Federal Trade Commission accuses three drug brokers of driving up insulin prices

The Federal Trade Commission announced Friday that it is filing lawsuits against three drug distributors, accusing them of driving up insulin prices.

The FTC accused the “big three” pharmacy benefit managers (PBMs) – UnitedHealth Group's Optum Rx, CVS Health's Caremark and Cigna's Express Scripts – of engaging in “anticompetitive and unfair discounting practices that artificially inflated the list price of insulin medications, made it harder for patients to access lower list price products and passed the cost of high insulin list prices on to vulnerable patients.” According to the FTC, approximately 8 million Americans in the United States rely on insulin.

PBMs work with insurance companies to negotiate discounts with pharmaceutical companies in exchange for including the drugs in their coverage. In theory, they should save patients money.

Also included in the lawsuit are the PBMs' purchasing groups, which include Zinc Health Services, Ascent Health Services and Emisar Pharma Services.

The Big Three oversee about 80 percent of all drug plans in the United States, the lawsuit says, alleging that they created a rebate system that favored deep discounts from drug manufacturers, leading to inflated insulin prices.

“This perverse system results in billions of dollars in rebates and fees for the PBMs and their clients, the health insurers – but at the expense of certain vulnerable diabetes patients who must pay significantly more out of pocket for their vital medications,” the FTC said in a press release.

CVS Caremark said in a statement that the FTC's allegations were “simply false” and blamed drug manufacturers for the drug price increases.

“CVS Caremark has reduced the cost of insulin for all patients: insured, uninsured and underinsured,” the company said. “Our members pay an average of less than $25, well below list prices and well below the Biden administration's $35 cap. In addition, we offer every American, insured or uninsured, access to insulin for $25 through our ReducedRx program at any of our 67,000 network pharmacies and more than 9,000 CVS pharmacies.”

Andrea Nelson, Cigna's general counsel, said the FTC's lawsuit continues its “troubling pattern” of “baseless and ideologically motivated attacks on pharmacy benefit managers,” including a commission report released in July accusing PBMs of driving up drug prices. Cigna filed suit against the FTC on Tuesday, asking it to retract the report.

“Once again, the FTC – a government agency funded by taxpayer dollars – is proving that it does not understand drug pricing and is instead ignoring the facts and scoring political points rather than focusing on its duty to protect consumers,” Nelson said in a statement. “The fact is that in the unlikely event that the FTC succeeds in its lawsuit and forces PBMs to add drugs to the drug schedule, even if they impose higher net costs to plan sponsors – and regardless of whether they are clinically necessary – it will drive up drug prices in this country. This will harm consumers and those who provide them with prescription drug benefits – including employers, unions and the federal government itself.”

UnitedHealth Group did not immediately respond to requests for comment.

The FTC explained that insulin drugs used to be cheaper. It cited the example of Humalog, a drug made by Eli Lilly, which cost about $21 in 1999. Because of the PBMs' rebate system strategy, the drug cost $274 in 2017, the FTC said.

“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,” said Rahul Rao, deputy director of the FTC's Bureau of Competition.

According to the FTC, it is not only the PBMs that are responsible for the exploding prices, but also drug manufacturers such as Eli Lilly and Novo Nordisk. The commission is calling for them to be “warned” because they may be sued in the future.

In a statement released Friday, the National Community Pharmacists Association supported the FTC's lawsuit against the PBMs.

“One of the many ways PBMs rig the system against patients, taxpayers and small pharmacies is by gaming the rebates,” said B. Douglas Hoey, the association's chief executive officer. “The PBMs determine which drugs are covered by health insurance plans. They get higher rebates for the most expensive drugs. Of course, the most expensive drugs end up on the drug lists, even if there are cheaper alternatives. Patients end up paying more. Employers end up paying more. Taxpayers end up paying more. And more small pharmacies are forced out of business. The rebates create a strong incentive for higher drug prices, which is completely wrong.”

In July, Democratic and Republican lawmakers blamed executives from Caremark, Express Scripts and Optum Rx for the exorbitant prices of prescription drugs in the United States during a hearing before an oversight committee.

“On one side we have PBMs claiming to drive down prescription drug prices, and on the other side we have the Federal Trade Commission, we have major media outlets like the New York Times, and we have at least eight different attorneys general, Democrats and Republicans, all saying PBMs are driving up drug prices,” said Rep. Raja Krishnamoorthi, Democrat of Illinois.

The committee launched an investigation into the role of PBMs in driving up health care costs in March 2023. The lawsuit also comes after states – most recently Vermont – have sued PBMs for allegedly driving up drug costs.