HHS’ Office of Inspector General has found that patients in vertically integrated Medicare Part D plans pay substantially higher out-of-pocket drug costs — and that data gaps are preventing a full picture of how consolidation affects pharmacies, according to a May 19 report.
OIG also found that just six out of 11 health plans accounted for roughly 82% of the $275.9 billion in gross Part D spending in 2023, a level of concentration consistent with prior findings from the Federal Trade Commission and the House Oversight Committee.
Here are 3 things to know from the report:
- The report examined 2023 data across 60 high-cost and high-use drugs and found that while net drug costs were similar between vertically integrated and other sponsors overall, the two groups arrived at those figures differently. Vertically integrated sponsors paid pharmacies more upfront but recouped more on the back end through rebates and fees — capturing 85% of all direct and indirect remuneration in 2023.
- For patients without financial assistance, enrollees in vertically integrated plans paid nearly 40% more in out-of-pocket drug costs than those in other plans, facing higher costs for 52 of the 60 drugs examined. Monthly premiums were lower — $10 vs. $20 for Medicare Advantage drug coverage — but OIG attributed the savings largely to those larger rebate flows, not more efficient drug pricing.
- The report also flagged concerns about independent pharmacies, though data gaps limited conclusions. Vertically integrated sponsors reimbursed their own pharmacies about 4% less at the point of sale than unaffiliated ones — but OIG could not determine net payments after accounting for the $18.7 billion in pharmacy fees and price concessions those sponsors collected in 2023.
The National Community Pharmacists Association said the report raises important questions but leaves critical ones unanswered. CEO B. Douglas Hoey said in a statement that the “unholy trinity” of health plans, pharmacy benefit managers and affiliated pharmacies operating under common ownership creates conflicts of interest that drive up costs for patients.
He added that vertically integrated corporations have made it difficult even for the FTC to investigate their market impact, with the agency requiring multiple rounds of compulsory data requests due to what it has described as highly opaque PBM practices.
The NCPA said it looks forward to future OIG findings as the agency works to fill in the gaps left by data limitations in the current report.
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