FTC Sues Top Three Drug Middlemen for Allegedly Inflating Insulin Costs

The Federal Trade Commission (FTC) has filed a lawsuit against three of the largest pharmacy benefit managers (PBMs) in the U.S., claiming their practices are contributing to dramatic increases in insulin prices while boosting their profits.

The lawsuit targets CVS Caremark Rx, Cigna’s Express Scripts, and UnitedHealth’s OptumRx. Together, these companies manage approximately 80 percent of all prescriptions filled across the country.

According to the FTC, these PBMs have established a “perverse” system that favors higher list prices for insulin from manufacturers, even when more affordable alternatives exist. This system enables PBMs and their affiliated purchasing organizations to receive larger rebates, while patients are left to bear the burden of rising out-of-pocket expenses.

A statement from the FTC revealed that a Vice President from one of the PBMs acknowledged their strategy allowed them to benefit significantly from these rebates. This confession raised concerns about the ethical implications of prioritizing profits over patient needs.

Rahul Rao, Deputy Director of the FTC’s Bureau of Competition, commented on the issue, highlighting that millions of individuals with diabetes rely on insulin for survival. He noted how the costs associated with insulin have surged over the past decade, attributing part of this rise to the aggressive tactics employed by PBMs.

“Caremark, ESI, and Optum—as medication gatekeepers—have extracted millions of dollars off the backs of patients who need life-saving medications,” Rao emphasized.

This lawsuit represents a significant step in the Biden administration’s efforts to scrutinize the practices of PBMs, which have come under increasing criticism for their role in the pharmaceutical distribution chain.

The accused companies have strongly defended their practices. Andrea Nelson, chief legal officer of the Cigna Group, criticized the FTC’s actions as ideologically driven and lacking in substantiated evidence. In response to an interim report issued by the FTC in July, Cigna’s Express Scripts filed its own lawsuit against the commission, demanding the retraction of what they referred to as misleading claims about the PBM industry.

A representative from Optum Rx labeled the FTC’s lawsuit as a misunderstanding of the drug pricing landscape, while CVS Caremark stated it takes pride in its efforts to make insulin affordable for Americans with diabetes. The company strongly rejected the FTC’s allegations, asserting its commitment to protecting patients and controlling prescription drug prices.

PBMs play a crucial role in negotiating access to prescription drugs for millions of Americans. They are responsible for setting the terms with pharmaceutical companies, making payments to pharmacies, and determining patient access to medications and associated costs.

As the industry has consolidated, critics argue that PBMs have increasingly dominated the market, thus limiting patient access to essential medications. The largest PBMs are often owned by insurance companies, creating a vertically integrated model that raises additional concerns regarding control over drug pricing and availability.

Pharmaceutical companies and PBMs often blame each other for the escalating costs of medications. Manufacturers argue that high PBM rebates necessitate increases in list prices, while PBMs maintain that those rebates are ultimately shared with health plan sponsors.

However, the FTC indicates that PBMs are not the sole players responsible for the increasing prices of insulin. The agency expressed serious concerns regarding the role of drug manufacturers such as Eli Lilly, Novo Nordisk, and Sanofi in pushing up prices for critical treatments like insulin. As a result, the FTC has indicated it may pursue further legal action against drug companies in the future.

In summary, the ongoing conflict between PBMs and the pharmaceutical industry reflects deep-rooted issues within the U.S. healthcare system, particularly regarding affordability and access to life-saving medications.

Source: Nexstar Media, Inc.