Six companies manage nearly 95 percent of American prescriptions and are vertically integrated with insurers and pharmacies. The FTC documented what that produces.
Between a manufacturer setting a price and a patient receiving a drug sit several intermediaries. The most consequential is the pharmacy benefit manager, and the Federal Trade Commission has published findings that make the structure describable without relying on advocacy from any side.
Concentration
The FTC’s interim staff report “details how increasing vertical integration and concentration has enabled the six largest PBMs to manage nearly 95 percent of all prescriptions filled in the United States.”
More precisely: “the top three PBMs processed nearly 80 percent of the approximately 6.6 billion prescriptions dispensed by U.S. pharmacies in 2023, while the top six processed more than 90 percent.”
The six that received the FTC’s orders are Caremark Rx, Express Scripts, OptumRx, Humana Pharmacy Solutions, Prime Therapeutics, and MedImpact Healthcare Systems.
Vertical integration
The structural finding is that concentration is paired with ownership across the supply chain: “the market for pharmacy benefit management services has become highly concentrated, and the largest PBMs are now also vertically integrated with the nation’s largest health insurers and specialty and retail pharmacies.”
A single corporate parent may therefore own the insurer that designs the benefit, the PBM that sets the formulary and negotiates rebates, and the specialty pharmacy that dispenses the drug. Each of those entities transacts with the others.
The FTC also issued orders to rebate aggregating entities, “also known as ‘group purchasing organizations,’ that negotiate drug rebates on behalf of PBMs,” which adds a further layer between the manufacturer’s price and the plan’s cost.
What the FTC found this produces
The Commission’s characterization is direct: “this vertically integrated and concentrated market structure has allowed PBMs to profit at the expense of patients and independent pharmacists.”
A second interim report examined specialty generic drugs and found that the three largest PBMs “marked up numerous specialty generic drugs dispensed at their affiliated pharmacies by thousands of percent, and many others by hundreds of percent.” Those markups “allowed the Big 3 PBMs and their affiliated specialty pharmacies to generate more than $7.3 billion in revenue from dispensing drugs in excess of the drugs’ estimated acquisition costs from 2017-2022,” while “patient, employer, and other health care plan sponsor payments for drugs steadily increased annually.”
The first report also noted that “nearly 30 percent of Americans surveyed reported rationing or even skipping doses of their prescribed medicines due to high costs.”
Why this belongs in a value-based curriculum
Because it determines what a risk-bearing organization is actually managing. The employer course established that a self-funded employer bears risk for prices negotiated by someone else. In pharmacy that gap is wider, because the intermediary setting the price may also own the pharmacy dispensing the drug and the insurer administering the benefit.
Worth remembering: these findings come from the government’s competition authority using compulsory process under Section 6(b), not from a party to the dispute, which is why this course cites them rather than the abundant advocacy on all sides of PBM policy. That distinction matters more here than almost anywhere else in the curriculum. PBM economics is argued by manufacturers who benefit from blaming intermediaries, by PBMs who benefit from blaming list prices, and by pharmacies caught between them. Restricting yourself to what a disinterested investigator documented under legal process is the only way to hold a defensible position.
Key takeaways
- The six largest PBMs manage nearly 95 percent of US prescriptions; the top three processed nearly 80 percent of 6.6 billion prescriptions in 2023.
- The largest PBMs are vertically integrated with the largest insurers and with specialty and retail pharmacies.
- FTC staff found specialty generic markups of hundreds to thousands of percent, generating over $7.3 billion above estimated acquisition cost from 2017 to 2022.
- Nearly 30 percent of Americans surveyed reported rationing or skipping doses due to cost.
Sources
Check your understanding
According to the FTC's interim staff report, what share of US prescriptions do the six largest PBMs manage?
The top three processed nearly 80 percent of the approximately 6.6 billion prescriptions dispensed in 2023, and the top six processed more than 90 percent. This is among the most concentrated markets in American health care.