CVS says FTC should take Lina Khan, two commissioners off PBM case

CVS Health is demanding Federal Trade Commission Chairwoman Lina Khan and two other commissioners recuse themselves from a lawsuit accusing the corporate and other drug middlemen of boosting their profits while inflating insulin costs for Americans. 

In a 23-page motion filed Tuesday night with the FTC, CVS argued that each one three commissioners have “a lengthy track record of creating public statements that indicate serious bias” against the corporate and other drug middlemen. 

The corporate accused Khan, in addition to commissioners Alvaro Bedoya and Rebecca Kelly Slaughter, of incorrectly asserting that so-called pharmacy profit managers are “price gougers” that hold significant control over the pricing and access to drugs like insulin. CVS said those statements show that the commissioners have “prejudged this matter,” so their participation within the case “violates due process.” 

“If the alternative of ‘complete fairness’ is ‘blatant bias,’ the Three Commissioners would easily satisfy even that standard,” CVS wrote.

The FTC on Wednesday didn’t immediately reply to CNBC’s request for comment on the motion. 

Other corporate giants, including Amazon and Meta, have unsuccessfully pushed for Khan to be disqualified from previous cases or investigations, citing concerns about her objectivity. Khan has resisted those calls, saying she has never prejudged any case or set of facts. 

The FTC filed the suit last month against the three largest PBMs, CVS Health’s Caremark, UnitedHealth Group‘s Optum Rx and Cigna‘s Express Scripts. All are owned by or connected to health insurers and collectively administer about 80% of the nation’s prescriptions, in response to the FTC. 

PBMs sit at the middle of the drug supply chain within the U.S., negotiating medication rebates with manufacturers on behalf of insurers, creating lists of preferred medications covered by health plans and reimbursing pharmacies for prescriptions. The FTC has been investigating PBMs and their role in insulin prices since 2022.

The agency’s lawsuit argues that the three PBMs have created a “perverse” system that prioritizes high rebates from manufacturers, which results in “artificially inflated insulin list prices.” The suit also alleges that PBMs favor high-list-price insulins even when insulins with lower list prices turn into available. 

The lawsuit also includes each PBM’s affiliated group purchasing organization, or GPO, which brokers drug purchases for hospitals and other health-care providers. Zinc Health Services operates because the GPO for Caremark. 

The lawsuit is just certainly one of several headwinds CVS is facing. Shares of the corporate are down greater than 20% this yr because it grapples with runaway medical costs in its insurance segment and pharmacy reimbursement pressure. 

CVS has engaged advisors in a strategic review of its business, which could potentially involve splitting the corporate’s insurer from its retail pharmacies. It’s unclear where Caremark would fall within the case of a breakup. 

Within the motion Tuesday, CVS alleged that Khan has vilified PBMs during her entire skilled profession. For instance, the corporate cited a 2022 statement during which Khan said PBMs “practically determine which medicines are prescribed, which pharmacies patients can use, and the quantity patients can pay on the pharmacy counter.”

CVS similarly pointed to Slaughter’s previous comments in regards to the allegedly “disturbing,” “unacceptable” and “rotten” rebating practices of PBMs and the way she believes they create “competitive distortions in pharmaceutical markets.” Meanwhile, the corporate cited Bedoya’s suggestions that “a major a part of the blame” for insulin price increases rests on rebates demanded by PBMs. 

CVS called the prior statements of the three commissioners “incorrect assertions” about Caremark and other PBMs. 

The healthcare giant also alleged that through the FTC probe, the three commissioners attended closed events to assist fundraise for anti-PBM lobbying groups. Organizers of those events vilified PBMs as “bloodsuckers” and “vampires,” CVS argued within the motion.

The Biden administration and lawmakers on either side of the aisle have escalated pressure on PBMs, in search of to extend transparency into their business practices as many patients struggle to afford prescribed drugs. Americans pay two to 3 times greater than patients in other developed nations for prescribed drugs on average, in response to a fact sheet from the White House.