FTC Sues PBMs for Artificially Hiking Insulin Prices

The Federal Trade Commission announced today that it had issued an antirust and consumer protection complaint against the three largest pharmacy benefit managers and their affiliated group purchasing organizations that accuses of inflating the list price of insulin drugs and shifted costs to patients in pursuit of hundred of millions in rebates from drugmakers.

The FTC’s news release about the complaint alleges that CV Caremark, which is part of CVS Health; Express Scripts, which is part of Cigna; and Optum Rx, which is part of United Health Group; and their respective group purchasing organizations — Zinc Health Services, Ascent Health Services, and Emisar Pharma Services — have abused their dominance of the PBM industry to prioritize rebates collected from drug manufacturers and by doing so, are responsible for higher list prices for insulin.

When insulin products with lower list prices became available, the three PBMs systematically excluded them in favor of products with high list prices and large rebates, says the news release.

"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, the deputy director of the FTC's Bureau of Competition, was quoted as saying in the news release.

The administrative complaint is directed at the PBMs and their GPOs. But a statement accompanying the news release from Rao said FTC’s investigation had uncovered “the concerning and active role that the insulin manufacturers—Eli Lilly, Sanofi, and Novo Nordisk—play in the challenged conduct” and that they inflated their list prices to meet the PBMs’ demand for higher rebates.

The FTC news release has warning to "all drugmakers" that the Bureau of Competition may recommend suing drug manufacturers for their part in the high rebate-high list price dealings with PBMs in future enforcement actions.

As others have, the FTC's news release dates the rise of insulin prices to 2012 when, according to the release, the PBMs started using exclusionary formularies and formulary placement to extract high rebates from manufacturrs in exchange for formulary placement. The news release says the PBMs keep hundreds of millions of dollars in rebates each year and use them to attract clients, which include self-insured employers, labor unions and health insurers. Meanwhile, the news release said, list prices for insulin soared, citing the example of a Novo Nordisk product, Novolog U-100, that increased from $122.59 in 2012 to $289.36 in 2018.

The FTC posted the strongly worded news release on its website today but the complaint itself was not publicly available. FTC officials said a redacted version would be available soon, perhaps on Monday.

The FTC’s complaint is an administrative action, not a criminal one, and, as today’s news release explains, it will trigger a proceeding in which the allegations in the complaint will be presented in a hearing before an administrative law judge.

The FTC news release said three commissioners — chair Lina Khan, Rebecca Kelly Slaughter, Alvaro Bedoya — voted to file the complaint while Melissa Holyoak and Andrew N.Ferguson recused themselves.

Todays’ news release about the complaint did not come out of the blue. In the July 2024, the FTC issued a staff interim that was similarly critical of the PBM industry and, more specifically, the big three. Two years earlier, the commission publicly announced that it was launching an inquiry of the PBM industry, although that initial announcement mentioned the six largest PBMs, a group that includes Humana’s PBM, Prime Therapeutics and MedImpact.

Transparency-Rx, a trade group for smaller PBMs that have positioned themselves as being more transparent, applauded the FTC today for bringing federal antitrust action against the big 3.

Joseph M. Shields

Joseph M. Shields, managing director of the group, said "big PBMs’ anti-competitive practices, price gouging, the offshoring and manipulation of patient prescription rebates has placed employers, main street job-creators, patients, and communities at risk for too long."

He said the inclusion by the FTC of the PBMs’ group purchasing organizations (GPOs) is notable as increasingly PBMs and vertically integrated health carriers "have secured record profits at the expense of patients, through opaque GPO fees, and risky offshore arrangements, undercutting affordable medicines and true transparency."

Shields said that focus on insulin was foreshadowed by the staff interim report that showed that FTC had gathered the most robust data on insulin products. "That said, the price-gouging tactics outlined by the FTC are not unique to one specific drug and so, arguably this becomes the first complaint of many," Shields wrote in email.

Lawyers representing self-insured employers in federal lawsuit against the PBMs and drug manufacturers that alleges that they manipulated insulin prices praised the FTC for taking "decisive action against the unfair and deceptive practices of PBMs." Their lawsuit and the FTC complaint make many of the same arguments.

The three PBMs said in statements that they have worked to bring down the costs of insulin prices for consumers, with insulin out-of-pocket costs at or below the Biden Administration’s $35 cap for many insulin products. Officials from CVS Caremark, Express Scripts and Optum Rx point to pharmaceutical companies as the reason why costs are high.

CVS Health spokesperson David Whitrap said “three brand drugmakers control nearly the entire insulin market, and without competitive lower cost generic alternatives, they raised their list prices by as much as 500% in lockstep with one another prior to 2012.”

Andrea Nelson, chief legal officer, The Cigna Group, said in a statement, “This action continues a troubling pattern from the FTC of unsubstantiated and ideologically-driven attacks on pharmacy benefit managers, following the FTC’s biased and misleading July 2024 report, which Express Scripts demanded the Commission retract earlier this week. “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.”

A spokesperson for Optum Rx called the FTC lawsuit baseless and said it “demonstrates a profound misunderstanding of how drug pricing works.” The spokesperson said Optum Rx has offered multiple insulin products on its standard commercial formularies and in January of this year placed eight preferred insulin products on tier one, which will lower out-of-pocket costs for members in plans adopting those formularies.