The Federal Trade Commission plans to sue the three largest pharmacy benefit managers over their negotiating tactics for various medicines, including insulin, that pushed patients toward higher-priced treatments, according to a source familiar with the matter.
The step comes after the agency this week released a scathing report that found the three largest PBMs — Express Scripts, Caremark, and OptumRx — processed nearly 80% of the roughly 6.6 billion prescriptions that were dispensed by U.S. pharmacies in 2023. The FTC said its findings were interim, though, because some companies did not provide all of the requested information and threatened further action.
In its report, the FTC argued that the largest PBMs wield such “enormous power” that the companies can affect the ability of many Americans to access and afford their medicines. The agency also found that the prescription drug market is “highly concentrated” because the largest PBMs are owned by insurers and, in turn, own specialty, mail-order, or retail pharmacies, which throttles competition.
The lawsuits are expected to focus on the controversial role of rebates, according to the source, who spoke on condition of anonymity. These are paid by drugmakers to PBMs to win favorable placement on formularies, which are the lists of medicines covered by health plans. In general, drugmakers argue they must raise prices to compensate for rebates, while PBMs maintain drug companies raise prices to boost profits.
Critics contend rebates create incentives for PBMs to accept higher prices rather than negotiate lower prices for health insurers and employers. They also argue the largest PBMs eventually created group purchasing organizations as an end-run by negotiating on their behalf, but pocket some rebates as fees. And the pharmacy benefit managers profit by then retaining those fees.
The FTC declined to comment about the lawsuits, which were first reported by The Wall Street Journal. A spokesman for OptumRx, which is owned by UnitedHealth Group, declined to comment. We reached out to Express Scripts, which is owned by Cigna, and will update you accordingly.
A spokesman for Caremark, which is owned by CVS, maintained its members pay less than $25 for insulin. The PBM, he wrote, is “proud of the work we have done to make insulin more affordable for all Americans with diabetes, and we stand by our record of protecting American businesses, unions, and patients from rising prescription drug prices.
“Any action that limits … PBM negotiating tools would reward the pharmaceutical industry and return the market to a broken state, leaving American businesses and patients at the mercy of the prices drugmakers set,” he added.
The three largest insulin makers — Eli Lilly, Novo Nordisk and Sanofi — are also reportedly being scrutinized by the FTC. The cost of insulin, in particular, has been the subject of mounting litigation across the country. Over the past year, a growing number of state and local governments across the U.S. filed lawsuits against the insulin makers and the large PBMs over claims the companies conspired to illegally drive up prices.
Such claims have been leveled before. In recent years, various lawsuits, some of which were filed by consumers, alleged the insulin makers and PBMs conspired in a complicated scheme that involved lockstep pricing, favorable insurance coverage, and secret rebate fees. The PBMs allegedly received “secret” rebates from the manufacturers for advantageous formulary placements and, in some cases, by favoring their own mail-order pharmacy units.
The focus on PBMs comes as the agency also takes a tougher stance toward the pharmaceutical industry over patents that are improperly or inaccurately filed with a registry maintained by the Food and Drug Administration. The FTC has warned several companies over their patent filings and last week opened an investigation into Teva Pharmaceuticals over concerns that the patent system is being abused in ways that unfairly extend monopolies held by brand-name drug companies that allow them to maintain higher prices for longer periods of time.
These moves reflect efforts by the Biden administration to address the high cost of prescription medicines, which has been a pocketbook issue for a growing number of Americans for many years. Toward that end, the administration pushed to cap the cost of insulin at $35 for Medicare beneficiaries, although the insulin makers had also pursued various programs to lower the cost of the lifesaving diabetes treatment.
Read More at STAT.
