WASHINGTON, July 9 (Reuters) -

The U.S. Federal Trade Commission said on Tuesday in an

interim

report on its investigation

into pharmacy benefit managers that healthcare

consolidation has given the companies outsized influence over

prescription drug prices that could warrant regulation.

Many lawmakers, drugmakers and government officials have

pointed a finger at these industry middlemen, suggesting they

play a critical role in high prescription drug costs in the

United States. Here is what you need to know about PBMs.

WHAT ARE PHARMACY BENEFIT MANAGERS?

Pharmacy benefit managers are companies that handle

prescription drug benefits for health insurance companies, large

employers, and Medicare prescription drug plans - a group often

referred to as payers.

The PBMs negotiate fees and volume-based discounts, known as

rebates, on behalf of payers with drugmakers and pharmacies;

create lists known as formularies of medications covered by

insurance plans; reimburse pharmacies by processing claims; and

manage pharmacy networks. Many also operate their own mail-order

pharmacies. They collect fees from payers and rebates from

drugmakers.

Studies, including one from the Congressional Budget Office,

show that rebates lower drug costs for the government and

consumers. Other studies show a correlation between increases in

a drug's list price and rising rebates for the drug.

WHO ARE THE BIG PBM PLAYERS?

Three companies controlled 79% of U.S. pharmacy benefit

management in 2022, according to the data platform Statista: CVS

Caremark with 33%, Express Scripts at 24%, and OptumRx owns 22%

of the market.

The other noteworthy companies by market share are Humana

Pharmacy Solutions at 8%, Prime Therapeutics at 5%, and

MedImpact Healthcare Systems with 4%.

These six companies together control 96% of the PBM market.

WHO OWNS THE PBMs?

The top five pharmacy benefit managers are owned by

companies that also offer insurance and other healthcare

services.

CVS Health ( CVS ) owns Caremark and insurer Aetna as well

as specialty mail-order pharmacies, a national pharmacy chain

and a physician's group.

UnitedHealth Group ( UNH ) owns OptumRx, insurer United

Healthcare, specialty pharmacies, physician groups and express

medical and surgical centers.

Cigna ( CI ) operates an insurer, Express Scripts and a

specialty pharmacy.

Humana is an insurer and owns a benefit manager,

while 19 different Blue Cross Blue Shield plans own a stake in

Prime Therapeutics.

HOW AND WHY ARE PBMs FACING INTENSE SCRUTINY?

The FTC began investigating the top PBMs and their

impact on pricing and access to prescription drugs in 2022.

The FTC looked into the fees they charge, how they

reimburse pharmacies, clawback of payments to pharmacies outside

of their networks, and whether the companies steer patients to

their own pharmacies. It also investigated whether benefit

managers favor more expensive drugs that yield higher rebates

over lower-cost alternatives.

Lawmakers have introduced about two dozen bills since last

year targeting PBMs including at least five with bipartisan

support, Congressional records show. Several have passed

committees, but have yet to come to a vote by the broader Senate

or House of Representatives.

Separate bills aim to ban what is known as "spread pricing,"

a practice in which PBMs charge health plans a larger amount for

a drug than they pay out to pharmacies. Some are seeking more

transparency under which the companies would be required to

provide more information on their non-public negotiations.

Rebates have also been a subject of proposed new government

rules. The Trump administration sought in 2020 to make rebates

illegal for Medicare prescription drug plans by removing the

safe harbor protection that shields rebates from federal

anti-kickback laws. The Biden administration delayed the rule

until 2023 and Congress further delayed it until 2027.

The Department of Justice is investigating UnitedHealth

Group ( UNH ), including the relationship between its UnitedHealthcare

health insurance business and its OptumRx PBM unit, according to

a February Wall Street Journal report.