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FTC Takes On Prescription Drug Middlemen Over High Insulin Costs

By  |  September 20, 2024

The Federal Trade Commission (FTC) has filed a lawsuit against the United States’ largest pharmacy benefit managers (PBMs), accusing them of inflating insulin prices through a “perverse drug rebate system.” The defendants, CVS Health’s Caremark, Cigna’s Express Scripts, and UnitedHealth Group’s Optum, collectively manage approximately 80% of all prescriptions in the U.S., generating over $400 billion in annual revenue.

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    According to the Financial Times, the FTC is targeting these PBMs for their role in raising the price of insulin, specifically pointing to Eli Lilly’s Humalog, which saw its wholesale price surge by over 1,200% between 1999 and 2017, eventually costing more than $274. The agency, under the leadership of Chair Lina Khan, is aiming to reduce insurance premiums and wholesale drug prices through its legal action.

    Rahul Rao, the FTC’s deputy director of competition, stated, “Caremark, ESI, and Optum—as medication gatekeepers—have extracted millions of dollars off the backs of patients who need life-saving medications.” Per the Financial Times, the lawsuit highlights the growing concern about PBMs’ influence in the pharmaceutical industry, alleging that they prioritize high-priced drugs that offer them larger rebates, to the detriment of consumers.

    PBMs act as intermediaries between drug manufacturers and consumers, negotiating discounts on drug prices and taking a portion of these rebates as profits. However, the Financial Times notes that following significant consolidation in the wake of the Affordable Care Act, PBMs are now largely owned by health insurers. This has raised concerns that PBMs favor their own affiliated pharmacies, giving them an unfair advantage and contributing to rising drug prices.

    Related: Express Scripts Files Lawsuit Against FTC, Claims Drug Pricing Report Misleading

    The FTC alleges that these PBMs have repeatedly selected higher-priced insulin options to increase the rebates and fees they receive. Rao added that the commission’s complaint seeks to end the “exploitative conduct” of these three major PBMs and marks a significant effort to “fix a broken system” that could also impact drug pricing beyond insulin.

    In response to the lawsuit, CVS defended itself, calling the FTC’s claims “simply wrong.” Andrea Nelson, Cigna’s chief legal officer, criticized the agency, stating the suit is part of a “troubling pattern” of “unsubstantiated and ideologically-driven attacks” on PBMs. UnitedHealth Group has yet to issue a comment on the matter.

    The FTC’s scrutiny isn’t limited to PBMs. According to the Financial Times, the commission is also concerned about the role played by drug manufacturers, such as Eli Lilly, Novo Nordisk, and Sanofi, in driving up insulin prices. The FTC noted that PBMs “are not the only potentially culpable actors” in this complex pricing system.

    Khan, who has long been vocal about the outsized power of PBMs in the U.S. healthcare landscape, argues that their practices harm both market competition and consumers. The lawsuit against the PBMs arrives just days after Express Scripts filed its own suit against the FTC, challenging a recent study published by the agency that accused PBMs of inflating drug prices at the expense of patients and pharmacies. Express Scripts is demanding a retraction of the report, but the FTC stands by its findings.

    Source: The Financial Times