process and then provide this information to the PBM-owned or corporate-affiliated pharmacy for the express purpose of diverting and capturing the patient and their prescriptions.  In most cases, this is being done without the explicit knowledge or consent of each affected patient.
In recent months, several community oncology practices have been informed by a PBM that they will be “taking away” patient prescriptions from the practice’s in-office dispensary or pharmacy.  When the practices call and attempt to verify with affected patients whether the patient would, in fact, like for their prescription(s) to be transferred to the PBM’s pharmacy, it has become clear that affected patients have not previously spoken to the PBM and have not consented to a prescription transfer to the PBM pharmacy.
We ask the FTC to investigate what might be endemic, illegal, and dishonest practices by PBMs in diverting the flow of prescriptions to their own or corporate-affiliated pharmacies.  It is very important for the FTC to understand that we have reason to believe that the top PBMs have made or are in the process of making their pharmacies into contract pharmacies under the 340B Drug Discount Program.  As such, PBMs will realize far greater profits in having their pharmacies dispense drugs than low-balling reimbursement to Pharmacy Providers.  In fact, the low-balling of reimbursement will put even greater pressure on Pharmacy Providers to close, turning the business back to the PBM pharmacies.  We expand upon this in the following section.
The FTC should also note that COA believes that the PBM steerage and diversionary tactics also implicate Section 2 of the Sherman Act, through its attempted monopolization using its role and leverage as PBM gatekeeper to divert business to the PBM-owned or corporate-affiliated pharmacy.  As such, we urge the FTC to investigate this issue and the antitrust implications of anti-competitive PBM business practices.
From the perspective of the oncologist, the practice of PBMs diverting prescriptions away from the patient’s pharmacy provider of choice to PBM-owned or corporate-affiliated pharmacies is potentially very dangerous to patients with cancer.  These tactics almost always create confusion and distress for patients and their care teams, can impact patient adherence and care continuity, and increases the potential of unnecessary delivery of prescriptions, thereby creating waste and increased cost to patients.
Potential conflicts of interest and anti-competitive effects arising from horizontal and vertical consolidation of PBMs with insurance companies, specialty pharmacies, and providers.
As we have referenced throughout this RFI comment letter, the consolidation among PBMs and health insurers has created an environment where the PBM/insurer integrated “complex” have the power to dictate what the physician can prescribe and how and where the patient will obtain their treatment.  There are multiple conflicts of interest whereby the PBM/insurer steers business toward its corporate “self” in order to maximize profits.
In addition to steering oral drugs to its owned or corporate-affiliated pharmacies, the FTC needs to investigate the growing trend of oncology practices being forced to obtain infused drugs through specified mail order companies as dictated by the pharmacy benefits of patients’ policies rather than direct purchase by the practice.  These medications are shipped to the physician’s office in a process known as “white bagging” or directly to the patient, in a process known as “brown bagging,” who in turn takes the medication to their oncologist to be administered.
About one-fourth of drug volume for in-practice use in 2014 was purchased by specialty pharmacies and supplied to practices via white and brown bagging, and more than three in 10 oncology practice managers forecasted an increase in white bagging in 2015 compared with 2014.[71]  Similar to previous study periods, 65.6 percent of cancer drugs were sent from specialty pharmacies directly to patients’ homes for self-administration or home administration, followed by 21.8 percent of drugs delivered directly to oncology practices for patients’ treatment (white bagging) and 6.7 percent delivered to patients’ homes for brown bagging. A 2015 pharmacy trend report, which includes data from 59 health plans representing 129.7 million covered individuals, found that 28 percent of medical benefit drug volume was distributed to physician offices by specialty pharmacies through white or brown bagging.[72]
White and brown bagging create patient quality of care issues, expensive drug waste, and liability and responsibility concerns for providers.  For these reasons, COA opposes white and brown bagging because it interferes with the proper treatment and management of patients with cancer.  These concerns are all covered in COA’s position statement on white and brown bagging.[73]  It is also a PBM/insurer integrated effort to drive more specialty drug spending through their wholly owned or affiliated specialty pharmacies.
COA has seen many health insurance companies (who coincidentally have integrated PBMs and specialty pharmacies) mandate that infusible drugs be filled by the PBM-owned or corporate-affiliated pharmacy through white or brown bagging.[74] These are medications that historically have been administered in-office by community oncology practices and billed to patients’ medical benefit (as opposed to their pharmacy benefit).  Because these are IV medications, they cannot be self-administered by the patient and must be infused by a health care provider.
