You probably don't think about Pharmacy Benefit Managers (PBMs) when you're standing at the CVS counter waiting for a prescription. You’re just annoyed that your copay is $40 instead of $10. But behind that transaction, there's a massive, invisible machinery—a group of "middlemen" who essentially control which drugs you can get and how much you pay. Honestly, most people have never even heard of them. That’s changing fast. The Federal Trade Commission (FTC) has spent the last few years digging into the FTC pharmacy benefit managers relationship, and what they’ve found is, frankly, pretty wild.
It’s messy.
The FTC started this deep look back in 2022. They weren’t just asking nicely for information; they issued compulsory orders to the six largest PBMs: Caremark (CVS Health), Express Scripts (Cigna), OptumRx (UnitedHealth Group), Humana Pharmacy Solutions, Prime Therapeutics, and MedImpact Healthcare Systems. Why? Because these six companies handle about 90% of all prescriptions in the United States. That is a staggering amount of power for a handful of corporations that most Americans couldn't name if you paid them.
The FTC Pharmacy Benefit Managers Report: A Wake-Up Call
In July 2024, the FTC released an interim report that basically dropped a bomb on the industry. FTC Chair Lina Khan didn’t pull many punches. She noted that the agency’s investigation suggests these "dominant" middlemen have an outsized influence over the entire healthcare system. They aren't just processing claims. They are making decisions that can put local, independent pharmacies out of business. It’s a classic case of vertical integration.
Think about it this way.
A company like CVS Health owns the PBM (Caremark), the retail pharmacy (CVS), and an insurance provider (Aetna). When a PBM is owned by the same company that owns the pharmacy, there is a massive incentive to steer patients toward their own stores. The FTC found that PBMs often reimburse their own pharmacies at much higher rates than they pay the mom-and-pop shop down the street. If you're an independent pharmacist in a small town, you're basically being squeezed until you have to close your doors.
It's predatory. Some call it "spread pricing."
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This is where the PBM charges the insurance plan one price for a drug but pays the pharmacy a much lower price. They pocket the difference. While PBMs argue that they use their size to negotiate lower prices from drug manufacturers, the FTC's data suggests those "savings" aren't always making it to your wallet. Instead, they’re being used to pad the bottom line of some of the largest conglomerates in the world.
The "Rebate Trap" and Why Your Meds Cost So Much
One of the weirdest things the FTC has been looking at is the rebate system. Most people assume that if a drug is cheaper, the insurance company will want you to use it. Simple math, right? Wrong.
PBMs often prefer high-priced drugs over cheaper generics because the high-priced drugs come with massive rebates from the manufacturers. The drug company says, "If you put our $500 drug on your 'preferred' list instead of the $50 generic, we’ll give you $200 back." The PBM takes the rebate. You, the patient, are stuck paying a percentage of the original $500 price as your coinsurance. You’re literally paying more so the middleman can make more.
The FTC has specifically looked into how this affects insulin. For decades, the price of insulin skyrocketed even though the product itself hadn't changed much. The FTC’s ongoing litigation against the "Big Three" PBMs (and the manufacturers Eli Lilly, Novo Nordisk, and Sanofi) alleges that they’ve created a system that artificially inflates the list price of insulin.
It's a game of chicken where the patient always loses.
Why the PBMs Are Fighting Back
To be fair, the PBM industry isn't just taking this lying down. The Pharmaceutical Care Management Association (PCMA), which is the big lobbying group for PBMs, argues that the FTC’s report is "flawed" and "politically motivated." They claim that without PBMs, drug prices would actually be higher because there would be no one to negotiate against the massive pharmaceutical companies.
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They also argue that the FTC ignored data that shows PBMs save employers and taxpayers billions of dollars every year.
But the FTC isn't buying it. Commissioner Alvaro Bedoya has been particularly vocal about the "black box" nature of these companies. If the system is so efficient and helpful, why is it so hard to see where the money is going? The lack of transparency is the core issue. When the FTC asked for data during their 6(b) study, they reported that some PBMs were less than cooperative. That kind of behavior usually suggests there's something they don't want the public to see.
The Human Cost of Market Consolidation
We talk a lot about "market share" and "vertical integration," but what does this actually look like for a regular person?
