Missing the economists in FTC’s latest PBM study

The Federal Trade Commission (FTC) released its not-so-objectively titled interim report on Pharmacy Benefit Managers (PBMs): Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies.

The inflammatory title of the report (contrasted with the reassuringly bland 2005 FTC study title:  Pharmacy Benefit Managers: Ownership of Mail-Order Pharmacies) is the logical conclusion of a process that’s appeared to work backward from already-drawn conclusions. The abrupt resignation of the FTC’s Bureau of Economics director at the outset, multiple versions of the proposed study being circulated as soon as a half hour before the commission vote, and partisan divides on moving forward all seem more like incidents sparked by ideological agendas and less like a run-up to staid economic analysis.  

The click-bait title and agency bias could perhaps be forgiven if the contents of the report proved any of the dire accusations. But the FTC continues its march away from rigorous fact finding and economic evaluation. At a recent CEI-hosted event on a different topic, panelist Fred Ashton said, “When it came to writing the report, it’s as if the FTC locked the economists out of the room.”  Ditto for the PBM report.

Instead, we are left with anecdotes in the form of (sometimes anonymous) public comments and scary hypotheticals. There is no evidence presented of higher costs to consumers caused by PBM practices, even though that question should be at the crux of a 6(b) study of that industry. If the conclusions many in FTC leadership have seemingly already reached are so obvious, why not produce a robust economic treatment of the issue?

As a balm to the absence of rigorous economic or legal analysis in the FTC’s report, I recommend Commissioner Melissa Holyoke’s excellent dissent.