New Comprehensive Analysis of PBM-Affiliated Pharmacy Reimbursements Shows FTC Interim Reports Reached Flawed Conclusions Based on a Small, Non-Representative Sample of Drugs

The co-authored study, commissioned by CVS Caremark, Express Scripts, and Optum Rx, follows Professor Carlton’s previous report released in October 2024 and responds directly to the analyses of markups at PBM-affiliated and non-affiliated pharmacies in the reports recently released by FTC staff, focusing primarily on the FTC staff’s second interim report.

In contrast to the FTC staff interim reports, which limited their analysis to a small subset of drugs, Professor Carlton’s study relies on data for all drugs in the FTC dataset. Professor Carlton observed, “The FTC examined a non-representative sample of drugs comprising about 2% of drug expenditures. Not only is it inappropriate to draw general conclusions about drug pricing from such a limited analysis, but a more comprehensive analysis shows that the FTC staff’s claims do not hold when all drugs are examined.”

Professor Carlton’s new study shows that the analysis put forward in the FTC staff’s second interim report ignores 98% of drug expenditures. The conclusions of the FTC staff’s analysis of just 2% of drug expenditures are contradicted by Professor Carlton’s more comprehensive analysis. Professor Carlton finds that, when applying the FTC staff’s methodology to all drugs available in the data, the reimbursement rate at PBM-affiliated pharmacies is, on average, 2.1% lower than NADAC while the reimbursement rate at non-affiliated pharmacies is, on average, 3.8% higher than NADAC. Thus, even if, as the FTC staff reports, reimbursements for the examined specialty generics at affiliated pharmacies are $7.3 billion above NADAC over the period 2017-2022, reimbursements for all drugs at affiliated pharmacies (including those examined by the FTC) are $15.9 billion below NADAC. Additionally, any suggestion that non-affiliated pharmacies are substantially cheaper for plan sponsors and members than PBM-affiliated pharmacies is contradicted by an analysis of all drug expenditures.

Key highlights from Professor Carlton's report include:

• The drugs analyzed in the FTC staff interim reports have markups that are extreme outliers. The small subset of drugs studied by the FTC staff have an average reimbursement markup over NADAC (which the FTC uses as a proxy for acquisition costs) that far exceeds the average reimbursement markup of drugs that make up the vast majority of drug purchases.

• Markups are negative, on average, at PBM-affiliated pharmacies when one analyzes all drugs purchased by plan sponsors and members. When all drugs are considered, the average reimbursement markup at PBM-affiliated pharmacies is negative: the reimbursement rate is 2.1% below NADAC acquisition cost at PBM-affiliated pharmacies. This result is starkly different than the greater than 100% markup alleged in the FTC staff’s interim reports for certain individual drugs.

• Markups are lower, on average, at PBM-affiliated pharmacies than at non-affiliated pharmacies when one analyzes all drugs purchased by plan sponsors and members. A comprehensive analysis of the data shows that, while the reimbursement rate is 2.1% below NADAC, on average, for PBM-affiliated pharmacies, it is 3.8% above NADAC, on average, for non-affiliated pharmacies.

• Plan sponsors and members would not realize substantial savings on their total drug purchases if they used only non-affiliated pharmacies compared to using only PBM-affiliated pharmacies. At the prices shown in the data, total drug expenditures would be about the same whether the basket of all drugs was purchased at non-affiliated pharmacies or at PBM-affiliated pharmacies. This counters the idea that overall drug expenditures could be significantly reduced if all drugs were purchased at non-affiliated pharmacies instead of at PBM-affiliated pharmacies.

Though the FTC staff suggest that the PBM industry may be in need of reform, Professor Carlton’s analysis shows that the FTC staff’s analysis provides no basis for policymaking that affects all drugs.