CELS/USC Virtual Antitrust Law Workshop Series: 'Competitive Concerns from Pharmacy Benefit Managers Selling Their Own Drugs'

Speaker: Professor Michael Carrier (Rutgers) 

Abstract:  Brand-name drug prices in the United States are higher than they should be. One reason is that the complex regulatory regime intended to increase competition and reduce prices after branded drugs’ patent terms have expired has not been fully effective. Policymakers and scholars have focused on ensuring regulatory approval and market entry of lower priced competitors to brand drugs, but few have analyzed a subsequent stage of competition: being accessible to consumers. Just because a manufacturer is permitted to sell a lower priced product does not mean that the more affordable version will be made available to patients. Here, the frequently discussed pharmacy benefit managers (PBMs) play a role in enabling access to lower priced products. PBMs create and maintain formularies, lists of drugs covered by insurance plans. Because of the leading PBMs’ market power, drugs not covered on formularies tend to be inaccessible to patients. Formularies were supposed to encourage the use of cost-effective drugs. But today, it seems that PBMs are using formularies to increase their own financial rewards. In this paper, we examine a new development in PBMs’ conduct: the allowance of a limited amount of self-serving competition on formularies. The largest PBMs have recently entered the business of selling drugs in combination with drug manufacturers. These PBMs also have excluded from their formularies drugs competing with those in which the PBM has a financial interest, even if that would not be the most cost-effective option for patients. Although this self-serving competition could reduce prices in the short term, it threatens at least two downsides: (1) forestalling even greater price reductions and (2) harming long-term competition and innovation.

To register your interest for this event please contact Professor Oke Odudu (oo201@cam.ac.uk).