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The Federal Trade Commission has sued America’s largest prescription-drug “gatekeepers” over a “perverse drug rebate system” that it alleges artificially raised insulin prices.
The competition regulator’s complaint names CVS Health’s Caremark, Cigna’s Express Scripts and UnitedHealth Group’s Optum, which administer about 80 per cent of all prescriptions in the US and generate more than $400bn in combined annual revenues.
The FTC, led by chair Lina Khan, is seeking to ultimately lower insurance premiums as well as wholesale prices, which in the case of Humalog, an Eli Lilly insulin drug, ballooned more than 1,200 per cent between 1999 and 2017, to more than $274, according to the agency.
Rahul Rao, deputy director of the FTC’s competition bureau, said: “Caremark, ESI and Optum — as medication gatekeepers — have extracted millions of dollars off the backs of patients who need life-saving medications.”
Pharmacy benefit managers, or PBMs, act as middlemen within the pharmaceutical industry. They negotiate rebates from wholesale prices with drugmakers, before passing some of the discount on to consumers and pocketing the rest as profits.
Following sweeping consolidation in the aftermath of the Affordable Care Act, the biggest PBMs are now owned by large insurers. Drugmakers have blamed PBMs for inflating drug prices, while independent pharmacies have said they give preferential treatment to the pharmacy chains they own.
The FTC alleges the three PBMs routinely favoured higher-priced insulin that would result in higher rebates and fees for themselves.
Rao said the complaint, which has not yet been made public, “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”.
CVS said the FTC’s accusations were “simply wrong”. Andrea Nelson, Cigna’s chief legal officer, said the lawsuit “continues a troubling pattern from the FTC of unsubstantiated and ideologically-driven attacks on pharmacy benefit managers”.
UnitedHealth did not immediately respond to a request for comment.
The FTC said it was also troubled by the role played by drug manufacturers such as Eli Lilly, Novo Nordisk, and Sanofi in the price system for insulin. PBMs “are not the only potentially culpable actors”, the agency said.
Khan has long focused on what she has described as PBMs’ outsized power in the US healthcare system, arguing it has harmed market competition as well as consumers.
The move comes just days after Express Scripts sued the FTC over a study the agency published in July, which argued PBMs inflated drug prices at the expense of pharmacies and patients. The company is demanding retractions. The FTC said it stood by its report.