The Federal Trade Commission said that it is suing the three major US pharmacy benefit managers over their role in the insulin market, claiming that the companies’ practice of using large rebates has inflated costs for patients and distorted the market.
The FTC didn’t provide a copy of the lawsuit, which it said would be made public Monday. In a statement describing the action, it said it was suing the PBMs associated with CVS Health, Cigna and UnitedHealth Group, as well as other affiliated companies known as group purchasing organizations. Together, the three PBMs control about 80% of the US market, according to the FTC.
The heart of the lawsuit appears to be PBMs’ use of rebates to obtain steep discounts on the list prices for insulin. Those discounts are partially returned to PBMs’ clients, but also help make up PBM fees, according to the FTC, creating incentives to favor products with high list prices and huge rebates, rather than ones with a lower list price.
“These strategies have allowed the PBMs and GPOs to line their pockets while certain patients are forced to pay higher out-of-pocket costs for insulin medication,” the FTC said in its announcement. According to the FTC, the patients harmed include those who pay in cash or have insurance plans with high cost-sharing, who end up having to pay large amounts for insulins sold at list price, and who don’t benefit from rebates the PBMs get.
The antitrust regulator didn’t take action against insulin drugmakers, including Eli Lilly, Sanofi and Novo Nordisk. But it said that it was “deeply troubled by the role drug manufacturers” play in the rebate market, and that “all drug manufacturers should be on notice that their participation in the type of conduct challenged here raises serious concerns” — even for other drug classes. It said it might recommend a suit against drug manufacturers in a future action.
Rahul Rao, deputy director of the FTC’s Bureau of Competition, said the action “seeks to put an end to the Big Three PBMs’ exploitative conduct and marks an important step in fixing a broken system.”
Rao earlier this year spoke at the Financial Times-Endpoints News US healthcare summit in New York, in which he described the current drug market as broken and not working for consumers.
In an emailed statement, CVS said the FTC’s allegations were incorrect, and that it has worked to bring down the cost of insulin, including with a program offering low-price, cash-pay product. Cigna called the lawsuit part of a “troubling pattern from the FTC of unsubstantiated and ideologically-driven attacks on” PBMs, and said it would defend itself. A spokesperson for UnitedHealth Group’s PBM said the announcement represented a “profound misunderstanding of how drug pricing works.”
Step-by-step action
In July, the FTC issued an interim report detailing findings from its two-year investigation of the PBM industry. In the report, the regulator said that pharmacy benefit managers “exercise vast control over huge swaths of the healthcare sector,” and described how they use that market power to push around competing pharmacies and extract favorable financial outcomes.
But missing from the interim report were two major elements: It didn’t call for any action, such as a breakup of the companies or limits on their practices. And it gave only limited space to PBMs’ relationships with drugmakers, which has been a major focus of other critics of the industry because of their complex, opaque nature.
Since then, PBMs have pushed back aggressively on the FTC’s effort. Cigna, which owns the PBM Express Scripts, this month sued the FTC and called for the interim report to be withdrawn.
Even inside the FTC, there has been disagreement over the report. When it was issued in July, one of the regulator’s five commissioners, Melissa Holyoak, wrote a dissent calling it irregular, full of “hyperbolic language,” and said it hadn’t conducted a thorough economic review of market conditions.
Holyoak was one of two Republican commissioners who recused themselves from voting to support the lawsuit, while the three Democrats backed it.
FTC Chair Lina Khan’s current term is only days away from ending on Sept. 26, and there is also a presidential election that could change antitrust priorities with a new administration. The PBMs have resisted providing some information the FTC has sought, including details of their commercial arrangements with drugmakers, many details of which are held within group purchasing organizations that they have set up in recent years.
Editor’s note: This story has been updated to add comment from the PBMs.