AMA reports low PBM competition, high vertical integration
A 2024 AMA annual report confirms low competition and high vertical integration in PBM markets, urging regulatory action to protect patients and ensure affordability.
The American Medical Association has released its latest annual report, "Competition in PBM Markets and Vertical Integration of Insurers with PBMs: 2024 Update." The report reinforces concerns about limited competition and high levels of vertical integration within the pharmacy benefit manager sector. The findings highlight the need for increased regulatory oversight as PBMs maintain a powerful role in the pharmaceutical supply chain.
"The call for increased regulatory oversight of PBM business practices is overwhelmingly welcomed by physicians as a check against possible anticompetitive harm resulting from low competition and high vertical integration in the PBM industry," said AMA President Bruce A. Scott, MD, in a press release -- emphasizing that the AMA's findings should guide ongoing legislative efforts to ensure the affordability and accessibility of prescription drugs for patients.
Key findings
The AMA's 2024 report uses 2022 data from commercial and Medicare Part D prescription drug plan (PDP) enrollees, offering one of the most comprehensive analyses of PBM market concentration and vertical integration. Notably, the four largest PBMs control 70% of the national market across three primary functions: rebate negotiation, retail network management and claims adjudication.
CVS Health leads the pack with a 21.3% market share, followed by OptumRx (20.8%), Express Scripts (17.1%) and Prime Therapeutics (10.3%).
At the local level, 82% of PDP regions exhibit high market concentration, indicating limited competition and few PBM options for insurers. This raises concerns about the potential for inflated drug prices, as only a few PBMs dominate the supply of services to insurers.
High levels of vertical integration
The AMA urges careful monitoring, and intervention when needed, of both horizontal and vertical integration to ensure competition in PBM and health insurance markets.
Bruce A. Scott, MDPresident, AMA
One of the most significant issues highlighted in the report is the high degree of vertical integration between PBMs and health insurance companies. Nationally, 72% of people with a commercial or Medicare Part D PDP are covered by insurers vertically integrated with a PBM. The share is even higher in the Medicare Part D market, where 77% of enrollees are covered by vertically integrated insurers, compared to 69% in the commercial market.
This consolidation has competitive implications.
"The findings from the new AMA analysis warrant attention as Congress and the administration continue their work to protect patients and ensure prescription drugs remain affordable and accessible," noted Scott in the AMA press release. "The AMA urges careful monitoring, and intervention when needed, of both horizontal and vertical integration to ensure competition in PBM and health insurance markets."
Drug insurer market shares
In tandem with PBM market analysis, the AMA's report also details the market shares of the 10 largest PDP insurers. UnitedHealth Group leads the commercial PDP (13%) and Medicare Advantage PDP (28.2%) markets and ranks third in standalone PDP with 17.6%. CVS Health dominates the standalone PDP market with a 25.6% share, while Centene follows with 17.8%.
Implications for healthcare and regulatory action
The AMA's latest findings confirm that vertical and horizontal consolidation are reshaping the PBM landscape, reducing competition and potentially driving up healthcare costs. As federal and state regulators increase their focus on PBM practices, the AMA's data will serve as a critical resource for ensuring policy decisions are guided by a need to protect both patients and physicians from anticompetitive harm.
With ongoing Congressional hearings and federal scrutiny on PBMs, this 2024 update is a vital tool for industry stakeholders seeking to navigate the future of healthcare technology, pharmaceutical markets and regulatory reforms. The AMA has committed to continuing its advocacy for increased transparency and fair competition in the PBM and health insurance markets.
Alivia Kaylor is a scientist and the senior site editor of Pharma Life Sciences.
