The United States Federal Trade Commission (FTC) filed an administrative complaint against the nation’s three largest prescription drug benefit managers (PBMs) – Caremark Rx, Express Scripts (ESI), and OptumRx – and their affiliated group purchasing organizations (GPOs) for engaging in alleged anticompetitive and unfair rebating practices. The FTC alleges that these practices have artificially inflated the list price of insulin drugs, hindered patients’ access to lower list price products, and shifted the cost of high insulin list prices to vulnerable patients.
The complaint details allegations that the PBMs and GPOs abused their economic power by turning the pharmaceutical supply chain competition in their favor by creating a perverse drug rebate system that prioritized high rebates from drug manufacturers, which led to artificially inflated insulin list prices. The complaint went on to allege that even when lower list price insulins became available, the PBMs excluded them in favor of higher list price, higher rebated insulin products.
The complaint goes on to say that in 1999, the average list price of Eli Lilly’s insulin, Humalog, was $21. By 2017, however, that price had skyrocketed to more than $274 – a more than 1200% increase. The complaint alleges that while the PBMs were collecting their rebates and associated fees, roughly 25% of insulin patients were unable to afford their necessary medication. According to the complaint, the PBMs kept hundreds of millions of dollars in rebates and fees annually and use rebates to attract payer clients, such as employers, labor unions, and health insurers.
“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,” said Rahul Rao, Deputy Director of the FTC’s Bureau of Competition. “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.”
Of note, Rao also hinted that PBMs are not the only ones culpable in this scenario, raising names of large drug manufacturers, like Eli Lilly, Sanofi, and Novo Nordisk, and the role they play in increasing the list price of life-saving medications. The Bureau of Competition even went so far as to issue a blanket warning to all drug manufacturers to be aware that participation in conduct similar to the conduct raised in the administrative complaint may result in future lawsuits against drug manufacturers.
The PBMs strongly disagree with the FTC’s allegations. Cigna Chief Legal Officer Andrea Nelson said in a statement that the FTC’s lawsuit is a continuation of a “troubling pattern” of “unsubstantiated and ideologically driven attacks” on PBMs and noted that she believes it is an “unlikely event” that the lawsuit succeeds.