PBM markets are at risk of harming patients

The American Medical Association (AMA) today published a new annual analysis (PDF) measuring competition in pharmacy benefit manager (PBM) markets and vertical integration of insurers with PBMs. The assessment demonstrates low competition in PBM markets across the nation and high vertical integration as the largest PBMs share ownership with health insurers.

The AMA analysis adds to growing concern over anticompetitive harm resulting from low competition and high vertical integration in the PBM industry. It comes on the heels of reports by the Federal Trade Commission and U.S. House Committee on Oversight and Accountability finding that a handful of PBMs have vast power and control over medication access and affordability. Both government reports concluded that the unchecked influence of PBMs allows bad actors to inflate drug prices, limit access to necessary medications, and undermine competition.

“As PBMs increasingly act in their own self-interest without transparency or accountability, drug prices rise and patients face health risks from cost prohibitive drug treatments,” said AMA President Bobby Mukkamala, M.D. “The AMA’s analysis is intended to provide insight to help policymakers understand the anticompetitive conditions in the PBM market that can result in harm to patients. The AMA fully supports greater transparency and accountability that is needed to prohibit PBMs from engaging in opaque and harmful business practices.”

Based on 2022 and 2023 data on prescription drug plan (PDP) enrollees, the AMA analysis presents a snapshot of PBM market concentration, lists national-level market shares of the 10 largest PBMs, and measures the share of commercial and Medicare Part D PDP enrollees where the insurer and PBM are vertically integrated.

The findings in the AMA paper highlight whether proposed or consummated mergers among PBMs and between insurers and PBMs should or should have raised antitrust concerns. Low competition may lead to higher prices paid by insurers for PBM services, higher insurance premiums, PBMs not fully passing rebates through, and lower reimbursement to pharmacies. Moreover, given extensive vertical integration of insurers and PBMs, non-affiliated insurers may be losing access to PBMs.

The PBM market had low competition in 2023 with just four firms having a two-thirds share of the national market, according to the AMA analysis. Competition in the PBM market was assessed based on three functions for which insurers typically hire an external PBM: rebate negotiation, retail network management and claims adjudication. As the AMA’s findings are similar across all three functions, the results reported below focus on rebate negotiation.

• The four largest PBMs collectively had a 67% share of the national PBM market in 2023.
• OptumRx was the largest PBM in the U.S. in 2023 with a 22.2% market share—up slightly from 20.8% in 2022. It was followed by CVS Health with an 18.9% share—down from 21.3% in 2022. Express Scripts was third largest with a 15.5% share, followed by Prime Therapeutics with a 10.6% share.
• Seventy-nine percent of PDP region-level PBM markets lacked adequate competition and were “highly concentrated” according to 2023 federal antitrust guidelines (PDF).

There was significant vertical integration of insurers with PBMs in 2023, according to the AMA analysis.

• At the national level, 77% of commercial and Part D enrollees were in a PDP where the insurer and PBM were vertically integrated.
• The vertically integrated share was higher in Part D than in commercial insurance (88% vs. 71%).
• At the PDP region-level, an average of 76% of enrollees were in a PDP where the insurer and PBM were vertically integrated.
• There was wide variation across PDP regions, with some having little vertical integration between insurers and PBMs, while others are almost entirely vertically integrated.
• Nine of the 10 largest PBMs share ownership with health insurers.

The analysis also lists national-level shares of the 10 largest PDP insurers in 2023 and ranks each according to three PDP markets—commercial, Medicare Advantage PDP, and stand-alone Medicare Part D—as these are the PDP benefits managed by PBMs.

• UnitedHealth Group was the largest PDP insurer in the commercial market (13.2% share) and Medicare Advantage market (29.4% share), and third largest in the stand-alone PDP market (18.5% share).
• Kaiser was the second largest PDP insurer in the commercial market with an 11.0% share, while Humana was second in the Medicare Advantage market and fourth in the stand-alone market with 18.9% and 13.1% shares, respectively.
• CVS Health was the biggest PDP insurer in the stand-alone market with 27.2% share, where Centene followed with a 19.7% share.

The analysis of competition and vertical integration in PBM markets adds to the AMA’s work to shine a light on unfair business practices in pharmaceutical drug pricing and alleviate the financial burdens on patients from high drug costs in the U.S. that can be more than double the cost of identical drugs in other high-income nations. Protecting patients and physicians from those that game the drug pricing system is a vital issue of public policy for the nation’s physicians and the AMA’s TruthinRx campaign continues to call for drug pricing transparency.