New approaches to evaluating pharma mergers should include a closer look at PBMs


Experts discussed new approaches to antitrust enforcement in the pharmaceutical sector, including the role pharmaceutical benefit managers (PBMs) play in competition, on day one of a two-day virtual workshop hosted by the Federal Trade Commission (FTC). and the US Department of Justice (DOJ).

Overall, the goal is to promote fair competition for scientific advances and ensure that people can benefit from that advance, said Lina Khan, JD, chair of the FTC, at the start of the workshop. Reports on the state of competition in the industry have been troubling in recent years, she acknowledged.

“The research and development behind modern medicine has transformed society, saving or improving countless lives every day,” Khan said. “Diseases that were incurable just a few years or decades ago are now routinely treated by doctors around the world. And the work of antitrust regulators can help ensure companies have the right incentives to continue innovating and reaping the fruits of scientific excellence that are widely available at affordable prices.”

A recent study found that the average list price for new drugs has increased from around $2,000 in 2008 to $180,000 in 2021, and killer acquisitions aimed at eliminating competition are relatively common in the pharmaceutical industry could occur, she stressed.

The biggest drug companies, which enjoy the vast majority of profits, are lagging behind in drug development, Khan added, noting that there have also been a number of lawsuits over illegal drug bundling schemes in recent years.

Currently, there are a variety of sources of anti-competitive behavior in the pharmaceutical sector, including other players in the supply chain, she said. “There is so much to do.”

Rebecca Kelly Slaughter, JD, who has been the FTC commissioner since 2018 and formed a new pharmaceutical mergers task force in March 2021 while serving as the agency’s vice chair, agreed.

“Every day, millions of people depend on medicines to treat deadly and serious diseases, manage chronic illnesses and conditions, and provide preventative care,” she said during her keynote address at Tuesday’s workshop. “A competitive market protects access to existing medicines and encourages new innovation. But access to medicines is already threatened by prohibitive costs.”

“Prescription drug spending in the United States has grown from $30 billion in 1980 to $335 billion in 2018. And over that period, real per capita spending on prescription drugs has increased more than sevenfold, from $140 to $1,073,” she continued. “Not only is this coming out of consumers’ pockets, but a significant amount of it is taxpayer money being spent on Medicaid and Medicare drug programs. When mergers reduce competition in pharmaceutical markets, it leads to higher prices that can have devastating effects on patients. “

Slaughter pointed out that the FTC has a long track record of investigating pharmaceutical mergers and resolving divestiture approval issues.

“But we must not limit our enforcement to existing products and pipeline products,” she said. “Competitive pharmaceutical markets are driven by the incentive to innovate…Mergers that constrain drug research and development may reduce the innovation competition that drives scientific advance.”

Slaughter also acknowledged that the FTC pays close attention to the behavior of PBMs, the intermediaries between manufacturers and patients. Last week, the agency issued a series of orders investigating the industry and a handful of critical drugs like insulin, she said.

The move is expected to increase the FTC’s knowledge and understanding of contract practices and pharmaceutical company pricing and incentives, she explained. It should also help inform policymakers, other government agencies, academics and market participants all working to address drug prices, she added.

Other panelists at the workshop also expressed an interest in addressing the role played by PBMs.

“The kind of approach that I think is really needed is an approach that the FTC developed not long ago,” said Barak Richman, PhD, professor of law and business administration at Duke University School of Law in Durham, North Carolina.

In hospital mergers, the agency is now recognizing the important role played by intermediaries, the insurance companies, he noted, adding that it needs to be recognized that pharmaceutical companies are not competing for consumers but are competing for space in the formularies.

  • Jennifer Henderson joined MedPage Today in January 2021 as a corporate and investigative writer. She has covered the NYC healthcare industry, life sciences and business law, among others.


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