The Federal Trade Commission on Friday Legal action was taken The company has filed lawsuits against the three major pharmacy benefit managers, accusing drug middlemen of inflating insulin prices and steering patients to more expensive insulin products to increase profits.
The lawsuit targets CVS Health’s Caremark, Cigna’s Express Scripts and UnitedHealth’s OptumRx, as well as subsidiaries they set up to handle drug negotiations, according to a person familiar with the matter. 80 percent Ten percent of prescriptions in the U.S. are filled by pharmaceutical benefit managers (PBMs). Employed by employers or government health insurance programs such as Medicare, PBMs are responsible for negotiating prices with drug companies, making payments to pharmacies, and determining which drugs are available to patients and how much they cost.
The agency has filed an administrative complaint, which has not yet been made public, accusing PBMs of distorting competition and harming consumers. The agency is seeking to prohibit benefit managers from giving preferential treatment to drugs that generate profits.
The agency’s five commissioners voted for the measure, with three Democratic appointees in favor and two Republican appointees abstaining.
The largest PBMs have “squeezed millions of dollars from patients who need life-saving medications,” FTC Director Rahul Rao said in a news release Friday.
He said the agency’s legal action “aims to put an end to the predatory practices of the big three PBMs and marks an important step in fixing a broken system that could ripple beyond the insulin market and restore healthy competition to lower drug prices for consumers.”
Benefits managers have denied the FTC’s charges, arguing that they save patients and payers money and that they are being unfairly scapegoated for high drug prices set by pharmaceutical companies. “This baseless action shows a gross misunderstanding of how drug pricing works,” said Elizabeth Hoff, a spokeswoman for OptumRx.
CVS Caremark spokesman David Whittrap said the company is “proud of the work we’ve done to make insulin more affordable for all Americans with diabetes,” but added that it is “simply wrong to suggest otherwise, as the FTC did today.”
Insulin is a prime example of high prices, after years of price hikes by drug companies. Eli Lilly, Sanofi and Novo Nordisk dominate the market. The agency’s action does not name drug companies as defendants, but the agency said in a news release that it urged drugmakers to be on notice and may recommend lawsuits in the future.
About 8 million Americans with diabetes depend on insulin to live, and for years many patients faced high out-of-pocket costs that led some to skimp on their insulin.
Today, thanks to a federally mandated $35-a-month copay cap for Medicare patients and a similar voluntary cap by manufacturers for privately insured patients, the price of insulin is no longer an issue for most patients. But some patients using newer insulins still face high out-of-pocket costs.
Just weeks before the presidential election, the agency is addressing an issue that has been of concern to Vice President Kamala Harris. campaign Speaking at a community college in Raleigh, North Carolina, in August, Harris promised to demand transparency from “the middlemen who act as intermediaries between big pharmaceutical companies and insurance companies, using opaque practices to drive up drug prices and profiting from demand for our drugs.”
Former President Donald J. Trump did not campaign on the issue, but his administration in 2018 Suggested It was a radical change that would have threatened the business model of employee benefits managers. The proposal ultimately failed. The Trump administration also Created a model The bill capped out-of-pocket costs for Medicare patients for some insulin products, and was later expanded under President Biden.
PBMs have come under increasing scrutiny for their role in inflated drug prices, and an investigation published by The New York Times in June found that PBMs often act in their own interests at the expense of patients, employers and taxpayers.
Under Lina Khan’s leadership, the FTC has aggressively challenged PBMs after years of indifference. In July, the agency released a report that harshly criticized benefit managers and flagged possible legal action. On Tuesday, Express Scripts launched a legal offensive in federal court. Litigation It filed suit against the FTC, accusing it of making false and misleading claims about the industry in a July report.
Cigna executive Andrea Nelson said in a statement Friday that the agency’s legal action “continues a disturbing pattern of baseless, ideologically driven attacks by the FTC against pharmacy benefit managers.”
Khan has taken a much broader view of anticompetitive harm than his predecessor. His efforts against big companies in industries ranging from tech to supermarkets to pharmaceuticals have produced mixed results and criticism that the FTC is overstepping its authority. In suing Amazon and now a major medical conglomerate, he has taken on some of the world’s largest companies.
The department filed a complaint against the PBMs through the administrative process, which initiates a process in which an administrative or in-house judge will hear the case. The complaint is expected to be made public as early as Monday.
The FTC’s action focuses on one of the key parts of benefits managers’ jobs: negotiating discounts with manufacturers of brand-name drugs. Drug companies agree to pay these discounts in exchange for benefits managers providing their drugs to patients.
Manufacturers set an initial list price, from which benefit managers negotiate a series of discounts. The PBM passes most of that money on to the employer or the government that hired them but keeps some for itself, which can amount to billions of dollars.
PBMs often have an incentive to push more expensive drugs to patients because it makes them money by doing so: For example, cheaper generic drugs typically don’t get discounts, so PBMs make more money by favoring brand-name products.
Over time, PBMs have negotiated bigger discounts, passing more money back to their customers while putting upward pressure on original list prices that manufacturers had increased to maintain their profits.
For insulin, PBMs secured bigger discounts, slashing initial list prices for employers and governments by more than half, but PBMs’ discount demands were the main driver behind insulin manufacturers increasing list prices over the years, officials said.
As a result, patients are at a disadvantage because the price they pay at the pharmacy counter is sometimes based on the initial listed price.
The agency argues that PBMs are gaming the system to their own advantage at the expense of patients.
In recent years, insulin manufacturers have released lower-cost, identical versions of some of their most popular insulin products, and when PBMs push patients to take those versions, they typically see a drop in revenue.
The agency alleges that PBMs favored the more profitable versions at higher list prices even after versions with lower list prices were released. The complaint quoted a PBM vice president as saying that this strategy allowed the largest PBMs to “keep sipping on those juicy kickbacks,” according to the agency.
The future of the FTC’s legal actions may depend on the outcome of the presidential election. If Trump is elected, he could restructure the commission and settle or drop lawsuits. That may depend on who advises him.
“I have deep doubts about everything the FTC is doing in this space,” Joe Grogan, a former Trump administration official who is considered a leading contender in Washington to be Trump’s health policy chief in his second term, said in an interview Friday. “It seems to me like it was rushed before the election.”
Grogan, a paid consultant to the PBM trade group, predicted that the Trump-appointed commissioners would not automatically dismiss lawsuits but would decide whether to proceed based on the merits of the allegations.
Republican officials are divided on whether PBMs are to blame for high drug prices. Several conservative attorneys general have filed lawsuits against benefit managers, including over insulin pricing, and some Republicans have proposed reining in some of their business practices. But other Republican officials say they are not willing to accept the PBMs as the only ones to blame. Protected PBMs said the FTC was overstepping its authority.
Noah Weiland contributed reporting.
