FTC to Consider Some Drug Rebates as Bribes

The Federal Trade Commission said that paying or accepting rebates or fees in exchange for excluding lower cost drugs on formularies could be considered commercial bribery.

The Federal Trade Commission is calling attention to the drug rebates PBMs receive from pharmaceutical companies in exchange for formulary placement. The FTC has issued an enforcement policy statement that indicates rebates and fees that exclude competitors offering lower-cost drug alternatives can violate competition and consumer protection laws.

The committee voted 5-0 to issue the new enforcement statement, which said that exclusionary rebates may constitute restraint of trade and unlawful monopolization, and PBMs that place higher-priced drugs on formularies instead of lower-cost alternatives in a manner that shifts costs to payers and patients may violate the prohibition against unfair methods of competition or unfair acts or practices.

Additionally, they said that paying or accepting rebates or fees in exchange for excluding lower cost drugs could be considered commercial bribery under the Robinson-Patman Act, which prohibits compensating an intermediary to act against the interests of the party it represents in the transaction.

“Today’s action should put the entire prescription drug industry on notice: when we see illegal rebate practices that foreclose competition and raise prescription drug costs for families, we won’t hesitate to bring our full authorities to bear,” FTC Chair Lina Khan said in a press release. “Protecting Americans from unlawful business practices that are raising drug prices is a top priority for the commission.”

The FTC is concerned that rebate practices may be driving up list price of some drugs, including, for example, insulin to control their diabetes. The list price of insulin has soared over the last two decades, increasing by more that 300%. On average, the list price of a one-year supply of insulin has risen to nearly $6,000 per year, with patient out of pocket costs ranging from $1,288 for the uninsured to $613 for the insured as of 2017, according to the FTC.

Pharmaceutical Care Management Association (PCMA) President and CEO JC Scott said in a statement that "the use of prescription drug rebates has been studied multiple times and the same conclusion reached – rebates lower prescription drug costs for consumers. In fact, PBM negotiations with drug manufacturers reduce consumer drug costs by nearly $1,000 per consumer each year, and PBMs are expected to save health plans and consumers more than $1 trillion over the next 10 years," he said.

Last week, the FTC launched an investigation of PBMs, with the goal of reviewing PBM business practices, including the impact of rebates on formulary design, the costs of prescription drugs to patients, and methods to determine pharmacy reimbursement.

Related:FTC Launches Investigation of PBMs

The FTC is asking the PBMs for a wide range of information from Jan. 1, 2017, to the present about contracts that determine reimbursement, pharmacy reimbursement data and information about all formularies, including criteria for designating and reimbursing drugs as specialty drugs. The FTC wants information about formulary placement, formulary exclusion, formulary tier assignment, prior authorization or step therapy requirements for all rebated drug products. Additionally, regulators want to know any situation where a brand or reference biologic drug is placed on a more favorable formulary tier than a generic or biosimilar equivalent.