Federal Trade Commission accuses three drug middlemen of inflating insulin prices

The Federal Trade Commission announced on Friday that it is to sue three drug middlemen, alleging that they have been fixing high insulin prices.

Ftc claimed that the three main PBMs – UnitedHealth Group’s Optum Rx, CVS ‘s Caremark and Cigna`s Express Scripts – have engaged in anticompetitive and unfair rebating practices that have inflated list price of insulin drugs,limited patients’ access to lower list price products and shifted to consumers the cost of high list price of insulin. The disability organization that is FTC has said that 8 million Americans depend on insulin each day in the U.S.

PBMs negotiate with insurance companies to get rebates from drug makers in order to get the drugs included in plans. On paper, they are supposed to cost the patient less.

Also named in the lawsuit are group purchasing organizations affiliated with the PBMs namely Zinc Health Services, Ascent Health Services and Emisar Pharma Services.

The “Big Three” administer approximately 80% of current prescription drug plans in the United States, says the complaint, which accuses them of establishing a rebate scheme that prioritises rebates from drug manufacturers, thus leading to the excessive insulin prices.

“This perverse system generates rebates and fees for PBMs and their health plan sponsor clients in the billions of dollars — but at the direct, direct, direct wellbeing of specific certain vulnerable diabetic patients who must spend much more out of their pockets for their necessary medications,” the FTC said in a news release.

CVS Caremark, through a statement, said that the FTC was absolutely off base with its allegations while pointing a finger at other drug makers for increasing the price of the drugs.

"CVS Caremark has led the way in driving down the cost of insulin for all patients: of which 25 million are insured, uninsured, and underinsured, the company said. Our members on average spend less than $25, these are far from list prices and even below the Biden Administration’s $35 ceiling. Moreover, we also offer $25 insulin to every American irrespective of insured or uninsurer through our ReducedRx Program in all 67000 network pharmacies and more than 9000 CVS pharmacy.

Citing the case, Cigna’s Chief Legal Officer, Andrea Nelson stated that the FTC’s lawsuit marks the company’s “troubling pattern of unsubstantiated and ideologically driven attacks on pharmacy benefit managers,’ the commission released a report in July alleging that PBMs are to blame for high drug prices. On Tuesday, Cigna took the FTC to court demanding that they retract the report.

“Once again the FTC, a government entity funded by taxpayer dollars, is proving that the FTC does not comprehend drug pricing and has no interest in the facts but is determined to politicize this issue in order to score political points of the sort that are the primary function of its newly appointed director,” Nelson said in a press release. In fact, if the FTC actually wins its suit and succeeds in compelling PBMs to place drugs on a formulary even though they increase their net costs to plan sponsors, and even if these drugs are not clinically necessary, the FTC will push up drug prices in this country. This will undoubtedly adversely affect consumers as well as those that subsidize their prescription drug benefits, be it employers, labor unions or even the federal government itself.

Representatives at UnitedHealth Group could not be reached for comment on the matter.

According to the FTC, insulin medication was cheaper before citing that by 1999, Humalog insulin by Eli Lilly cost a mere $21 for the medicine. The FTC said that by the PBMs rebate system strategy, the drug was $274 in 2017.

For millions of Americans with diabetes, insulin is a lifeline, but for many of these patients, the cost for their insulin drug has significantly risen over the decade due to greedy PBMs, said Rahul Rao, the deputy director of the FTC’s Bureau of Competition.

This is why the PBMs are stealing so much money, the FTC said, but it is also drug manufacturers such as Eli Lilly and Novo Nordisk, that should be on notice because they may be sued in future.

I checked White House Press Secretary Karine Jean-Pierre for a comment on the lawsuit and she simply said they do not have any comment, but, “we have been very clear that no one should have to pay higher prices for their prescription drugs because of corporate greed.”

“The President and Vice President have been going after the outrageous prices of healthcare and prescription medicines and equipment—from providing Medicare with the authority to bargain for lower prices of the necessary medications and vaccines, to reducing the prices for insulin, inhalers, EpiPens and hearing aids by promoting competition,” Jean-Pierre said. 

The National Community Pharmacists Association offered its support to the FTC’s lawsuit against the PBMs on Friday in a statement.

“Indeed one of the many ways that PBMs have devised to game the system against patient, taxpayers and small pharmacies is the rebate game,” said B. Douglas Hoey, the association’s chief executive officer. The PBMs themselves decide which drugs health insurance plans should cover. They take home bigger rebates for the costliest medications. Of course the costliest medications make their way to the formularies even if cheaper medications are available on the market. Patients end up paying more. Employers end up paying more. Taxpayers end up paying more. As well as even more small business pharmacies are pushed out of business. Such rebates are a great motivator of raising drug prices, it is completely reverse of what we need.

In July, Democratic and Republican lawmakers singled out Caremark, Express Scripts and Optum Rx’s executives on prescription drug prices in the United States in an oversight hearing.

“On one hand we have PBMs [pharmacy benefit managers] boasting how they lower the price of prescription drugs and on the other side of the aisle we have the Federal Trade Commission, numerous major media outlets, including the New York Times, and at least eight state attorneys generals – Democrats and Republicans – who insist that PBMs are actually increasing the cost of drugs,” Rep. Raja Krishnamoorthi, D-Ill., said. 

The committee opened an investigation in March 2023 about PBMs ‘contribution to the increase in the prices of heath care. It also comes as states — most recently, Vermont — have sued PBMs, saying they are responsible for spiraling the costs of drugs.