Part I of III
Attorney General James Uthmeier, Florida’s ultimate consumer advocate, has struck a second time within the last two months against the Pharmacy Benefit Managers (PBMs) cartel that dominates America’s and Florida’s prescription drug delivery system.
In June, he announced an investigation of Caremark/CVS for alleged monopolistic practices, and on August 27th, he announced the filing of two lawsuits, one against Express Scripts, one of the four major PBMs, and the other against Prime Therapeutics for collusion on price fixing.
Attorney General Uthmeier is not the first to sue PBMs for their unseemly, unethical business practices, as he joins the Federal Trade Commission and a host of other state Attorneys General, particularly in Oklahoma and Tennessee, who have uncovered evidence of illegal activities.
To understand the scope of the problem surrounding PBMs, we need a short history lesson.
In the beginning, PBMs were the back-office managers for insurance companies for just one easy reason: they actually possessed the electronic health records for all Americans.
From that point, they decided to monetize their data as any entrepreneur would do when they are handed a golden opportunity on a silver platter.
With a brilliant business plan, they created an entire electronic system whereby any physician or medical provider who writes prescriptions could connect that prescription request, a/k/a “script,” for a specific drug for that particular patient to a specific retail pharmacy for fulfillment.
Since they had unique access to all of the health records, they would become the de facto doorkeeper to whether yours and my prescriptions would get filled, by whom, and at what cost.
To have complete and unfettered control of America’s prescription drug delivery system, they needed one more important thing – secret contracts with the (a) drug manufacturers, (b) distributors/wholesalers, and finally (c) the retail pharmacies themselves.
To make the system self-sustaining and impenetrable, when they contracted with these three entities – manufacturers/distributors/retailers – they declared the contracts to be proprietary and thus exempt from inspection by anyone at any time.
A perfect plan!
To add muscular context to their contracts, they demanded and received that if any of the entities disclosed the contents of the contract to anyone outside of the circle, they would be denied continued membership in the cartel, essentially a business death sentence.
Instead of using violence like the Mexican cartels, PBMs used their brains to create an insular system that was guaranteed to provide unbelievable profits!
Those profits would then be used to make the system even bigger, stronger, and more intrusive, and they would go worldwide.
They not only controlled doctors’ scripts in private practice, but they also soon controlled drug prices at hospitals and any place that created a prescription.
But they wanted even more.
So, with all of the billions of dollars of profit, they started buying the largest insurance companies in America, the same ones that they initially worked for.
And when they bought some of those insurance companies, they also bought the retail pharmacies that those insurance companies owned, now referred to as “affiliated“ pharmacies, like CVS.
By 2024, the four largest Insurance companies/PBMs: Express Scripts, CVS Caremark, Optum Rx, and Humana Pharmacy Solutions (CenterWell), controlled about 87% of the prescription drug marketplace.
The total U.S. prescription drug spending in 2024 ranged from $467 billion to $487 billion.
Are you getting the picture yet?
Then they fought for and gobbled up America’s biggest prescription drug plan, Medicaid, by becoming the administrator for various states of their program.
Medicaid is a federal/state benefits program where the feds pay about 60%, and the states pay about 40%.
The total spend on Medicaid drugs by the federal and state governments in FY 2024 was $103.58 billion.
For comparison purposes, that exceeds Apple’s 2024 profit of $97B, the #2 most profitable company in the world.
It also exceeds #3 Berkshire Hathaway ($96.2B), or #4 Alphabet ($73.8B), or Microsoft, JP Morgan Chase, or Meta, to name just a few international conglomerates.
But Medicaid was only the tip of the iceberg.
The PBMs then started competing to administer various states’ employee benefit programs, including current employees and their families, along with retirees and their families, and in many states they administer that program too.
Today, PBMs control the entire prescription drug system that everyone in America must use to get their legal script filled.
You might be asking, how much profit did PBMs make in 2024?
Well, interestingly, that’s a secret, because not every PBM breaks out its net revenue number.
Of course, it has to be an astronomical number, one that few of us could even fathom.
The closest comparison would be to look at the 2024 corporate rankings of the four insurance companies that the PBMs own.
- Express Scripts
- Market Share ~30%
- Affiliated Company: The Cigna Group
- Fortune 500 Gross Revenue Rank: #13 ~$247B
- Net Profit (Net Income): $3.4B
- CVS Caremark
- Market Share ~27%
- Affiliated Company: CVS Health, which owns Aetna)
- Fortune 500 Gross Revenue Rank: #6 ~$357-373B
- Net Profit (Net Income): $4.6B
- Optum RX
- Market Share ~23%
- Affiliated Company: UnitedHealth Group (which owns UnitedHealthcare)
- Fortune 500 Gross Revenue Rank: #4 ~~ $371-400+B
- Net Profit (Net Income): $14.4B
- Humana Pharmacy Solutions (CenterWell)
- Market Share ~7%
- Affiliated Company: Humana Inc.
- Fortune 500 Gross Revenue Rank: #39 ~ $113-129B
- Net Profit (Net Income): $1.2B
Barney Bishop III is a registered lobbyist for independent pharmacists in Florida. He is also a former executive director of the Florida Democratic Party and a former Chief Executive Officer of Associated Industries of Florida, known as “The Voice of Florida Business.” He is currently the CEO of Barney Bishop Consulting LLC, and he can be reached at Barney@BarneyBishop.com
To further strengthen the belief that PBMs have a brilliant business plan, one must understand that PBMs are not regulated at the federal level.
And to the extent that states regulate them, they do so usually with both hands tied behind their back.
First, no state Attorney General or state regulator has ever successfully garnered the PBM proprietary contracts that were purposely designed to benefit themselves.
Second, states that attempt to regulate PBMs already have laws on the books that disproportionately benefit PBMs, and the rules and regulations that govern PBMs are lax, with inappropriate fines that amount to the cost of business in that state for just a few hours, or perhaps a day at best.
In Part II, we will explore what impact PBMs have on your access to your prescription, how they decide if you are entitled to your prescription, how and where you will get your script filled, and what you will pay. Interestingly, this is a unique issue – PBMs – that both Democrats and Republicans agree on.
In Part III, we will close with an examination of efforts by the Federal Trade Commission, various state Attorneys General, and others to rein in unsavory, unethical, immoral, and illegal practices and how PBMs still control the US drug delivery system while paying fines that represent the cost of doing business without negatively impacting their profits.
Barney Bishop III is a registered lobbyist for independent pharmacists in Florida. He is also a former executive director of the Florida Democratic Party and a former Chief Executive Officer of Associated Industries of Florida, known as “The Voice of Florida Business.” He is currently the CEO of Barney Bishop Consulting LLC, and he can be reached at Barney@BarneyBishop.com