The Takeover and Growing Role of the Broken 340B Drug Pricing Program by PBM Contract Pharmacies
While not specifically called for in the FTC RFI, COA encourages the agency to examine the anti-competitive impact of the 340B Drug Pricing Program and growing role of PBMs as “contract pharmacies” in the program.
340B is a federal program that requires drug manufacturers to provide outpatient drugs at significantly reduced prices to eligible health care organizations that are supposed to treat high numbers of underinsured, uninsured, and indigent patients.  While estimates vary, a CMS study found that the average 340B discount is at least 34.7 percent off of the average sales price (“ASP”).[75]  One study estimates that 340B will be the largest drug program by 2026, exceeding gross drug purchases through Medicare Part D and B, and Medicaid.[76]  Unfortunately, hospitals have used the powerful economic incentives of the 340B program and arbitrage from discounted expensive cancer drugs to gain outsized market share and consolidate the nation’s cancer care into hospital outpatient departments participating in the program.
We know hospital consolidation, the 340B program, and competition is outside the scope of this RFI, but COA encourages the FTC to investigate this issue as it has an enormous impact on patients, payers, and providers and has now attracted the participation of the top PBMs.  The growth of the 340B program has been a powerful driver in facilitating hospital consolidation.  A COA-commissioned Milliman report demonstrated that from 2004-2014, the proportion of chemotherapy infusions delivered in the hospital outpatient setting nearly tripled, increasing from 15.8 percent to 45.9 percent for the Medicare population and 5.8 percent to 45.9 percent for the commercially insured population.[77]  On average, the cost of care is about double in a hospital outpatient department in comparison to a private community practice setting. This shift in site of service has increased costs without meaningfully translating into improved care for vulnerable patients with cancer.
PBMs participate in the 340B program through contract pharmacy arrangements, allowing 340B covered entities that do not own or operate their own pharmacies to contract with third-party pharmacies to dispense 340B purchased medications.  Originally contract pharmacy arrangements were limited to grantees (not DSH hospitals) and were predominantly established with independently owned community pharmacies located near the 340B covered entity.  In 2010, the Health Resources and Services Administration, a Department of Health and Human Services agency that oversees the program, issued guidance allowing all 340B entities to contract with an unlimited number of third-party contract pharmacies.  This opened the floodgates for PBMs to further pervert the 340B program through contract pharmacy relationships.
According to the latest study from Drug Channels Institute, 30,000 pharmacy locations – half of the entire U.S. pharmacy industry – act as contract pharmacies for the hospitals and other health care providers that participate in the 340B program.[78] This is an increase of 24 percent since the 2020 analysis.  The largest PBMs are among the most active 340B contract pharmacy participants when measured by the number of contract pharmacy agreements.
The reason for the growth of PBM contract pharmacy participation in 340B is simple: huge profits on expensive specialty drugs.  The average gross margin on a 340B prescription dispensed through contract pharmacies is an estimated 72 percent, whereas a community pharmacy reports average gross margins of 22 to 23 percent.[79]  These excess profits from 340B prescriptions are further used to pervert the health care system, directly enriching large dominant PBMs, allowing them to gain competitive edges in other contract negotiations, and fundamentally perverting the drug payment system.
Clear evidence of the scale and importance of 340B PBM contract pharmacy participation can be seen in the 2021 10K filing to the Securities and Exchange Commission for CVS Health.  Referencing recent controversy and examination of for-profit PBM participation in 340B, CVS Health noted that a change in participation of the PBM as a 340B contract pharmacy “…could materially and adversely affect the Company.”[80]
COA urges the FTC to investigate the interplay between market dominance and unfair competition of PBMs that have infiltrated the 340B Drug Discount Program.
COA appreciates the opportunity to comment on the RFI and efforts by the FTC to better understand the antitrust and consumer harm PBMs and their corporate affiliates have on patients, physicians, employers, pharmacies, and other businesses across the health care system in this country.
As noted in the opening of this letter, while COA applauds the FTC for finally focusing on the issue of PBMs, we truly fear that this might be “too little, too late.”  Experts have long sounded the alarm that PBM abuses and vertical integration are a disaster for quality and freedom of choice, and yet countless mergers and acquisitions have been allowed.  If the FTC is truly serious about addressing the broken PBM marketplace, dramatic and urgent action will be necessary.
Ultimately, these policy changes are critical to not only supporting the ability of community oncology and urology practices in providing the highest quality, most affordable care to vulnerable patients with cancer but also to protecting the nation’s backbone of independent retail pharmacies, which are vanishing from the landscape, especially in rural and underserved areas.
Thank you.

