FTC sues drug brokers for manipulating insulin market – Orange County Register

By John Tozzi and Leah Nylen | Bloomberg

The U.S. Federal Trade Commission filed a lawsuit on Friday against units of CVS Health Corp., Cigna Group and UnitedHealth Group Inc., accusing the drug distributors of participating in illegal discount programs that drove up the price of insulin.

The agency said it had filed a lawsuit in administrative law alleging that CVS' Caremark, Cigna's Express Scripts and UnitedHealth's Optum Rx accepted money from drug companies to remove cheaper insulin from their approved lists. It also named the companies' affiliated purchasing groups that were formed in recent years to negotiate rebate payments with drug companies.

The enforcement action is part of an escalating conflict between the FTC and the three pharmacy benefit managers, which together control about 80 percent of all prescriptions issued in the United States. Since the companies merged with larger health care groups that also own insurance companies, pharmacies and doctor's offices, they have come under increasing pressure in Washington.

Drug gatekeepers favored versions of insulin with higher upfront prices and higher rebates from drug companies, passing more costs on to patients, the FTC alleged. PBMs collected billions in rebates and fees while the list price of a common insulin, Humalog, rose 1,200% between 1999 and 2017, the agency said.

The agency did not immediately make its records available but described them in materials it provided to reporters. The administrative complaint initiates a process in which the allegations will be heard in a formal hearing before an administrative law judge, the agency said.

Shares of the parent companies of the major PBMs fell on the news. CVS was down 1.8% by 12:58 p.m. Cigna and UnitedHealth were each down less than 1%.

An FTC official said the case suggests that the PBMs' discounting practices amount to unfair competition. The official, who was not authorized to comment publicly on the matter, said the agency hopes the enforcement action will lead to lower list prices not only for insulin but also for other drugs.

Pharmacy benefit managers defended their programs by saying they protect Americans from rising drug costs. If the lawsuit is successful, prices could rise even further, Andrea Nelson, Cigna's chief legal officer, said in an emailed statement.

The lawsuit “continues a disturbing pattern by the FTC of baseless and ideologically motivated attacks on pharmacy benefit managers,” Nelson said. The company intends to “protect our ability to lower drug costs for customers and members,” she said.

CVS said its members already pay less than $25 on average for insulin. The company blamed drug companies for the rising prices and said it had negotiated discounts to reduce costs for members.

“Any action that restricts the use of these PBM negotiating tools would reward the pharmaceutical industry and return the market to a broken state,” spokesman David Whitrap said in an email.

The lawsuit “reveals a profound misunderstanding of how drug pricing works,” Elizabeth Hoff, a spokeswoman for Optum Rx, a UnitedHealth company, said in an email. Thanks to negotiations with the drug companies, insulin costs for its members are on average less than $18 a month, she said.

Lawmakers from both parties have sharply questioned the PBMs' practices and called for new laws to increase transparency. These measures could come up for a vote in the outgoing administration's session after the U.S. presidential election. The FTC, under Chair Lina Khan, has been investigating the industry for years and in a July report accused large PBMs of driving up prescription drug costs and favoring their own pharmacies.

PBMs claim the July FTC report cherry-picked individual examples rather than considering all of the data.

Cigna called the report “defamatory” in a lawsuit against the FTC this week and took out a full-page ad in the Wall Street Journal as part of a campaign to refute the report. The pharmacy support groups claim that almost all drug company rebates are passed on to customers, who can use them to cover other health care costs.

Three of the five FTC commissioners voted to file the administrative complaint, while two abstained from the hearing.

Caremark, Express Scripts and Optum Rx are the three largest PBMs. The companies negotiate with drug manufacturers and manage prescription plans for employers and health insurers, influencing what drugs are available to millions of Americans and at what price.

Amid mounting criticism in Washington, drug brokers have launched a campaign to fight back. They hired an outside firm to compile the companies' data and produce a report that refutes arguments that the industry drives up costs. Drug brokers say they are a necessary counterweight to the drug companies' unchecked power to set prices.

The insulin market is dominated by three manufacturers: Eli Lilly & Co., Sanofi SA and Novo Nordisk A/S. Although the FTC did not take action against these companies today, the agency said they should be “warned” and could face enforcement action in the future.

Since Lilly developed the first commercial insulin a century ago, it has become one of the world's most sought-after drugs, helping diabetics control their blood sugar when their bodies either don't produce enough of the hormone or have developed resistance to it. Medicare spending on insulin in the U.S. topped $13 billion in 2017, more than eight times what it was a decade earlier.

Last year, Lilly and Sanofi committed to capping the cost of certain insulin products at $35 per month, following U.S. President Joe Biden's call for a nationwide cap. Novo also lowered list prices for its most widely used insulin. For patients on Medicare prescription plans, insulin copayments are now capped at $35 per month under the Inflation Reduction Act.

A Lilly spokesman said the company has been cutting insulin prices since 2017, and the FTC complaint focuses on aspects of health care where the drugmaker has long sought reform.