On Oct. 5, the Government Accountability Office released a report on vertical integration among Medicare Part D pharmacies, PBMs, and plan sponsors, revealing details about its pervasiveness and how it distorts drug pricing.
The GAO found that plan sponsor pharmacies accounted for over a quarter (28 percent) of the Part D drugs provided to enrollees, and primarily dispensed via mail order, once again highlighting the intense vertical integration in the program. Meanwhile, non-integrated pharmacies tended to dispense via retail channels. Additionally, for more than half of the 20 drugs with the highest payments for a 30-day supply, GAO found cost sharing across the four top sponsors was approximately $340 higher at pharmacies owned by plan sponsors than at those not affiliated with the plans.
GAO noted the pervasiveness of vertical integration in Part D, stating that eight of the 15 plan sponsors with the largest Part D enrollment in 2023 were vertically integrated, with each owning a mail-order or specialty pharmacy, and some of them owning a retail pharmacy as well. It went on to detail how that combined ownership means plans can “steer beneficiaries to their own pharmacies instead of other non-owned pharmacies to keep revenue within their organization,” which “could reduce access to independent and other non-owned pharmacies by potentially making it more difficult for them to compete to stay in business.”
In response to the report, PCMA released a statement cherry-picking data, using only gross payment to pharmacies, not net payments, which does not accurately reflect what pharmacies are paid. This report, based on data from 2023, looks at the pharmacy landscape before the DIR rule went into effect. In that year alone, $21.2 billion was clawed back from pharmacies.
The report came at the instigation of House Ways and Means Health Subcommittee Ranking Member Lloyd Doggett (D-Texas).
