WASHINGTON, Sept 20 (Reuters) - The U.S. Federal Trade

Commission said on Friday it was suing the country's three

largest pharmacy benefit managers, accusing them of abusing

their power and rigging the pharmaceutical supply chain to

artificially inflate the cost of insulin.

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

Health's ( CVS ) CVS Caremark with 33%, Cigna's ( CI ) Express

Scripts at 24%, and UnitedHealth Group's ( UNH ) OptumRx owns

22% of the market. The FTC's complaint says they now control 80%

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.

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.

In an interim report on its investigation released in July,

the agency said healthcare consolidation has given the companies

outsized influence over prescription drug prices that could

warrant regulation.

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.

There is bipartisan support for PBM reform, and lawmakers on

both sides of the aisle heavily criticized the companies in a

July hearing of the House Committee on Oversight and

Accountability where PBM executives came under fire.

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.