The Federal Trade Commission is suing the titans of the pharmacy benefit manager industry for anticompetitive practices and artificially raising the price of insulin drug prices, the agency announced Friday.
The complaint alleges that Optum Rx, Express Scripts and Caremark—all vertically integrated with UnitedHealth Group, Cigna and CVS Health, respectively—caused patients to pay more for life-saving drugs and engaging in “rigging pharmaceutical supply chain competition in their favor.”
“As the complaint explains, the PBMs have created and manage a system in which drug manufacturers compete for formulary placement by raising (not lowering) drug list prices so they can feed the higher rebates that PBMs demand,” Rahul Rao, FTC Bureau of Competition Deputy Director, said in a statement. “This perverse system results in billions of dollars in rebates and fees for the PBMs and their health plan sponsor clients—but does so at the expense of certain vulnerable diabetic patients who must pay significantly more out-of-pocket for their critical medications.”
The lawsuit also includes the company’s group purchasing organizations. Emisar Pharma Services is owned by UnitedHealth, Ascent Health Services by Cigna and Zinc Health Services is controlled by CVS Health.
These PBMs value high rebates from manufacturers and purposefully excluded lower list price insulins, resulting in greater profits for the companies and higher costs for patients, the agency said. Rebates are also used to attract payers, employers, unions and other insurers, the FTC alleges.
White House Press Secretary Karine Jean-Pierre said the Biden administration doesn't have a comment on the lawsuit but "we have made clear that no one should pay higher prices because of corporate greed."
Express Scripts called the lawsuit "unsubstantiated" and said it will lead to higher drug prices for employers and unions, while Optum described the suit as a "profound misunderstanding."
While the goal of the lawsuit is to dramatically reduce the list price of certain drugs and diminish central formulary design and rebate practices, it only focuses on insulin though the practices extend beyond insulin drugs. The agency hopes successful legal action could lead to lower health premiums for beneficiaries.
However, the agency said its internal investigation found potential wrongdoing from insulin manufacturers Eli Lilly, Sanofi and Novo Nordisk, hinting more legal action could be justified. Pharma companies have inflated their drug list prices in response to PBM’s high rebate prices, Rao said, citing Lilly’s Humalog increasing 1,200% in price from 1999 to 2017.
The FTC says insulin prices started increasing in 2012, coinciding with PBMs creating “exclusionary” drug formularies.
“Although not named in this case, all drug manufacturers should be on notice that their participation in the type of conduct challenged here can raise serious concerns, with a potential for significant consumer harm, and that the Bureau of Competition reserves the right to recommend naming drug manufacturers as defendants in any future enforcement actions over similar conduct,” said Rao.
An FTC report in July detailed how the agency believes the top six PBMs, including Prime Therapeutics, MedImpact Healthcare Systems and Humana Pharmacy Solutions overcharge patients and weaken accessibility. The report suggested potential regulation in the future but received criticism for not obtaining more incriminating information from the PBMs.
"What PBMs are doing to all patients, especially those who rely on insulin, is criminal," said Rep. Buddy Carter, R-Georgia, a longtime Congressional critic of PBMs, in a statement shared with Fierce Healthcare. "I applaud FTC Chair Lina Khan for taking this critical step and sending a message that PBMs’ days of abusing patients are coming to an end. It is time to bust this monopoly up for good.”
The Pharmaceutical Care Management Association (PCMA), which represents and lobbies on behalf of PBMs, said the FTC is pursuing an anti-PBM agenda and that rebates are not correlated to higher list prices.
"This action not only fails to accurately consider the role of the entire prescription drug supply chain, but disregards positive progress, supported by PBMs, in making insulin more affordable for patients," said the PCMA in a statement. "In contrast to the rhetoric, the current insulin market is actually working, with PBMs effectively leveraging greater competition to drive down insulin prices and doing their part to make insulin affordable for patients through innovative programs." The group says the average out-of-pocket cost for a monthly supply of insulin has decreased from $25.79 in 2019 to $18.64 last year.
The complaint has been filed but will not be made public until Monday after it goes through a redaction process. The commission voted to file an administrative complaint 3-0, with two commissioners recusing themselves from the vote.