The Federal Trade Commission (FTC) on Friday sued the three largest pharmacy benefit managers (PBMs) for engaging in alleged anticompetitive practices that boosted profits while “artificially” inflating the list price of insulin.
The agency’s action targeted CVS Caremark Rx, Cigna’s Express Scripts and UnitedHealth’s OptumRx. The three companies combined administer about 80 percent of all prescriptions in the United States.
The FTC accused the companies of creating a “perverse” drug rebate system that prioritizes insulin from manufacturers sold at a higher list price even when cheaper versions are available.
The system allowed the PBMs and their affiliated group purchasing organizations, which broker drug purchases for hospitals and other providers, to “line their pockets” with bigger rebates while patients pay higher out-of-pocket costs, the complaint alleged.
The FTC in a statement said one PBM Vice President acknowledged the strategy allowed the Big Three to continue to “drink down the tasty … rebates.”
“Millions of Americans with diabetes need insulin to survive, yet for many of these vulnerable patients, their insulin drug costs have skyrocketed over the past decade thanks in part to powerful PBMs and their greed,” Rahul Rao, Deputy Director of the FTC’s Bureau of Competition said in a statement.
“Caremark, ESI, and Optum—as medication gatekeepers—have extracted millions of dollars off the backs of patients who need life-saving medications,” Rao said.
The lawsuit, which hasn’t yet been made public, represents an escalation of the Biden administration’s scrutiny of the business practices of PBMs, seeking to shine light on the opaque intermediaries at the center of the pharmaceutical distribution system.
The companies forcefully pushed back.
“This action continues a troubling pattern from the FTC of unsubstantiated and ideologically-driven attacks on pharmacy benefit managers,” said Andrea Nelson, chief legal officer of the Cigna Group.
Cigna’s Express Scripts sued the FTC on Tuesday over an interim report issued in July on PBMs, demanded the report be retracted because it is “filled with false and misleading claims” about the PBM industry.
A spokeswoman for Optum Rx said the FTC’s “baseless action demonstrates a profound misunderstanding of how drug pricing works.”
A CVS Caremark spokesman said it is “proud of the work we have done to make insulin more affordable for all Americans with diabetes. To suggest anything else, as the FTC did today, is simply wrong. We stand by our record of protecting American businesses, unions, and patients from rising prescription drug prices.
PBMs negotiate the terms and conditions for access to prescription drugs for hundreds of millions of Americans. They are responsible for negotiating prices with drug companies, paying pharmacies and determining which drugs patients can access and how much they cost.
As the industry has grown more consolidated, critics say PBMs have exerted greater control over patients’ access to medicine. PBMs are vertically integrated, serving as health plans and pharmacists. The largest PBMs are owned by insurers, which own specialty, mail order or retail pharmacies.
Drug companies and PBMs each blame the other for rising drug costs. Manufacturers say they need to raise list prices because of high PBM rebates, but the intermediaries argue that those rebates are passed on to health plan sponsors.
But the FTC said that PBMs aren’t necessarily the only ones to blame for high insulin prices. The Bureau of Competition “remains deeply troubled by the role drug manufacturers like Eli Lilly, Novo Nordisk, and Sanofi play in driving up list prices of life-saving medications like insulin,” FTC said.
The agency said it “may recommend suing drug manufacturers” in the future.