The Federal Trade Commission (FTC) and the Department of Health and Human Services (HHS) have launched an investigation into drug wholesalers and purchasing companies in response to the ongoing shortages of generic drugs in the United States. Generic drugs make up the majority of Americans’ prescriptions, and the recent shortfall has led to hospitals and patients having to ration medications.
The investigation aims to uncover the “root causes and potential solutions” to these shortages by examining the contracting practices, market concentration, and compensation of two types of middlemen in the drug supply chain: group purchasing organizations (GPOs) and drug wholesalers. GPOs act as intermediaries between hospitals and healthcare providers, brokering drug purchases, while drug wholesalers buy medicines from manufacturers and distribute them to providers.
The FTC and HHS are particularly interested in whether these middlemen have misused their market power to drive down the prices of generic drugs to a point where manufacturers can no longer profit, leading to a decrease in production and discouraging competition in the generic drug market. This investigation comes as the Biden administration seeks to address the ongoing shortages and find solutions.
Doug Farrar, director of the FTC’s Office of Public Affairs, explained the motivation behind the investigation, stating, “The FTC is interested in looking at this market because on one side of the market, you have patients that are desperate for the right drug and would pay a very high price for that drug if they could. And on the other side of the market, you have manufacturers that can’t get more than a few dollars per dose of that same drug. So that negative outcome for patients is what caused the FTC to want to study this market.”
While specific companies were not named by the FTC and HHS, some of the major players in the industry include Vizient, Premier, and HealthTrust as group purchasing organizations, and Cencora, Cardinal Health, and McKesson as prescription drug distributors. These companies will likely face scrutiny as part of the investigation.
The public will have 60 days to submit comments on this issue, providing an opportunity for individuals and organizations to share their experiences and perspectives on the matter. The FTC has encouraged people to submit their comments at Regulations.gov.
It is worth noting that group purchasing organizations and wholesalers have received limited attention on Capitol Hill, despite the growing concern over high drug costs. Lawmakers have primarily focused on pharmacy benefit managers (PBMs), who negotiate drug discounts on behalf of insurance companies and other payors. However, as part of the effort to reduce medication costs, there has been a push for greater transparency from PBMs regarding their business practices.
PBMs argue that manufacturers are responsible for the high prices of drugs, while drugmakers claim that rebates and fees collected by middlemen like PBMs force them to increase list prices for their products. This investigation into drug wholesalers and purchasing companies represents a broader effort to address the complex issues surrounding drug pricing and availability in the United States.
As the investigation unfolds, it remains to be seen what actions will be taken to alleviate the shortages of generic drugs and ensure that patients have access to affordable medications. The findings of the FTC and HHS investigation could potentially lead to regulatory changes or reforms within the drug supply chain, ultimately benefiting both patients and manufacturers.