Federal Trade Commission sues largest drug middlemen for allegedly inflating insulin prices

By Tami Luhby, CNN

(CNN) — The Federal Trade Commission took action Friday against the three largest pharmacy benefit managers, accusing the companies of artificially inflating insulin list prices that resulted in patients paying more for the medications.

The agency alleges that CVS Health’s Caremark Rx, Cigna’s Express Scripts and UnitedHealth Group’s Optum Rx and their affiliated group purchasing organizations created a system that prioritizes high rebates from drug manufacturers, leading to artificially high insulin list prices. The companies, known as PBMs, excluded available insulin products with lower prices — that could have been more affordable for patients — in favor of higher-priced insulins that provided higher rebates.

PBMs make money through rebates and fees, which are negotiated with drug manufacturers and are tied to a drug’s list price. Insulin products with higher list prices result in higher rebates and fees for the PBMs, the complaint alleges.

“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, deputy director of the FTC’s Bureau of Competition, said in a statement. “Caremark, ESI, and Optum—as medication gatekeepers—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.”

The Cigna Group’s chief legal officer, Andrea Nelson, said the agency’s action “continues a troubling pattern from the FTC of unsubstantiated and ideologically-driven attacks on pharmacy benefit managers,” and that Express Scripts would defend itself.

“Once again, the FTC – a government agency funded by taxpayer dollars – is proving that the FTC does not understand drug pricing and instead is choosing to ignore the facts and score political points, rather than focus on its duty to protect consumers,” Nelson said in a statement, adding that if the agency succeeds, it will drive drug prices higher.

Optum Rx called the FTC’s suit “baseless,” saying “it demonstrates a profound misunderstanding of how drug pricing works.”

“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,” Elizabeth Hoff, a company spokeswoman, said in a statement.

CVS Caremark said it has made insulin more affordable and to suggest otherwise, as the FTC has done, is “simply wrong.”

“Any action that limits the use of these 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,” the company said in a statement.

The Pharmaceutical Care Management Association, the industry’s trade group, said PBMs are reducing insulin costs by leveraging greater competition.

“The FTC’s action ignores significant progress PBMs have made lowering costs in the insulin market and is yet another example that the agency is running a biased investigation with predetermined anti-industry outcomes — driven by the self-serving agendas of special interests and designed to misrepresent the role and value of pharmacy benefit managers,” the association said in a statement.

This is a breaking news story and will be updated.

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