The Federal Trade Commission (FTC) has launched a major lawsuit against three of the largest pharmacy benefit managers (PBMs) over allegations of unfair practices related to insulin pricing. The targeted companies—CVS Health's Caremark, Cigna's Express Scripts, and UnitedHealth's Optum Rx—are accused of artificially inflaming the cost of insulin, significantly impacting millions of Americans who depend on this life-saving medication.
According to the FTC, these companies, which collectively handle around 80% of U.S. prescriptions, have established what is described as a "perverse" rebate system. This system prioritizes high-priced insulin products by pushing pharmacists and patients toward these options, even when lower-cost alternatives exist. The FTC claims this practice not only bumps up profits for the PBMs but also directly disadvantages patients who are forced to pay more for their prescriptions.
“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 to powerful prescription drug benefit managers and their greed,” stated Rahul Rao, Deputy Director of the FTC’s Bureau of Competition.
The lawsuit is rooted not just in anecdotal evidence but also follows extensive investigations where the FTC identified multiple tactics employed by PBMs to inflate drug charges. Among these is the exclusion of affordable insulin options from formulary lists, which direct patients toward pricier alternatives. The ramifications of such practices are stark: up to 30% of Americans have reported rationing their medications due to the soaring costs, according to the FTC.
The backdrop to this legal action is an atmosphere of growing scrutiny and criticism surrounding pharmacy benefit managers. These firms have long been viewed as "dominant gatekeepers" within the healthcare system, with the power to unjustly manipulate prices and access to medications, often at the expense of consumer welfare. Lina Khan, FTC Chair, has emphasized the urgent need for reform within this sector, which has faced numerous legal challenges for similar pricing strategies.
Earlier this year, the FTC produced findings indicating how PBMs drove up costs for various medications, including insulin, following which they began legal proceedings against the three aforementioned companies. The complaint targets their conduct directly, aiming to halt what the FTC describes as exploitative practices within the industry.
Business responses have been swift. A spokesperson for Caremark pushed back against the FTC's allegations, asserting, "CVS Caremark is proud of the work we have done to make insulin more affordable for all Americans with diabetes. To suggest anything else is simply wrong." The spokesperson claims their members pay less than $25 on average for insulin, even lower than the recently instituted price cap of $35 set by the Biden administration.
Express Scripts, meanwhile, has gone on the offensive, filing its own lawsuit against the FTC, seeking retraction of the agency's previous reports which they claim were "unfair, biased, erroneous, and defamatory". The suit argues the FTC ignored valid data provided by the company and leaned on unverified statements from competitors.
This legal dispute reflects broader systemic issues affecting insulin pricing, which has seen meteoric increases in recent years. For reference, the price of Humalog, one commonly prescribed insulin, soared from $21 in 1999 to over $270 by 2017. By 2019, nearly 25% of insulin users found themselves unable to afford their medication.
The FTC's investigation has opened up avenues to also target pharmaceutical giants like Eli Lilly, Novo Nordisk, and Sanofi, all implicated for their roles in contributing to insulin cost spikes. The agency has indicated these companies should brace for possible future actions as they investigate how the manufacturing side of the supply chain impacts drug prices.
With approximately 15% of American adults living with diabetes, the stakes are undeniably high. The FTC's actions could mark significant changes within the pricing structure for not only insulin but potentially other life-saving medications as well. Advocacy groups have long been calling for reforms to address the various barriers patients face when accessing necessary treatments, and this lawsuit may become a pivotal moment for reforming the practices of PBMs and drug manufacturers alike.
Given the complexity of drug pricing and the multitude of players involved, the outcome of this case could resonate through the healthcare industry for years to come. Whether it will lead to meaningful change for patients remains to be seen, but it has certainly intensified the focus on the role of pharmacy benefit managers.
