WASHINGTON — The Federal Trade Commission (FTC) and HHS jointly issued a request for information on the practices of “opaque middlemen” in the pharmaceutical supply chain and what role they play in ongoing generic shortages, FTC Chair Lina Khan announced on Wednesday.
“Today, I’m pleased to announce that we are launching an inquiry into how group purchasing organizations [GPOs] and drug wholesalers may be contributing to chronic shortages of generic medications used to treat everything from asthma, to fevers, to cancer,” said Khan during the American Medical Association’s (AMA) National Advocacy Conference.
“You all have seen first-hand how these persistent and acute drug shortages can, for very sick patients, literally mean the difference between life and death,” she said, citing the example of a father who can’t afford an inhaler for his daughter with asthma and a cancer patient forced to skip treatments due to drug shortages.
In March 2023, Akorn Operating Company ceased production of albuterol. Fifteen different cancer drugs were in shortage last year as a result of manufacturing and supply chain problems, according to the White House.
In a press release, the FTC said that the agencies are seeking public comment to “understand how both GPOs and drug wholesalers impact the overall generic pharmaceutical market, including how both entities may influence the pricing and availability of pharmaceutical drugs.”
GPOs are intermediaries that sit between healthcare providers — hospitals, physicians, nursing homes, and home health agencies — and manufacturers and distributors. Their job is to negotiate deals for generic drugs and medical supplies between the two groups. Drug wholesalers, also middlemen, buy drugs straight from manufacturers and deliver them to providers.
In her address, Khan stressed that policy choices made in Washington can have far-reaching impacts. She quoted President Biden, who said “we’re 40 years into the experiment of letting the corporations accumulate more and more power … I believe the experiment has failed.”
“Today … we’re returning to America’s long-standing anti-monopoly tradition,” she added, and that includes “scrutinizing opaque middlemen across the healthcare supply chain.”
Nuts and Bolts
The request emphasized the agencies’ interest in learning more about the market concentration and contracting practices of GPOs and drug wholesalers, particularly in the following areas:
- “Whether and to what extent market concentration among GPOs and drug wholesalers has impacted smaller healthcare providers and rural hospitals”
- “Whether and to what extent concentration among GPOs and drug wholesalers has disincentivized suppliers from competing in generic drug markets”
- “The impact of the prevailing GPO compensation model, which may rely on rebates, chargebacks, and administrative fees from manufacturers and suppliers in exchange for favorable treatment, on generic manufacturers and other suppliers”
The agencies are also seeking more information on “whether and to what extent” GPOs and wholesalers adhere to certain anti-trust laws, including provisions of the Clayton Act, focused on arrangements that may lead to decreased competition, and of the Robinson-Patman Act, which seeks to prevent wholesale distributors from leveraging “preferable volume pricing to franchises over small businesses.”
The request, in addition to a laundry list of other questions, also asked how GPOs could change their contracting practices in ways that would encourage manufacturers to keep “a steady and reliable supply of high-quality products, while also allowing these products to be purchased by healthcare providers at an affordable price.”
The ultimate goal of the agencies’ request is to identify “root causes” and “potential solutions” to the problem of drug shortages, the press release noted.
AMA President Jesse Ehrenfeld, MD, MPH, applauded the agency’s actions.
“Cracking down on bad actors — particularly those whose actions adversely impact our patients — is a critical step to ensuring and restoring patient access to chemotherapies and other drugs. Prior authorization, bureaucratic red tape, and onerous processes are bad enough — too often resulting in patients abandoning necessary care — without middlemen abusing their market power to make matters worse,” Ehrenfeld wrote in an email.
Other Actions, Inquiries
Meanwhile, the FTC is continuing its scrutiny of other pharmacy middlemen: pharmacy benefit managers (PBMs).
PBMs are intermediaries between drug companies and insurers. While, in theory, their role is to negotiate with insurers to help keep drug costs down, because they negotiate a discount or “rebate” based on a drug’s list price, and because they keep a portion of that benefit, they have a perverse incentive to favor higher-cost drugs.
Khan said the agency is looking forward to sharing its findings in “the coming months.”
The FTC is also advancing efforts in other key areas.
With regard to “unlawful consolidation and roll-ups,” Khan said the agency has blocked “over half a dozen healthcare mergers in the last 2 years alone.”
And for the first time ever, the agency sued a medical group and the private equity firm behind it.
The individual acquisitions in such “roll-up” schemes may appear “benign,” but at the aggregate level they can have significant impacts, she said. The private equity firm “used its dominance to raise prices for anesthesia services, raking in tens of millions of dollars for the executives at the expense of patients and businesses.”
In January 2023, the FTC also proposed a ban on non-compete clauses in employment contracts, the mention of which drew applause from the room.
“Whether you’re a doctor, a nurse, or a custodian, you should have the freedom to pursue better job opportunities,” Khan said.
The FTC, HHS, and the Department of Justice are also partnering on a “forthcoming joint Request for Information to seek input on how private equity and other corporations’ control of healthcare is impacting Americans,” the FTC press release noted.
The public has 60 days to submit comments on the newly released Request for Information.
Source: MedicalNewsToday.com
