FTC Disrupts Express Scripts’ PBM Model, Introduces Net Pricing Drug Channel

The Federal Trade Commission (FTC) has announced a significant settlement with Express Scripts that will transform its pharmacy benefit management (PBM) operations and the pharmaceutical landscape. This settlement aims to address longstanding issues related to the incentives within the drug pricing structure.

Transformative Changes for Express Scripts

The FTC’s actions will lead to a new era known as the Net Pricing Drug Channel (NPDC), which prioritizes net pricing over list pricing. This development is expected to alter the dynamics of how drug pricing and access are managed in the industry. Key changes within the settlement include:

• The standard formulary will no longer prioritize high Wholesale Acquisition Cost (WAC) drugs over lower-cost alternatives.
• Patient out-of-pocket expenses will be based on net prices instead of the often inflated list prices.
• Plans and beneficiaries will gain access to direct-to-consumer pricing through the TrumpRx initiative.
• Point-of-sale rebates must be passed directly to patients.
• Manufacturer fees will be separated from list prices.
• Plan sponsors will receive enhanced transparency in drug pricing.
• Retail pharmacies will adopt a cost-plus reimbursement model.
• The Ascent Health Services Group Purchasing Organization (GPO) is relocating from Switzerland to the U.S.

Compliance and Oversight

This settlement is not merely a symbolic gesture. It has specific timelines for implementation, mandating changes to occur as soon as commercially feasible and no later than January 1, 2028. The agreement will also involve formal oversight and compliance reporting to ensure adherence to the new regulations.

Impact on the Pharmaceutical Landscape

The implications of this FTC settlement extend beyond Express Scripts, affecting manufacturers, plan sponsors, pharmacies, and other competing PBMs. The shift towards net pricing is anticipated to lower patient costs and reshape the competitive strategy of key players in the market.

One critical consideration remains: will the “Meeting Competition” clause allow Express Scripts to adapt minimally to plan sponsors’ demands? This aspect raises questions about the potential limitations of the settlement.

As we await further commentary, especially during Cigna’s upcoming Q4 earnings call, the industry prepares for considerable changes. The FTC’s decisive actions reflect a growing momentum toward transparency and equity in the drug pricing system.

In conclusion, this settlement signifies a pivotal moment in PBM operations, ushering in era of net pricing in the drug channel and aiming for a more fair and transparent landscape for all stakeholders involved.