FTC sues drug middlemen for allegedly inflating insulin prices

The Federal Trade Commission on Friday sued three large U.S. health corporations that negotiate insulin prices, arguing the drug middlemen use practices that boost their profits while “artificially” inflating costs for patients. 

The suit targets the three biggest so-called pharmacy profit managers, UnitedHealth Group’s Optum Rx, CVS Health’s Caremark 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 line with the FTC. 

The FTC’s lawsuit also includes each PBM’s affiliated group purchasing organization, which brokers drug purchases for hospitals and other health-care providers. The agency said it could recommend suing drugmakers Eli Lilly, Sanofi and Novo Nordisk in the long run as well over their role in driving up list prices for his or her insulin products.

A UnitedHealth spokesperson said the suit “demonstrates a profound misunderstanding of how drug pricing works, noting that Optum RX has “aggressively and successfully” negotiated with drug manufacturers.

A CVS spokesperson said Caremark is “happy with the work” it has done to make insulin cheaper for Americans, adding that “to suggest anything, because the FTC did today, is just flawed.”

And, a spokesperson for Express Scripts said the suit “continues a troubling pattern from the FTC of unsubstantiated and ideologically-driven attacks” on PBMs. It comes three days after Express Scripts sued the FTC, demanding that the agency retract its allegedly “defamatory” July report that claimed that the PBM industry is mountain climbing drug prices.

PBMs sit at the middle of the drug supply chain within the U.S. They negotiate rebates with drug manufacturers on behalf of insurers, large employers and federal health plans. Additionally they create lists of medicines, or formularies, which can be covered by insurance and reimburse pharmacies for prescriptions. The FTC has been investigating PBMs since 2022. 

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

The FTC is filing its criticism through its so-called administrative process, which initiates a proceeding before an administrative judge who would hear the case.

“Tens of millions of Americans with diabetes need insulin to survive, yet for a lot of these vulnerable patients, their insulin drug costs have skyrocketed over the past decade thanks partly to powerful PBMs and their greed,” Rahul Rao, deputy director of the FTC’s Bureau of Competition, said in a press release. 

“The FTC’s administrative motion seeks to place an end to the Big Three PBMs’ exploitative conduct and marks a very important step in fixing a broken system—a fix that would ripple beyond the insulin market and restore healthy competition to drive down drug prices for consumers,” Rao continued. 

Roughly 8 million Americans with diabetes depend on insulin to survive, and lots of have been forced to ration the treatment as a consequence of high prices, in line with the FTC.

President Joe Biden’s signature Inflation Reduction Act has capped insulin prices for Medicare beneficiaries at $35 per thirty days. That policy currently doesn’t extend to patients with private insurance.

The Biden administration and Congress have ramped up pressure on PBMs, in search of to extend transparency into their operations as many Americans struggle to afford prescribed drugs. On average, Americans pay two to thrice greater than patients in other developed nations for prescribed drugs, in line with a fact sheet from the White House.

The FTC said it stays “deeply troubled” by the role insulin manufacturers play in higher list prices, arguing that they inflate prices in response to PBMs’ demands for higher rebates. Eli Lilly, Sanofi and Novo Nordisk control roughly 90% of the U.S. insulin market.

For instance, Eli Lilly’s Humalog insulin had an inventory price of $274 in 2017, a greater than 1,200% increase from its $21 list price in 1999, in line with the FTC.

The FTC said all drugmakers should “be on notice that their participation within the variety of conduct challenged here raises serious concerns.”

An Eli Lilly spokesperson said the FTC’s suit concerns “points of the U.S. health care system that we have now long been advocating to reform.” They added that the corporate last yr became the primary to cap out-of-pocket costs for all of its insulins at $35 per thirty days for individuals with private insurance. Eli Lilly also cut some insulin list prices by as much as 70%.

Sanofi last yr announced an analogous $35 monthly price cap for its mostly prescribed insulin. Novo Nordisk last yr also said it will slash the list prices of a few of its popular insulins by as much as 75%.

Sanofi and Novo Nordisk didn’t immediately reply to requests for comment.

Correction: This story has been updated to correct a quote from the FTC.