While these statistics highlight the growing importance of specialty pharmaceuticals in healthcare, they do not account for several important factors, such as changes in drug quality or shifts in the therapeutic mix of prescribed medications. Critically, gross expenditures do not reflect the true cost of the specialty drug to the patient, insurers, or healthcare organizations because they do not reflect manufacturer rebates or other price concessions. As noted by the HHS, “[r]ebates for specialty drugs with competition can be substantial,” and, as a result, an analysis focused on gross expenditures may substantially overstate the true cost of specialty drugs.
Specialty Pharmaceuticals and Potential Patient Steering
The rise in spending on specialty pharmaceuticals has drawn increased scrutiny over who bears the financial burden of these high-priced drugs and how payment flows are structured and managed. For example, in the past year, the FTC has issued two interim reports on PBMs that purport to describe how patients are being “steered” toward PBM-owned pharmacies for their specialty pharmaceutical purchases. It is critical to recognize that the reports’ findings, discussed below, are limited in certain ways and must be considered in context.
In its July 2024 report, “Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies” (the “First Interim Report”), the FTC outlines how recent consolidation and vertical integration within the U.S. healthcare system—particularly among pharmacy benefit managers (PBMs), insurers, and specialty pharmacies—has reshaped the pharmaceutical landscape. According to the FTC, this integration has given PBMs growing “influence over patients’ access to drugs and the prices they pay.”
The FTC identifies several potential mechanisms through which PBMs are alleged to direct patients toward affiliated pharmacies or products. According to the FTC, such “patient steering” may occur through:
- Exclusivity Provisions: Some PBM-payer contracts require patients to fill prescriptions for specialty drugs exclusively through the PBM’s affiliated specialty pharmacy;
- · “White-Bagging”: Healthcare providers may be required to obtain specialty drugs from PBM-affiliated pharmacies even when the medications are available from an unaffiliated pharmacy; and
- Preferential Treatment: PBMs may approve certain specialty prescriptions more quickly if the prescribing physician utilizes a PBM-affiliated pharmacy.
In its January 2025 report, “Specialty Generic Drugs: A Growing Profit Center for Vertically Integrated Pharmacy Benefit Managers” (the “Second Interim Report”), the FTC evaluates potential “patient steering” practices by analyzing data from the three largest PBMs in the United States (CVS Caremark, Express Scripts, and Optum Rx). Using a sample of more than 30 specialty generics, the FTC report explores the question of whether PBMs “steer” commercial health plan patients to fill prescriptions for higher-profit-margin specialty drugs at their affiliated pharmacies. To assess this question, the FTC calculates the profit margin (i.e., markup) for each specialty generic drug as the difference between the average reimbursement paid to the pharmacy and the drug’s average acquisition cost. Based on this methodology, the FTC concludes that, between 2020 and 2022, PBM-affiliated pharmacies dispensed 45% of all 30-day equivalent prescriptions for specialty generics on commercial health plans, but 72% of all such drugs with margins over $1,000.
However, the FTC’s margin estimates based solely on acquisition costs do not account for other relevant operational expenses—such as storage, shipping, dispensing, and patient support services—and these costs may be substantially higher for certain specialty drugs. The FTC’s approach, which ignores important cost components for specialty pharmaceuticals, can result in overestimation or incorrect conclusions about the profit margins on specialty generics. As such, the FTC’s finding—that PBM-affiliated pharmacies dispense an outsized share of the most profitable specialty generics for commercially insured patients—is premised on incomplete and error-prone margin measures, calling into question the commission’s conclusion about PBMs’ behavior with specialty pharmaceuticals.
The FTC’s scrutiny of certain PBM practices reflects the commission’s concern that such conduct may limit patient information and choice and contribute to higher drug prices. However, it is important to recognize that there may be legitimate and procompetitive benefits that justify these practices. For example, contract provisions that facilitate patients’ use of the PBM’s preferred or in-house specialty pharmacy can provide patients with access to higher-quality services and operational efficiency, including better communication and information flow between PBMs and pharmacies, integrated customer experiences, improved care coordination, and expedited prescription authorizations.
