The Wall Street Journal Editorial Board: “You Have To Smile At Ms. Khan Portraying Big Drug Makers As Victims In Her Suit.”

In case you missed it, The Wall Street Journal Editorial Board warns the Federal Trade Commission's (FTC) recent enforcement action against pharmacy benefit managers (PBMs) would lead to higher health care premiums for patients, families and taxpayers in a new editorial.

The WSJ Editorial Board writes:

"Lina Khan claims she's trying to lower prices, but the Federal Trade Commission Chair's attacks on business often do the opposite. Consider her new charge against pharmacy benefit managers (PBMs), which could result in higher healthcare premiums for all Americans.

"Democratic commissioners on Friday voted 3-0 to bring a complaint against PBMs for extracting rebates from drug makers in return for preferential placement on insurer formularies. The agency filed the charges in its administrative tribunal where it nearly always wins. (The two Republican commissioners were recused.)"

The WSJ Editorial Board notes how the winners in the FTC's suit would be Big Pharma:

"Congress has been debating how to regulate PBMs, but Ms. Khan isn't waiting. She's seeking to effectively ban PBM rebates by deeming them an "unfair method of competition" under the Federal Trade Commission Act. You have to smile at Ms. Khan portraying big drug makers as victims in her suit."

Undermining rebates would do nothing to lower prescription drug costs, and would very well increase health care costs and drug company profits:

"If rebates are a problem, why does Congress require them for government plans? Drug makers must pay Medicaid rebates that start at 23.1% of a medicine's average price and can exceed 100%. The Trump Administration tried to ban rebates in Medicare, but the Congressional Budget Office estimated it would substantially raise senior premiums and increase government spending by $170 billion over 10 years. Congress blocked the rule. Yet now Ms. Khan wants to ban rebates in private insurance."

Anthony LoSasso, Professor and Chair, Department of Economics, DePaul University emphasized the importance of rebates in a recent Congressional hearing: "Rebates are a good thing because they represent price decreases. And price competition is a good thing for consumers." View what academics had to say during the hearing HERE.

In fact, policies that ban market-based incentives for PBMs successfully securing rebate savings from drug companies would hand Big Pharma a financial windfall of more than $32 billion in the commercial health insurance market and Medicare Part D program.

The Wall Street Journal Editorial Board also highlights how PBMs already pass the majority of rebates down to health plan sponsors:

"The FTC says PBMs use rebates to inflate their profits, but this is contradicted by the complaint's admission that they pass on 90% to 98% of rebate dollars to their clients-i.e., employer, union and Medicare Part D plans. A recent study by the healthcare research firm Nephron Research found that rebates accounted for only 13% of PBM profits in 2022.

"In any case, plans have increasingly moved to point-of-sale rebates. This is one reason average insulin out-of-pocket costs fell to $21.19 from $31.52 between 2018 and 2022. Nearly 80% of insulin prescriptions cost less than $35 a month out of pocket in 2022."

The editorial goes on to explain how the insulin market is already working, in part due to PBMs encouraging greater competition, and how health plan sponsors get to decide how to apply rebates:

"Yet even the FTC admits that net insulin prices after rebates have declined over time. This suggests competition fueled by the PBMs is working. But patients who pay co-insurance on medicines-which is set as a percentage of a drug's list price-or who have high deductibles can get slammed by high list prices.

"As the FTC complaint notes, health plans can mitigate high list prices "by applying drug rebates directly at the pharmacy counter when the patient purchases the drug"-known as a point-of-sale rebate. It says employers aren't doing this, but why is that the PBMs' fault?"

Read the full editorial from The Wall Street Journal Editorial Board HERE.

See PCMA's statement on the FTC's recent enforcement action HERE.

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