Kashyap Patel, MD

Ted Okron
Executive Director

COA stands ready to answer any questions about our comments and serve as a resource for future investigations.

CC: Hon. Ron Wyden, Chair, Senate Committee on Finance

Hon. Michael Crapo, Ranking Member, Senate Committee on Finance

Hon. Richard Neal, Chair, House Committee on Ways and Means

Hon. Cathy McMorris Rodgers, Ranking Member, House Committee on Energy and Commerce

Hon. Frank Pallone, Chair, House Committee on Energy and Commerce

Hon. Kevin Brady, Ranking Member, House Committee on Ways and Means

Hon. Carolyn B. Maloney, Chair, House Committee on Oversight and Reform

Hon. James Comer, Ranking Member, House Committee on Oversight and Reform

Hon. Xavier Becerra, Secretary, Department of Health and Human Services

Hon. Chiquita Brooks-LaSure, Administrator, Centers for Medicare & Medicaid Services


[2] Ibid.






[8] percent20the percent20Affordability percent20of percent20the percent20Prescription percent20Drug percent20Benefit.pdf

[9] Complaint, Ohio Highway Patrol Retirement System v. Express Scripts, Inc., Case No. AM-20CV004504, Court of Common Pleas, Franklin County, Ohio


















[27] percent20Agenda percent20Review percent20of percent20Pharmacy percent20Benefit percent20Management percent20Services percent20by percent20StoneBridge/2017_1212 percent20Exh1_OptumRx.pdf

[28] percent20Agenda percent20Review percent20of percent20Pharmacy percent20Benefit percent20Management percent20Services percent20by percent20StoneBridge/2017_1212 percent20Exh1_OptumRx.pdf





[33] percent20 percentE2 percent80 percent94 percent20More percent20than percent20one percent2Dquarter,the percent20American percent20Medical percent20Association percent20(AMA








[41] Adam Fein, PhD, The 2021 Economic Report on U.S. Pharmacy Providers and Pharmacy Benefit Managers (Philadelphia: Drug Channels Institute, 2021), 301






[47] Hassett, Brianna Willyard, Darrel. Oncology Today. “The DIR Labyrinth: How Conflicting Adherence Rules Hamper Mid Clinics.” Spring 2021

[48] and



[51] Ibid.



[54] 42 CFR § 423.120(a)(8)(i)

[55] 42 § 423.505(b)(18) and 83 FR at 16590

[56] See, e.g., In re Express Scripts, Inc., PBM Litigation, 2008 WL 2952787 *5 (E.D. Mo. July 30, 2008)




[60] See generally, Neeraj Sood, et al., “The Association Between Drug Rebates and List Prices,” 2020, accessible online:

[61] See 46 Brooklyn, New Pricing Analysis Reveals Where PBMs and Pharmacies Make Their Money, April 21, 2019, that despite lower payouts to pharmacies and a deflating generic market, Ohio’s generic drug unit costs increased 1.8% in SFY 2017 and, of the total state spending on generic drugs, 31.4% went to PBMs via spread pricing)

[62] See Complaint, Total Care Rx, Inc. v. Epic Pharmacy Network, Inc., No. 1:18-cv-3853 (D.Md. December 14, 2018)















[77] percent20Oncology percent20Alliance percent20Position percent3A, percent2C percent20uninsured percent2C percent20and percent20indigent percent20patients.