Moreover, entities that are vertically integrated with PBMs may possess specialized institutional knowledge regarding the handling and administration of complex specialty drugs. As such, PBMs may prefer that certain specialty drugs—especially those with potentially harmful side effects—be dispensed and administered by their specialty pharmacies to maintain tighter quality control and ensure that patients receive appropriate monitoring and support. Ultimately, evaluating the competitive impact of these practices requires a nuanced, case-specific analysis that weighs both the potential procompetitive benefits and potential anticompetitive effects of any conduct . Such rigorous, context-specific analysis is required to determine the net effect on patients, insurers, and other stakeholders in the broader healthcare ecosystem.
Payment Practices for Specialty Pharmaceuticals
The FTC’s Second Interim Report also examines payment practices and flows of funds associated with specialty pharmaceuticals. According to the FTC, pharmacies affiliated with the three largest PBMs generated $7.3 billion in dispensing revenue in excess of estimated acquisition costs for a sample of 51 specialty generic drugs between 2017 and 2021. The FTC also reports that this revenue in excess of acquisition costs grew at a compound annual growth rate over 40%, rising from $522 million in 2017 to $2.1 billion in 2021. As explained above, however, these figures reflect only PBMs’ acquisition costs and do not account for any additional expenses incurred by the PBMs, such as costs associated with dispensing, storage, or patient support services, for this sample of specialty generic drugs.
The Second Interim Report also concludes that PBMs paid higher reimbursements to their affiliated specialty pharmacies while allegedly disadvantaging independent and unaffiliated specialty pharmacies. According to the FTC, this pattern of directing favorable payments to affiliated pharmacies for specialty generic drugs was evident for both commercial and Medicare Part D health plans, although it was more common for commercial plans.
PBMs have responded to the FTC’s claims by noting that the Interim Reports adopt an overly narrow focus and fail to appropriately contextualize PBMs within the broader healthcare landscape. Representatives from CVS and Express Scripts, for example, highlight that specialty generics represent less than 1.5% and 2% of their clients’ total drug spending, respectively. Additionally, PBMs note that the FTC reports fail to consider the actual out-of-pocket costs incurred by patients. According to Optum, patients of Optum Specialty Pharmacy incurred median out-of-pocket costs of only $5 between January 2023 and March 2024.
Ultimately, the extent to which PBMs profit from dispensing specialty pharmaceuticals—whether through markups over acquisition costs or differing reimbursement practices to affiliated versus non-affiliated pharmacies—is highly fact-intensive and needs to be measured carefully. Failure to fully account for relevant costs borne by PBMs, which can contribute to improved safety and service to patients, can lead to misleading conclusions about PBMs’ practices.
What Lies Ahead
The FTC’s reports raise important questions about the role of PBMs as intermediaries in the specialty pharmaceutical distribution and payment chain. While the FTC has expressed concern over certain PBM practices that it claims could limit patient choice and increase costs, PBMs maintain that their operations deliver substantial consumer benefits, including improved affordability and access.
Although the FTC has initiated legal action against PBMs in the context of insulin pricing, it remains uncertain whether the commission or other regulatory agencies will pursue similar enforcement efforts targeting PBMs’ roles in the distribution of specialty pharmaceuticals. At the same time, private litigants may leverage these FTC reports to initiate legal challenges against PBMs and other entities in the pharmaceutical distribution chain. For example, a recent antitrust class action brought by a group of independent pharmacies alleges a price-fixing conspiracy involving several PBMs and a drug coupon provider, citing the FTC’s reports as supporting evidence.
Policymakers have also begun to scrutinize PBMs. In April 2025, a bipartisan group of state attorneys general submitted a letter to congressional leaders urging legislative action to prohibit PBMs, their parent companies, and affiliates from owning or operating pharmacies—a move they claim is aimed at promoting “fair competition.” In the United States, several states are also enacting, or looking to enact, similar legislation.
As these developments unfold, regulators, litigators, and economic experts must conduct rigorous, case-specific assessments of the role of PBMs in the distribution of and payment for specialty pharmaceuticals. A nuanced, context-specific analysis is essential to evaluate whether certain PBM practices yield potential procompetitive benefits or give rise to potential anticompetitive harms.
