FTC sues prescription-drug middlemen over insulin prices, says drugmakers are also 'on notice'

By Eleanor Laise

PBMs owned by CVS, Cigna and UnitedHealth 'artificially inflated' prices for lifesaving medications, regulator alleges

The Federal Trade Commission on Friday sued prescription-drug middlemen owned by CVS Health Corp., Cigna Group and UnitedHealth Group Inc., alleging that they artificially pumped up prices of insulin drugs and hindered patients' access to lower-priced products.

The three major pharamcy-benefit managers - CVS Health's (CVS) CVS Caremark, Cigna's (CI) Express Scripts and UnitedHealth's (UNH) Optum Rx - prioritized high rebates from drugmakers, leading to "artificially inflated insulin list prices," the FTC said in a release. Even when lower-priced insulins became available, the PBMs excluded them in favor of products with higher list prices and higher rebates, 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 competition bureau, said in a statement. The three major PBMs, he said, "have extracted millions of dollars off the backs of patients who need lifesaving medications."

The FTC's lawsuit comes just days after Express Scripts sued the agency, alleging that the agency's July report on the PBM industry was biased and defamatory and asking the court to order the report's retraction. It extends a long-running standoff between the FTC and PBMs, which are intermediaries who manage prescription-drug benefits on behalf of insurers, employers and other payers. The FTC launched an inquiry into the industry in 2022, saying it would scrutinize the companies' vertical integration and how it affects medication access and affordability.

The three major PBMs together administer about 80% of all prescriptions in the U.S., according to the FTC.

CVS Caremark said in a statement that it has "led the way in driving down the cost of insulin for all patients: insured, uninsured and underinsured," adding that its members pay an average of less than $25, well below list prices. When brand-name drugmakers raised list prices, the company said, it negotiated deep discounts on behalf of clients.

"Any action that limits the use of these PBM negotiating tools would reward the pharmaceutical industry and return the market to a broken state," the company said.

Cigna Chief Legal Officer Andrea Nelson said in a statement that the FTC's lawsuit is part of a pattern of "unsubstantiated and ideologically driven attacks" on PBMs. In the "unlikely event" that the FTC succeeds in its suit and forces PBMs to include drugs among covered medications even if they have higher net costs for plan sponsors, Nelson said, "the FTC will drive drug prices higher in this country," hurting consumers, employers and the federal government.

Optum Rx did not immediately respond to a request for comment.

The FTC also pointed a finger at drugmakers on Friday. Insulin makers Eli Lilly & Co. (LLY), Sanofi (SNY)and Novo Nordisk (NVO) "have sharply inflated the list price of their insulin products in response to PBMs' demand for higher rebates," the FTC's Rao said in a statement - noting that the list price of Lilly's insulin Humalog jumped more than 1,200% between 1999 and 2017.

"Although not named in this case, all drug manufacturers should be on notice that their participation in the type of conduct challenged here can raise serious concerns," Rao said.

The FTC's lawsuit "concerns aspects of the U.S. healthcare system that we have long been advocating to reform," a Lilly spokesperson said in a statement. The average monthly out-of-pocket cost for Lilly's insulin is about $17, the spokesperson noted, adding that the company has not raised list prices for any of its insulin since 2017, and only cut them in that time.

A Sanofi spokesperson said in a statement that the company had not seen and will not comment on the specific allegations in the FTC's complaint, but added that the company agrees with the FTC's point that "PBMs have leveraged their position as powerful industry middlemen and have exploited rebates, longstanding features of our healthcare system, to benefit themselves while increasing costs for patients and payers at the same time." Sanofi's pricing practices have always complied with the law, the spokesperson said.

A Novo Nordisk spokesperson said the drugmaker is committed to ensuring patients have affordable access to insulin but that it does not control the prices patients pay at the pharmacy. The company offers a range of affordability programs, including a one-time free short-term supply of insulin to eligible patients at risk of rationing, the spokesperson said.

Shares of UnitedHealth were little changed on Friday, while Cigna's stock fell 0.2% and CVS Health shares dropped 1.6%.

-Eleanor Laise

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09-20-24 1524ET

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