FTC’s second interim report on PBMs: Don’t hold your breath

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The Federal Trade Commission (FTC) will consider issuing a second interim report on Pharmacy Benefit Managers (PBMs) tomorrow during its January 14 open meeting. The second interim report will focus on "highlighting additional staff findings from the Commission's 6(b) study on the contracting practices of pharmacy benefit managers," according to the FTC's press release.

The Commission released its first interim report on PBMs in July of last year, after launching the 6(b) study two years prior. Soon after publishing the first interim report, the FTC filed an administrative complaint against the three largest PBMs, alleging that certain rebating practices artificially raised the list price of insulin.

There was an outpouring of criticism directed towards the Commission's first interim report, as illustrated in a recent CEI paper published in December 2024. Namely, the interim report did not conduct an empirical analysis on how PBM practices affect consumers' out of pocket expenses. As my colleague, Jessica Melugin, and I explain in our paper on the interim report, "This is concerning, since the inclusion of consumer price effects was essential to garner approval from Commissioners Phillips and Wilson in ultimately authorizing the 6(b) study."

We'll see if the second interim report on PBMs delivers the type of rigorous economic analysis expected of FTC 6(b) studies. As Commissioner Melissa Holyoak wrote in her dissent to the release of the first interim report,

Historically, the Federal Trade Commission has used its 6(b) authority to study industries and issues, gather information, and issue reports that are "in the public interest." These reports have provided Congress and the public with evidence-based, objective, and economically sound information that can shape the national debate on a wide range of important issues that affect consumers and competition. The standard of these reports has been nothing short of excellence. Indeed, when a Commission report reflects the historical excellence that the public has come to expect, it can generate significant public engagement and facilitate fruitful policy debates. But today's Report fails to meet that rigorous standard.

The FTC has produced a string of disappointing 6(b) studies under the leadership of Chair Lina Khan. In September 2024, the agency released its report on how social media and video streaming services handle personal data. That report relied on unfounded assertions, according to Alex Ambrose, policy analyst with Information Technology & Innovation Foundation. "Overall, the FTC's report raises concerns and assumptions without offering substantial data analysis or evidence of consumer harm… The FTC risks losing credibility on the data economy if it continues to produce reports that lack factual support and logical reasoning," Ambrose wrote.

Further, in March 2024, the FTC released another 6(b) study on grocery supply chain disruptions during the COVID-19 pandemic. The study failed to utilize extensive data gathered with the agency's 6(b) authority, rendering its conclusions weak and potentially misleading, according to Fred Ashton, director of competition policy at the American Action Forum. Despite having access to detailed information from companies, the FTC relied on publicly available data and failed to address key questions about competition and consumer costs. "When it came to writing the report, it's as if the FTC locked the economists out of the room," Ashton said during an event on grocery competition hosted by CEI.

The announcement of a second interim report on PBMs suggests more of the same and inspires little optimism. Sens. Elizabeth Warren (D-MA) and Josh Hawley (R-MO) sent a letter to the FTC urging them to approve and release the second interim study as they rev up efforts to regulate PBM practices during the 119^th Congress.

But good policy making isn't predicated on foregone conclusions. The prominence of PBMs is a symptom of excessive health care regulation, and more regulation is unlikely to be the solution.