Giant medical conglomerates have another reason to fear their business models will collapse. During a visit to Columbus on Monday, one of the country’s top antitrust watchdogs said her agency is scrutinizing companies and their practices.
Doha Mekki, No. 2 in the U.S. Justice Department’s Antitrust Division, said the Justice Department is investigating whether to take action in the health care sector in general, and specifically in insurance intermediaries known as pharmacy benefit managers.
Assistant Attorney General Doha Mekki. (Photo courtesy of the U.S. Department of Justice)
“It was eye-opening and reassuring for all of us to hear the depth of this problem,” Mekki said.
Mr. Mekki’s agency is one of two major federal antitrust enforcement agencies. Another, the Federal Trade Commission, is already conducting major investigations into pharmacy benefit managers and filing lawsuits over insulin pricing practices.
She spoke shortly after a roundtable held by the American Economic Liberties Project, a group that advocates for policies to address “today’s crisis of economic concentration of power.”
Roundtable participants spoke about how they believe pharmacy benefit managers are driving local pharmacies out of business, driving up drug prices and, in some cases, making people sicker. .
In terms of concentration of economic power, it seems difficult to put pharmacy benefit managers (PBMs) and their parent companies on top. All of these companies are among the top 15 companies by revenue in the United States.
PBMs represent insurance companies in drug transactions and determine which drugs are covered.
And because just three PBMs control access to about 80% of insured patients, they have enormous influence to extract ever-larger rebates from drug companies. This is a practice that has been found to increase costs at the pharmacy counter for many consumers.
Parent companies of PBMs are increasingly “vertically integrated” and thus are major players in many parts of the healthcare delivery chain in ways that can create conflicts of interest. For example, the three largest PBMs are powerful intermediaries in the pharmaceutical trade, and each is part of a company that owns a top 10 insurance company. As such, they may seek to obtain better deals with their sister insurers than with their competitors.
Large PBMs also decide how much to reimburse pharmacies that dispense drugs purchased from wholesalers. PBMs control access to so many insureds that independent pharmacies say they have no choice but to accept the terms and conditions offered.
“They say, ‘If you’re going to pay me what I want, I’ll sign you up,'” said Benjamin Jolly, a Salt Lake City pharmacist who works with the Economic Freedom Project.
The company that owns the PBM determines reimbursement amounts for pharmacies and also competes with the PBM.
The three largest companies, CVS, United Health, and Cigna/Express Scripts, each own mail-order pharmacies, and CVS also owns the nation’s largest retail chain. In other words, medical conglomerates can decide how much to pay their own pharmacies versus those of competitors.
While low reimbursement has long been blamed for community pharmacy closures, reimbursement and a challenging retail environment are now leading to thousands of major chain store closures. Experts say the closures will make it nearly impossible for the poor and elderly to talk face-to-face with health care professionals about their medications and chronic conditions like diabetes and high blood pressure, making them some of the hardest hit. I’m worried about that.
In an interview after Monday’s roundtable, the Justice Department’s Mekki said he could not discuss what his office would do regarding PBMs and the companies that own them. But what she has learned so far seems reminiscent of practices in other industries that the antitrust division has fought against, she said.
“One of the most consequential things we’ve done at the Department of Justice is to think more seriously about the economics of intermediaries,” she said. “In some cases, that means financial services, like in our visa case. In other cases, it means ticketing, as in the case of Ticketmaster. A lot of similar moves are at work in the pharmaceutical benefits industry as well. It seems so.”
In the Visa case, Mekki’s unit accuses the company of using its debit card infrastructure advantage to eliminate competition and raise costs for consumers. The Justice Department also accused Ticketmaster and Live Nation of using their advantages in entertainment ticket sales, venues, and promotions to charge patrons higher prices and reduce artists’ compensation. has filed a lawsuit seeking to dissolve the Live Nation merger.
These actions and those taken by the FTC are part of a newly revitalized approach to antitrust enforcement that has been absent since the 1980s. Mekki said the antitrust division established a healthcare task force earlier this year to keep tabs on anticompetitive behavior in the healthcare sector.
The idea “comes from the recognition that it is no longer effective to silo health care antitrust efforts,” she said. “The economy is more integrated and integrated than ever before.”
Just as they came to Ohio to hear from stakeholders about PBMs, Mekki said he and his colleagues wanted to hear from consumers.
“We are always in listening mode and if anyone has information about monopolies or collusion in any area of the healthcare industry, from nurses to hospitals to pharmacies… we are interested and everyone We would like to hear from you,” Mekki said.
She added that her office and the FTC have different resources and capabilities, so they are working collaboratively to avoid duplicating efforts. Mekki said what’s particularly encouraging about the medical field study is that it has support from officials across the political spectrum.
“I’m encouraged by the bipartisan, actually bipartisan interest in these issues,” she said. “Health care is so important. Nothing is more personal than the care we receive for ourselves and our families, and there’s a reason it currently accounts for 20% of the U.S. GDP. We spend a lot of public money on these issues and we need to focus on how this money is being channeled within the industry.”
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