The headlines sound like a massive victory for the American consumer. The Federal Trade Commission (FTC) just finalized settlements with corporate giants Express Scripts and CVS Caremark, with OptumRx soon to follow. The agency promised these deals would smash out-of-pocket drug costs and bring transparency to a broken system.
Do not buy the hype.
These settlements are a hollow victory. They are packed with giant loopholes. Worse, they completely ignore the latest corporate scheme to rig drug prices: Corporate-owned “private label” medications.
To understand why these deals fail, you have to look at what Pharmacy Benefit Managers (PBMs) actually do. They started decades ago as simple administrative middlemen. Today, the big three PBMs control 80% of all prescription claims in the country. They have swallowed up major health insurers and massive pharmacy chains. They control every single layer of the supply chain.
PBMs exploit this monopoly power through two toxic tactics.
First is the rebate trap. PBMs curate “formularies,” which are lists of medications covered by insurance. Instead of choosing the cheapest options, PBMs choose the most expensive brand-name drugs. Why? Because those drugs offer the PBM the largest secret corporate refunds, called rebates. This forces drug companies to artificially spike their sticker prices just to get covered. Studies show that a single-dollar increase in rebates drives up list prices by $1.17.
Second is spread pricing. PBMs charge your health plan a high fee for a drug, pay your local community pharmacy a tiny fraction of that amount, and pocket the difference. This predatory behavior is actively destroying independent pharmacies.
The FTC’s new settlements claim to fix this. They order PBMs to stop favoring high-cost drugs. They demand options that base patient costs on net prices rather than inflated sticker prices.
But the fine print ruins it all.
Most of these new rules only apply to a PBM’s “standard offerings.” However, passing rebates directly to patients will make standard insurance premiums go up. The settlements do absolutely nothing to stop PBMs from pushing employers toward “non-standard” plans. These non-standard plans will feature lower premiums but absolutely zero consumer protections.
Furthermore, monitoring this vast, secretive corporate web for the next decade is a logistical nightmare for regulators. If a giant conglomerate loses a dollar on the pharmacy side, it can easily hide that profit inside its insurance branch.
But the fatal flaw of these settlements is what they completely ignore. PBMs have found a new way to cheat the system: private-label biosimilars.
Biosimilars are generic versions of incredibly expensive biological drugs. They are supposed to bring fierce competition and crash monopoly pricing. Instead, PBMs are partnering with drugmakers to create their own private-label copycats, then banning all outside competitors from their insurance lists.
This corporate strategy causes massive long-term damage.
In the short term, it stops real price drops. By only covering their own private labels, PBMs block independent drug manufacturers from entering the market. True competition is strangled.
In the long term, it threatens the future of medicine. Developing these complex drugs costs millions. If independent scientists know the big three PBM monopolies will block them from the market, they will stop making them.
The proof is already in the market. Express Scripts uses its affiliated entity, Quallent Pharmaceuticals, to push its own private-label versions of blockbusters like Humira and Stelara. Monthly prices remain trapped in the thousands. CVS Caremark did the exact same thing. They kicked brand-name Humira off their formulary and replaced it with Hyrimoz, a drug co-produced by their own subsidiary, Cordavis. If you want coverage on a CVS plan, your medicine usually has to come from their own factory.
These corporate giants are also playing politics. Both companies agreed to cover the direct-to-consumer TrumpRx platform, but added a major catch. They will only do it if Congress changes Medicaid laws to exempt TrumpRx from rebate calculations. They are actively holding consumer access hostage for regulatory favors.
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Our healthcare system is driven by corporate greed, and PBMs sit right at the center of the crisis. Research shows that moving to a fully transparent, fixed-fee system would slash US drug spending by 15%. That is nearly $95 billion in annual savings for regular Americans.
By ignoring the private-label loophole, the FTC let these monopolies outsmart the system yet again. Until Washington bans this blatant self-preferencing, real financial relief for patients will remain a myth at best and a lie at worst.
Dr. Eric Wargotz is a practicing physician; clinical professor emeritus of pathology at the George Washington University School of Medicine and Health Sciences; Senior staff pathologist and immediate past Chief of Pathology and Medical Laboratory Director at Luminis Health Doctors Community Medical Center; Judge of the Orphans’ Court of Queen Anne’s County, Maryland Judiciary; former Elected President of the Queen Anne’s County Board of County Commissioners; and the 178th president of MedChi – the Maryland State Society. The views expressed in this article are solely his own and may not represent the official positions of any of his affiliates.