The Federal Trade Commission on Friday filed a lawsuit over insulin prices against the three largest pharmaceutical middlemen that negotiate prescription drug prices, arguing that the companies artificially inflate the costs of the lifesaving diabetes drug for patients.
The suit targets the three largest pharmacy benefits managers: UnitedHealth Group’s OptumRx , CVS Health’s Caremark , and Cigna ’s Express Scripts.
These pharmacy benefits managers, also known as PBMs, are either owned or connected to health insurance providers and are intended to facilitate negotiations with pharmaceutical manufacturers and insurers, as well as set list prices for prescriptions covered by insurance.
OptumRX, Caremark, and Express Scripts, also known as the Big Three, together administer approximately 80% of prescriptions in the United States.
“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, the deputy director of the FTC’s Bureau of Competition, said in a press release on Friday.
The FTC alleges that the Big Three have established what it calls a “perverse drug rebate system” that prioritizes high rebates from drug manufacturers and creates high list prices on the market.
Even when lower list price insulins became available to patients, the FTC said in its lawsuit, PBMs “systemically exclude them in favor of high list price, high rebate insulin products.”
Rao said in the Friday press release that the three PBMs “have extracted millions of dollars off the backs of patients who need life-saving medications.”
“The FTC’s administrative action seeks to put an end to the Big Three PBMs’ exploitative conduct and marks an important step in fixing a broken system — a fix that could ripple beyond the insulin market and restore healthy competition to drive down drug prices for consumers,” Rao said.
The FTC complaint alleges that insulin prices started to rise in 2012 when PBMs began creating more exclusionary drug formularies based upon the size of rebates from drug manufacturers. This, according to the FTC, required pharmaceutical companies to increase list prices in order to compete.
The lawsuit further alleges that patients with higher deductibles and coinsurance payments face the brunt of these higher list prices as they do not necessarily benefit from rebates at the point of sale.
PBM reform has received strong bipartisan support from both chambers of Congress in recent months.
Rep. Buddy Carter (R-GA), a pharmacist by trade, told the Washington Examiner that he applauds FTC Chairwoman Lina Khan for “sending a message that PBMs’s days of abusing patients are coming to an end.”
“In the early years of my pharmacy practice, insulin was affordable. Now, the price is up 1,200% for some patients, forcing them to choose between paying for life-saving treatment and paying for gas, groceries, and other basic necessities. During this time, profits for Optum RX, Express Scripts, and Caremark have soared,” Carter said. “What PBMs are doing to all patients, especially those who rely on insulin, is criminal.”
PBMs respond to lawsuit
CVS Health Caremark Vice President for External Affairs David Whitrap told the Washington Examiner that members insured by CVS Health on average pay less than $25 per month for their insulin and that the company has worked to offer similar prices to all patients regardless of insurance coverage through its Reduced RX program.
“CVS Caremark is proud of the work we have done to make insulin more affordable for all Americans with diabetes,” Whitrap said. “To suggest anything else, as the FTC did today, is simply wrong.”
Whitrap also said that three drugmakers who produce insulin, Novo Nordisk, Eli Lilly, and Sanofi, were the main culprits behind the insulin list price increases in 2012, saying that all three companies “raised their list prices by as much as 500% in lockstep with one another.”
Andrea Nelson, the chief legal officer for the Cigna Group, told the Washington Examiner that the lawsuit filed Friday “continues a troubling pattern from the FTC of unsubstantiated and ideologically-driven attacks on pharmacy benefit managers.”
Cigna filed its own lawsuit against the FTC on Tuesday regarding the Biden administration’s report on PBM anti-competitive practices published in July, which Cigna claims “perpetuates false narratives about the industry based on unsubstantiated claims and comments from self-interested sources.”
Nelson said that if the FTC succeeds in its lawsuit, the action will inevitably drive prescription prices higher.
“In a world where pharmaceutical manufacturers continue to raise the price of medications every year, Express Scripts's work is more important than ever, and we won’t allow baseless suits and false information to deter us from our mission,” Cigna's chief legal officer said.
A spokesperson for OptumRx called the FTC lawsuit a "baseless action" that betrays "a profound misunderstanding of how drug pricing works."
Insulin has been on OptumRx'sPreventative Drug List for high deductible health plans since 2015, helping to reduce out-of-pocket prices for members to as low as $0 per month, according to the company.
"For many years, Optum Rx has aggressively and successfully negotiated with drug manufacturers and taken additional actions to lower prescription insulin costs for our health plan customers and their members, who now pay an average of less than $18 per month for insulin," the OptumRx spokesperson said.
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