Volume 40 (2017)

Volume 40 (2017) / Issue 3

Ralf Boscheck, 'Pharmacy Benefit Managers: Fixing Healthcare Market Failures or Straining Regulatory Logics!?' (2017) 40 World Competition, Issue 3, pp. 459–469

Abstract

US healthcare spending has made healthcare market reforms a critical and ongoing priority of regulatory policy. Healthcare markets are intrinsically fragile simply because providers deliver heterogeneous services to generally ill-informed patients who cover only a fraction of the costs. Intermediaries respond to the root causes of failing market coordination by injecting knowhow, aggregating demand and screening supplies. But they themselves are subject to regulatory concerns, as non-transparent practices could give rise to deceptive conduct and the scale of operations may eliminate actual, or foreclose potential, competition. Pharmacy benefit managers (PBMs) are a case in point. PBMs organize the sale and reimbursement of prescription drugs between producers, pharmacists and diverse sets of private and public health plans. They are also the focal point in the current ‘drug-price blame game’ with independent pharmacists and drug producers zeroing in on PBMs as the main culprits. At the same time, the Federal Trade Commission (FTC) itself is called upon to reconsider its allegedly ‘laissez-faire’ position on healthcare markets, if only to avoid that a growing number of US states are to enact new regulations and licensing rules to curtail presumably abusive PBM behaviour. Observing the situation, Moody’s warned that if any of the legislative proposals aimed at reining in PBMs took hold, the value of the PBM model would be lost.

Given the contradictory atmosphere, how is one to know whether structural relief is needed or, on the contrary, if overregulation should be averted? This article addresses some of the key issues emerging from the current debate. By way of introduction, section 1 sketches ‘PBMs: Market contexts and benefits’. Section 2 assesses ‘Monopolization fears and fiduciary duties’. Section 3 discusses ‘Federal enforcement actions and local regulatory capture’. Section 4 sums up.

Copyright © 2017 Kluwer Law International
All rights reserved

ISSN: 1011-4548
ID: WOCO2017028