The modern proverb “people who live in glass houses shouldn’t throw stones” originated in 1385 when a primitive version of it appeared in Geoffrey Chaucer’s poem “Troilus and Criseyde” — “who that hath an heed of verre, Fro cast of stones war him in the werre!” In Middle English, the text literally refers to a person with a “head of glass,” but in contemporary context the saying cautions people (or organizations) not to criticize others for having the same faults.
The Federal Trade Commission’s (FTC) administrative complaint against PBMs, issued on September 20, criticizes PBMs for using exclusions. The FTC alleges that PBMs introduced formulary exclusions and leveraged this threat to demand larger rebates from drug manufacturers, incentivizing manufacturers to raise list prices to offset the larger rebates. The FTC’s critique ignores that PBMs have long used exclusions to trash wasteful products and unfairly blames PBMs for manufacturers’ pricing strategies. For the FTC, manufacturers, and others to throw shade on exclusions is like throwing stones in glass houses.
Exclusions are a universal procurement tactic
Exclusions are a cornerstone of strategic procurement — they can help an organization differentiate itself and achieve a competitive advantage. By deliberately selecting specific products and services, and, by default, excluding all the rest, organizations manage costs, assure quality, and streamline operations. A restricted vendor list isn’t just about cutting costs — it’s about increasing negotiating power, which can help to secure volume discounts, as well as maintain or increase service levels and improve other contract terms. Successful procurement teams continuously evaluate vendors, bringing in innovative vendors and throwing out those that underperform.
The FTC uses exclusions
With respect to use of exclusions, the FTC cast the first stone at PBMs. The FTC’s criticism of PBMs for using exclusions is hypocritical because the FTC engages in the same exclusionary practices. This double standard exemplifies a “do as I say, not as I do” approach that breaks its argument.
The FTC’s Acquisition Division demonstrates precisely the exclusionary approach the FTC criticizes. It purchases products and services requested by the FTC’s organizational units, following best practices in vendor limitation. The division primarily orders through preapproved, government-wide contracts (e.g., GSA, NASA). When a requirement cannot be filled by ordering through an existing government contract, the FTC uses competitive bidding among registered suppliers, which inherently excludes many potential suppliers.
Imagine the operational damage if the FTC were forced to abandon its exclusionary procurement practices. Without exclusions, the FTC would have to evaluate hundreds or even thousands of suppliers for each purchase. The resulting inefficiencies would increase administrative overhead and reduce negotiating leverage. The higher administrative costs would not be economically or politically sustainable.
Drug companies use exclusions, too
Drug companies’ criticism of PBMs’ use of exclusions is a striking contradiction.
Drug companies, like all large, sophisticated organizations, use vendor exclusions to help create and sustain competitive advantages. Their procurement departments curate approved vendor lists, effectively excluding those not meeting quality standards and cost-effectiveness. Take, for example, laptops. Most drug companies limit most purchases to a single brand (e.g., Lenovo) to optimize discounts and to simplify support and maintenance. While exceptions are made (e.g., graphic design teams using Macs, senior executives with specific device preferences), strategic exclusion helps drive organizational efficiency.
Beyond technology procurement, drug companies use exclusions throughout their operations. They maintain select lists of approved suppliers for raw materials, manufacturing equipment, strategic guidance, and market insights. These exclusions aren’t just about cost — they’re fundamental to maintaining quality, security, and operational efficiency.
Drug companies are also employers that purchase drug benefits for team members and their dependents. And the drug formularies they select have exclusions! Big pharma is large enough to have PBMs customize formularies to cover their own products if normally excluded. It would be awkward indeed if employees and their dependents couldn’t access their own companies’ drugs. Of course, they pay more for this customization. Small biotechs are typically not large enough to pay for such customization.
Rocking a double standard
Some may argue that access to drugs is different than that for all other products and services and, as such, should be shielded from exclusions. But this logic is shattered by the fact that other purchases can have life-or-death consequences. Consider emergency services — police, fire departments, emergency medical response teams — where choice of vendor can mean the difference between life and death. Standardizing equipment helps to reduce errors, improve response times, decrease training costs, and enhance outcomes. We accept and expect providers of these services to use exclusions to optimize performance and manage costs.
Hospitals routinely make procurement choices that directly impact patient outcomes. Decisions about which medical devices, surgical tools, or diagnostic equipment to purchase can influence recovery times, complication rates, and survival.
In transportation, manufacturers of planes, trains, and automobiles must carefully select approved suppliers for critical components, where even a minor flaw could jeopardize lives. Similarly, construction firms choose materials and contractors based on rigorous safety and quality standards, as subpar decisions could lead to catastrophic failures.
These examples demonstrate that exclusions are not only about cost-efficiency; they are central to safeguarding lives, achieving optimal outcomes, and ensuring quality.
Between a rock and a hard place
By criticizing PBMs’ use of exclusions, the FTC has placed itself in a difficult situation. Does the FTC continue this hypocrisy after cracks in its position become increasingly transparent? Or, ideally, does the FTC become more selective and target exclusions that appear to lack clinical and economic support?
With the closing of the American formulary, regulators and policymakers need to embrace the need for exclusions and expect that the number of excluded drugs will rise. Strategic, data-driven, ethical exclusions help manage costs, ensure quality, and drive innovation.
Every stakeholder — from the FTC to drug manufacturers — uses exclusions as a strategic tool. It’s time to recognize that PBMs are no different. Stop throwing stones in glass houses.
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