The Federal Trade Commission has reached a tentative settlement with the Big 3 PBM Caremark, which should increase the PBM’s transparency and has the potential for further reducing the use of rebate-based pharmaceutical pricing models.
In the latest salvo in the Federal Trade Commission’s (FTC’s) war on PBM practices, begun in 2024, it has reached a tentative settlement with CVS Health’s subsidiary Caremark, which should increase the pharmacy benefit manager’s (PBM’s) transparency and has the potential for further reducing the use of rebate-based pharmaceutical pricing models.
Announced on July 14, this is the second settlement with a Big 3 PBM formally announced by the FTC. A previous agreement with Express Scripts was reached in February, and the FTC stated in its press release that it is in active negotiations with OptumRx for a similar type of settlement.
TrumpRx Purchases to Count Towards Drug Deductibles
One of the interesting aspects of the settlement is the agreement by Caremark to incorporate purchases through TrumpRx under insureds’ pharmacy benefit—it will be counted toward drug deductible expenditures, as a standard offering to plan sponsors. These purchases would also be counted towards out-of-pocket maximums.
In addition, under the consent order, Caremark will be required to:
- Cease discriminating against low wholesale acquisition cost (WAC) versions of a drug on its standard formularies
- Provide a standard offering to plan sponsors that ensures that rebates will be passed through to members at the point of sale and that members’ out-of-pocket costs are no longer higher than the net cost to plan sponsors
- Provide a standard offering to all plan sponsors that allows the plan sponsor to transition off rebate guarantees and spread pricing
- Increase transparency for plan sponsors, assumedly through more frequent and comprehensive reporting
- Separate the fees paid by drug manufacturers to PBMs or GPOs from list prices in its standard offering
- Stop interfering with the ability of pharmacies in its networks to work with pharmacy hub service providers
These FTC agreements appear to be a valuable advantage for future biosimilars offered under the pharmacy benefit. Without a rebate-based reimbursement advantage, PBMs will have less incentive to retain reference products on their drug formulary, which opens the door to earlier access (and preference) of biosimilar agents.
Impact on Private-Label Arrangements for Biosimilars
It may also shed more light on private-label arrangements and pricing, through the transparency provision. Perhaps, the agreement will even inhibit the practice, through the provision prohibiting discrimination against low-WAC agents.
In these private-label arrangements, the biosimilars sold through the PBM distributor (in CVS’s case, Cordavis) are often substantially higher than other biosimilar brands, so that the PBM can profit from the price spread.
As a result, manufacturers of adalimumab and ustekinumab biosimilars, for example, have had to compete against their own private-label versions for market share. More importantly, it closed the access window on the fingers of manufacturers who did not reach private-label agreements, as these PBMs control more than 80% of the US prescription market, discouraging new biosimilar development.
There was no mention in the agreement about Caremark serving as a fiduciary to its clients, however, which would have further spotlighted the conflict of interest represented by these private-label arrangements.
According to the FTC, these terms are very similar to the terms reached in the settlement with Express Scripts earlier this year. The consent agreement is not finalized until a public comment of 30 days has elapsed.
This article was written by our Director of Content, Stanton Mehr. Stan has been writing commentary and reporting news about the biosimilar industry since the submission of the first biosimilar 351(k) application to the FDA 13 years ago. Since that time, BR&R has been tracking the US biosimilar marketplace, with the industry’s original, comprehensive and updated database of biosimilar filings with the FDA.
