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What's next as Lina Khan takes on PBMs

Jun 21, 2023
Illustration of a gavel hitting the top of a prescription pill bottle

Illustration: Sarah Grillo/Axios

Since launching an inquiry into PBM business practices last year, FTC chair Lina Khan has shown she's going to look even more deeply into the complex world of the pharmaceutical supply chain.

Why it matters: Experts say two of Khan's latest moves suggest she'll crack down on health care consolidation in general — and probably foreshadow impending action against PBMs.

  • Her recent moves include broadening the PBM study's focus and announcing a new anti-pharmaceutical merger lawsuit.

Driving the news: The FTC recently announced that it's expanding the scope of its PBM inquiry to require three GPOs — other organizations that negotiate drug rebates for PBMs — to hand over information and records of their business practices.

  • The agency also filed a lawsuit last month to block a merger between two pharmaceutical companies, Amgen and Horizon, stating they would have gamed the rebate system and pressured PBMs to favor two drugs that have no competition.

The backstory: Khan first tried to launch an inquiry into PBMs in February 2022, but lost the vote. The appointment of another Democratic commissioner and modification of the study scope then resulted in an unanimous vote to launch an inquiry in June.

  • That inquiry requires the six largest PBMs to share information and records on certain business practices, including clawbacks charged to pharmacies, complicated methods for reimbursements, and the rebate and fee system set up by drug manufacturers.
  • Khan also announced last June an enforcement policy warning drug companies and PBMs that paying rebates and fees to push out low-cost competition can violate consumer protection laws.

What they're saying: These actions suggest that Khan is open to challenging health care consolidation as well as readying for future actions against PBMs, health policy and anti-trust experts told Axios.

  • "The FTC's action in blocking the Horizon merger is a shot across the bow for pharmaceutical companies," said Robin Feldman, a law professor and drug policy expert at UC San Francisco Law School.
  • Barak Richman, a law professor and health policy expert at Duke University, noted that the FTC "has challenged some mergers of hospital systems, but there's more room to investigate the provider market that's squeezing out patients."
  • "It's a not matter of if but when, and in what capacity," said Chris Meekins, a health care analyst at Raymond James, about the prospect of the FTC taking action. "She [Khan] has come in and made very clear her views that she believes PBMs are engaged in anti-competitive business practices."
  • The FTC didn't comment on Khan's focus, but did point to public statements Khan has made about PBMs.

The other side: "We are confident that the FTC examination will once again validate that pharmacy benefit companies are reducing prescription drug costs for employers and patients," Greg Lopes, assistant vice president for strategic communications at PCMA, the PBM trade association group, said in a statement to Axios.

What we're watching: While experts said they don't expect the FTC to finish its PBM inquiry until the end of this year or early 2024, Congress has plenty of bills and numerous committees looking into the issue in the meantime. Remember our PBM bill guide?

  • But when the inquiry is finished, the implications could be big for both the PBM and pharmaceutical industry. It's possible the agency could release a report, as it has after other inquiries, including one on hospital mergers.
  • "The type of study the FTC launched, known as a Section 6(b), is rare and powerful. These types of investigations have historically led to significant pieces of legislation," including the meatpacking industry and the Securities Act of 1933 and the Securities Exchange Act of 1934, said Feldman.

Editor's note: This story has been corrected to note that the securities laws cited by Feldman were passed in 1933 and 1934, not 1923 and 1924.

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