Lina Kahn, Chair of the Federal Trade Commission (FTC), testifies before the House Appropriations Subcommittee at the Rayburn House Office Building on May 15, 2024 in Washington, DC.
Kevin Dietsch | News Getty Images | Getty Images
The Federal Trade Commission on Friday sued three major US health care companies that negotiate insulin prices, alleging that the drug middlemen use practices that boost their profits while “artificially inflating” costs for patients.
The suit is against the three largest so-called pharmacy benefit managers, UnitedHealth Group’s Optum Rx, CVS Health’s Caremark and of Cigna Express Scripts. All are owned or affiliated with health insurance companies and collectively manage about 80% of the nation’s prescriptions, according to the FTC.
The FTC’s lawsuit also involves each PBM’s affiliated group purchasing organization, which brokers drug purchases for hospitals and other health care providers. The agency said it could recommend suing pharmacists Eli Lilly, Sanofi and Novo Nordisk in the future, as well as for their role in raising the list prices for their insulin products.
A UnitedHealth spokesman said the lawsuit “demonstrates a profound misunderstanding of how drug pricing works,” noting that Optum RX has negotiated “aggressively and successfully” with drugmakers.
A CVS spokesman said Caremark is “proud of the work” it has done to make insulin more affordable for Americans, adding that “to suggest anything else, as the FTC did today, is simply wrong.”
And, an Express Scripts spokesman said the lawsuit “continues a troubling pattern by the FTC of baseless and ideological attacks” on PBMs. It comes three days after Express Scripts sued the FTC, demanding the agency retract its alleged “defamation” July report which claimed that the PBM industry is driving up drug prices.
PBMs are at the center of the US drug supply chain. They negotiate discounts with drug manufacturers on behalf of insurers, large employers and federal health plans. They also create lists of drugs, or formulations, covered by insurance and reimburse pharmacies for prescriptions. The FTC is investigating PBMs starting in 2022.
The agency’s lawsuit alleges that the three PBMs have created a “distorted” drug rebate system that prioritizes high rebates from drug manufacturers, which leads to “artificially inflated insulin list prices.” It also claims that PBMs favor these high-priced insulins, even when more affordable insulins are available with lower list prices.
The FTC files its complaint through its so-called administrative process, which brings proceedings before an administrative judge to hear the case.
“Millions of Americans with diabetes need insulin to survive, yet for many of these vulnerable patients, the cost of their insulin medications has skyrocketed over the past decade, thanks in part to powerful PBMs and their greed,” said Rahul Rao , deputy director of the FTC’s Office. Competition, it is stated in an announcement.
“The FTC’s administrative action seeks to end exploitative behavior by the Big Three PBMs and marks an important step toward fixing a broken system – a solution that could overhaul the insulin market and restore healthy competition to drive down prices of medicines for consumers. Rao continued.
About 8 million Americans with diabetes rely on insulin to survive, and many have been forced to seek treatment because of high prices, according to the FTC.
President Joe Biden’s Inflation Reduction Act has capped insulin prices for Medicare beneficiaries at $35 a month. This policy does not currently extend to patients with private insurance.
The Biden administration and Congress have increased pressure on PBMs, seeking to increase transparency in their operations as many Americans struggle to afford prescription drugs. On average, Americans pay two to three times more than patients in other developed countries for prescription drugs, according to newsletter from the White House.
The FTC said it remains “deeply troubled” by the role insulin manufacturers play in higher list prices, arguing that they inflate prices in response to PBM demands for higher rebates. Eli Lilly, Sanofi and Novo Nordisk control about 90% of the US insulin market.
For example, Eli Lilly’s Humalog insulin had a list price of $274 in 2017, an increase of more than 1,200% from its list price of $21 in 1999, according to the FTC.
The FTC said all drug makers should “be aware that engaging in the type of conduct at issue here raises serious concerns.”
An Eli Lilly spokesman said the FTC’s lawsuit addresses “aspects of the US health care system that we have long advocated for reform.” They added that the company last year became the first to cap the cost of all its insulins at $35 a month for people with private insurance. Eli Lilly also cut some insulin list prices by up to 70%.
Sanofi last year was announced a similar $35 monthly price cap for the most commonly prescribed insulin. Novo Nordisk last year also said it would cut the list prices of some of its popular insulins by up to 75%.
A Sanofi spokesman said the company has not seen and will not comment on the FTC’s complaint against PBMs. However, the French pharmaceutical industry agrees with the FTC’s allegation that PBMs “leveraged their position as powerful industry intermediaries and took advantage of discounts…to benefit themselves while increasing costs for patients and payers.”
A spokesman for Novo Nordisk said the company was “committed to ensuring that patients have affordable access to their medicines, including insulin”. Novo Nordisk does not control the prices patients pay at the pharmacy in the “complex US health care system,” the spokesman noted, pointing to the company’s insulin savings card programs.
Correction: This story has been updated to correct an offer from the FTC.