The Federal Trade Commission sued the three dominant pharmacy-benefit managers in the United States, alleging they inflated the cost of insulin by using their position as middlemen in the U.S. drug supply chain to win a higher cut of funds from drugmakers.
The agency alleges that PBMs, as they are known, benefit financially when the list price of insulin is higher, enabling them to extract heftier rebates from the manufacturers of a product that is essential for people with diabetes. According to the FTC, the three largest PBMs - CVS Health’s Caremark, Cigna’s Express Scripts and UnitedHealth’s Optum Rx - used their power to exclude cheaper insulin products from the menu of medications they make available to patients through insurance, instead favoring versions that gave them juicier rebates.
That has left certain patients, such as those with high deductibles, vulnerable to paying more out of pocket, according to the FTC. In a statement, the FTC wrote that an executive at a PBM acknowledged this strategy for insulins, saying that the big three PBMs continue to “drink down the tasty … rebates.”
PBMs pushed back Friday on the lawsuit, contending that the FTC has mischaracterized their role in drug prices.
“This action continues a troubling pattern from the FTC of unsubstantiated and ideologically-driven attacks on pharmacy benefit managers,” Andrea Nelson, Cigna’s chief legal officer, said in a statement.
Cigna’s Express Scripts sued the FTC on Tuesday over an interim report issued in July on PBMs, alleging it is “riddled with false statements” and seeking its retraction.
CVS said Friday the FTC was “simply wrong” and that it has “negotiated deep discounts on behalf of our clients” and “helped bring insulin back to affordable levels for their members.”
Optum Rx called the FTC’s lawsuit “baseless” and that it “demonstrates a profound misunderstanding of how drug pricing works.”
The FTC said that PBMs aren’t necessarily the only ones to blame for high insulin prices, and that its Bureau of Competition “remains deeply troubled by the role of drug manufacturers” including Eli Lilly, Novo Nordisk and Sanofi that dominate the insulin market. The bureau “may recommend suing drug manufacturers” in the future, the FTC said.
Insulin, a hormone produced by the pancreas, helps the body control blood-sugar levels. For people with diabetes, a condition affecting more than 38 million Americans, their bodies don’t make enough insulin. Some require a daily dose to live.
The three drugmakers all announced major cuts to the list price of their insulins last year, facing public and political pressure to rein in prices. The Inflation Reduction Act also caps the cost of insulin at $35 a month for patients covered by Medicare Part D, the government’s prescription drug benefit for seniors.
PBMs, a unique feature of the American health-care system, emerged to negotiate with drugmakers and bring down prices. They receive a cut of the savings in the form of rebates and fees. The higher the drug’s list price, the more money PBMs can make, according to the FTC, which alleges that they pocket hundreds of millions of dollars a year from rebates and fees.
Insurance companies hire PBMs to administer their pharmacy benefits, which includes a list of prescription drugs that they cover. Those lists, or formularies, play a role in how many patients have access to a given prescription drug, making it important for drug manufacturers to ensure their products are on the list.
According to the FTC, the PBMs leveraged their power to extract higher rebates from drugmakers in exchange for giving them access to their formularies. Even when cheaper insulins became available, PBMs “systematically excluded them in favor of identical high list price, highly rebated versions,” the FTC alleges.