Lina Khan, Chair of the Federal Trade Commission (FTC), testifies before the House Appropriations Committee in the Rayburn House Office Building in Washington, DC on May 15, 2024.
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The Federal Trade Commission (FTC) filed a lawsuit on Friday against three major U.S. healthcare companies that negotiate insulin prices. The plaintiffs argue that the middlemen used practices that increased their profits while “artificially” inflating costs for patients.
The lawsuit is directed against the three largest so-called Pharmacy Benefit Managers, The United Health Group Optum Rx, CVS Health Caremark and Cigna's Express Scripts. All are owned by or affiliated with health insurers and together fill about 80% of the nation's prescriptions, according to the FTC.
The FTC's lawsuit also affects each PBM's affiliated purchasing organization, which arranges drug purchases for hospitals and other health care providers. The agency said it may recommend suing drugmakers. Eli Lilly, Sanofi And Novo Nordisk continue to discuss their role in increasing the list prices of their insulin products.
A UnitedHealth spokesman said the lawsuit shows “a profound misunderstanding of how drug pricing works,” and noted that Optum RX has negotiated “aggressively and successfully” with drug makers.
A CVS spokesman said Caremark was “proud of the work” it had done to make insulin more affordable for Americans, adding, “To suggest otherwise, as the FTC did today, is simply wrong.”
And an Express Scripts spokesperson said the lawsuit “continues a disturbing pattern of baseless and ideologically motivated attacks by the FTC on PBMs.” It came three days after Express Scripts sued the FTC, demanding the agency retract its allegedly “defamatory” July report that claimed the PBM industry was raising drug prices.
PBMs are the center of the drug supply chain in the United States. They negotiate rebates with drug manufacturers on behalf of insurers, large employers, and government health plans. They also create drug lists, or drug schedules, covered by insurance and reimburse pharmacies for prescriptions. The FTC has been investigating PBMs since 2022.
The agency's lawsuit argues that the three PBMs have created a “perverse” drug rebate system that favors deep rebates from drug manufacturers, resulting in “artificially inflated insulin list prices.” It also alleges that PBMs favor these high-priced insulins even when cheaper insulins with lower list prices become available.
The FTC files its complaint in what is known as an administrative proceeding, which initiates proceedings before an administrative law judge who hears the case.
“Millions of Americans with diabetes need insulin to survive, yet for many of these vulnerable patients, the cost of insulin medications has skyrocketed over the past decade, in part because of powerful PBMs and their greed,” Rahul Rao, deputy director of the FTC's Bureau of Competition, said in a statement.
“The FTC's administrative action is designed to put an end to the exploitative behavior of the three major PBMs and represents an important step in fixing a broken system – a repair that could have implications beyond the insulin market and restore healthy competition to lower drug prices for consumers,” Rao continued.
According to the FTC, approximately 8 million Americans with diabetes rely on insulin to survive, and many are forced to ration treatment due to high prices.
President Joe Biden's inflation-fighting bill capped insulin prices at $35 per month for Medicare beneficiaries. This rule does not currently apply to patients with private health insurance.
The Biden administration and Congress have increased pressure on PBMs to make their operations more transparent as many Americans struggle to afford prescription drugs. On average, Americans pay two to three times more for prescription drugs than patients in other developed countries, according to a White House fact sheet.
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The FTC continued to express “deep concern” about the role of insulin manufacturers in raising list prices, arguing that they are driving up prices in response to PBMs' demands for higher rebates. Eli Lilly, Sanofi and Novo Nordisk control about 90 percent of the U.S. insulin market.
For example, according to the FTC, the list price of Eli Lilly's Humalog insulin was $274 in 2017, an increase of more than 1,200 percent from the list price of $21 in 1999.
The FTC said all pharmaceutical companies should be aware that their involvement in the type of conduct alleged here raises serious concerns.
An Eli Lilly spokesman said the FTC's complaint “affects aspects of the U.S. health care system that we have long advocated for reform.” He added that last year the company was the first to cap out-of-pocket costs for all of its insulins for privately insured people at $35 a month. Eli Lilly has also reduced the list prices of some insulins by as much as 70 percent.
Sanofi announced a similar price cap of $35 per month on its most commonly prescribed insulin last year. Novo Nordisk also announced last year that it would cut list prices of some of its most popular insulins by as much as 75 percent.
A Sanofi spokesperson said the company has not seen the FTC's complaint against the PBMs and will not comment on it. However, the French pharmaceutical giant agrees with the FTC's claim that the PBMs “have exploited their position as powerful industry middlemen and exploited rebates … to enrich themselves while increasing costs for patients and payers.”
A Novo Nordisk spokesperson said the company is “committed to providing patients with affordable access to their medicines, including insulin.” Novo Nordisk has no control over the prices patients pay at the pharmacy in the “complex U.S. healthcare system,” the spokesperson noted, referring to the company's insulin savings card programs.
Correction: This story has been updated to correct a quote from the FTC.
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