It looks like a cancer patient being told they can't get their life-saving medication at their local pharmacy because the PBM has "mandated" a specialty mail-order pharmacy. You wait by the mailbox. The package arrives, but the ice packs have melted and the meds are ruined. You call customer service and get stuck in a loop for three hours.
Or it looks like "PBM-defined" formularies. This is where the PBM decides which drugs are "covered." Sometimes, they’ll remove a drug from the list mid-year, even if it's the only one working for you, simply because they negotiated a better rebate deal with a different manufacturer. Your doctor says you need Drug A, but the PBM says you have to try (and fail) on Drug B and Drug C first. This is called "step therapy," but most patients call it a nightmare.
The Breakdown of the Six Largest PBMs (2024 Market Data)
- CVS Caremark: The giant. Part of CVS Health. They control roughly 33% of the market.
- Express Scripts: Owned by Cigna. They handle about 24%.
- OptumRx: Part of the UnitedHealth Group empire. They're around 22%.
- Humana Pharmacy Solutions: Focused heavily on the Medicare population, holding about 8%.
- Prime Therapeutics: Owned by several Blue Cross Blue Shield plans. They have about 5%.
- MedImpact: The largest independent PBM, but still small compared to the "Big Three."
When you look at those numbers, you realize that three companies control nearly 80% of the market. In any other industry, that would be an immediate red flag for antitrust regulators. The FTC is finally treating it like one.
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What Happens Next?
The FTC’s work isn't just about writing reports. They are actively suing. In September 2024, the FTC filed a formal administrative complaint against the three largest PBMs regarding the insulin market. This is a huge deal. It’s the first time the government has really gone after the "rebate wall" that keeps prices high.
Congress is also getting involved. There are multiple bipartisan bills floating around—like the PBM Reform Act—that aim to ban spread pricing and require PBMs to pass 100% of rebates back to the plan or the patient. It’s one of the few things Republicans and Democrats actually seem to agree on lately. Nobody likes high drug prices.
Real Actions for Patients and Employers
Waiting for the government to fix a system can take years. If you’re a business owner providing health insurance or a patient trying to save money, you need to be proactive.
For Patients:
- Check the "Cash" Price: Sometimes, the price of a drug via GoodRx or a "cost-plus" pharmacy (like Mark Cuban’s Cost Plus Drugs) is actually cheaper than your insurance copay. This is because PBMs often have "gag clauses" that prevent pharmacists from telling you that the cash price is lower.
- Appeal Denials: If your PBM refuses to cover a drug, don't just give up. Your doctor can file a "Letter of Medical Necessity." It’s a pain, but it works more often than you'd think.
- Look for Independent Pharmacies: They are fighting for their lives right now. Many offer better service and can help you navigate the complex billing issues that big chains might ignore.
For Employers:
- Audit Your PBM Contract: Most PBM contracts are written to benefit the PBM, not you. Hire a third-party auditor to look for hidden fees and ensure you're getting the rebates you were promised.
- Demand Transparency: Move toward "pass-through" models where the PBM charges a flat administrative fee per script rather than taking a cut of the drug price or the rebate.
- Consider Smaller PBMs: The "Big Three" aren't the only options. Smaller, more transparent PBMs are gaining traction by promising to show exactly where every dollar goes.
The FTC pharmacy benefit managers probe is far from over. As more documents come to light and more testimony is heard, we are likely to see a fundamental shift in how drugs are bought and sold in America. It’s a complex, often boring topic, but it affects the bank account of every single person who walks into a pharmacy. The days of PBMs operating in total darkness are coming to an end.
Keep an eye on the courts. The insulin lawsuit is the "canary in the coal mine." If the FTC wins that, the entire PBM business model might have to be rebuilt from the ground up. That would be a win for patients, a win for small pharmacies, and hopefully, a win for your wallet.
Practical Steps to Take Now
- Review your current health plan’s formulary. If your maintenance medications are on a "High Tier," talk to your doctor about generic alternatives or manufacturer assistance programs before the PBM changes the rules again.
- Use tools like the "Drug Price Transparency" databases provided by some states to see how much your PBM is actually being reimbursed compared to what you pay.
- Support legislation that demands PBM transparency. Contacting your local representative about the "PBM Transparency Act" or similar bills helps keep the pressure on.
- Evaluate "Cost-Plus" pharmacy options. For many common medications, bypassing the PBM system entirely and paying out-of-pocket can save hundreds of dollars a year.