Drug broker Cigna sues FTC for defamation

Diving certificate:

• A subsidiary of healthcare giant Cigna is suing the Federal Trade Commission over defamatory statements in a report about the way pharmacy benefit managers drive up prices and limit drug availability. The company is asking a federal judge to quash and overrule the report.
• “The commission’s report followed bias and politics, not evidence or sound economics, and incorrectly concluded that PBMs drive up drug costs and harm independent pharmacies,” said lawyers for Express Scripts, a PBM owned by Cigna, in the complaint filed on September 17 in federal court in Missouri. “Express Scripts' business and reputation have been harmed by the Commission's unlawful, unconstitutional, arbitrary and capricious conduct and defamatory statements.”
• The FTC published “Pharmacy Benefit Managers: The Powerful Middlemen Who Inflate Drug Costs and Squeeze Main Street Pharmacies” as an interim report in July.

Diving insight:

Express Scripts is one of half a dozen large PBMs that the FTC says play an intermediary role in 80% of the prescription drugs dispensed in the U.S. today. When smaller PBMs are included, the industry controls 90% of the market, the agency's report said.

The companies work with drug manufacturers on the one hand and health insurance carriers on the other to negotiate how much insured people pay for prescription drugs and which drugs are considered standard under their insurance programs.

Express Scripts accuses the FTC of conducting sloppy research to conclude that PBMs are falsifying drug costs and availability by favoring manufacturers and pharmacies that are part of the same integrated vertical corporate conglomerate as themselves. Rather than building the report based on the full amount of data the PBMs provided, the company claims, the agency relied heavily on publicly available information and public comments, including anonymous comments, in a way that does not meet the high standard of accuracy expected of an agency like the FTC, the company says.

“Over 75 percent of the citations in the report refer to public sources, including selected third-party publications and anonymous public comments. They do not refer to the extensive data and information produced in response to the Commission's extensive and burdensome requests for information in support of this alleged study,” the complaint states.

The company said it had been named as a defendant in several lawsuits as a result of the report and expected further lawsuits.

The company says FTC Chair Lina Khan was biased against PBMs as a law student and brought that bias to the agency when she began the investigation in 2022.

“Chairman Khan came to office having already decided, as a law student, that PBMs are the villains,” the company says. “Chairman Khan is irrevocably closed to opposing views on PBMs and the overwhelming evidence supporting those opposing views.”

A previous FTC study of PBMs in 2005 concluded that the brokers were actually good for consumers. Other documents and letters the agency wrote in previous years largely reached the same conclusion, but they and the report were not included in the latest investigation, the company claims.

“The decision to deny these letters and reports was made solely by Chairman Khan and the other two Democratic commissioners,” the company said.

In a different In releasing the report, FTC Commissioner Melissa Holyoak said she hopes this new report will pick up where the 2005 report left off and examine how the market has changed since then to see if the earlier conclusion still holds. But the new report does not take the earlier findings into account.

“The report does not contain any empirical evidence that refutes the findings of the 2005 report,” said Holyoak, who was Utah's attorney general before being appointed to the FTC earlier this year. In her previous role, she says, she supported efforts to hold PBMs accountable when appropriate, but she cannot support the way the FTC conducted its investigation in this case.

“Instead of generating public engagement and fruitful political debate, the report will only exacerbate ideological divisions and further undermine the legitimacy of the Commission,” she says.

In addition to asking the court to overturn and set aside the report, Express Scripts also wants the court to find that the agency defamed the company when it stated without evidence that the company, as a PBM, inflated drug costs.

The company also accuses the agency of violating its due process rights by preempting its role in the market and of violating the federal Administrative Procedures Act by ignoring its previous findings on the positive role of PBMs and issuing a report that is not in the public interest because of its deficiencies. It also challenges the agency on the broader constitutional grounds used by the U.S. Supreme Court in a landmark case this year. SEC v. JarkesyThis calls into question the extent of the authorities’ executive powers.

“Because the members of the FTC exercise executive powers but are not freely removable by the President, the isolation of the members under Section 41 of the FTC Act violates Article II, Sections 1 and 3 of the United States Constitution,” the complaint states.

The FTC did not immediately respond to a request for comment, but said in a comment to Bloomberg News that it refutes the company's claims.

“This is a complicated and opaque market, and the FTC is committed to using its clear authority to help the public and policymakers understand it,” said FTC spokesman Douglas Farrar. said Bloomberg in an email.