FTC lawsuit alleges pharmaceutical middlemen manipulate insulin market

The federal government is suing several large pharmacy benefit managers over a drug rebate system that regulators say has led to a rapid increase in insulin prices for diabetics.

Three companies that process about 80 percent of all prescriptions in the United States – Caremark, Express Scripts and OptumRx – have engaged in anti-competitive practices that have led to price increases, the Federal Trade Commission alleged in a lawsuit filed Friday.

Pharmacy benefit managers (PBMs) manage prescription drug coverage for insurers, large employers, and other clients. They create drug lists, or lists of covered drugs, and negotiate discounts for the drugs.

The FTC said the three companies' discounting practices resulted in artificially inflated list prices for consumers. List prices are the prices a drug manufacturer initially sets for a product and are what people who don't have insurance or have an insurance plan with high deductibles sometimes have to pay for their prescription drugs.

The price of insulin has become a major issue in this year's presidential election campaign.

For years, pharmacy benefit managers have been the target of ire from politicians, patients and others, but they have said they play an important role in controlling drug costs and pass on most of the discounts they negotiate to their customers.

Some of the PBMs named by the FTC said in statements that the government's actions show that it does not understand how drug pricing works.

However, the FTC said the current system favors insulins with high list prices and excludes cheaper products. This, the FTC said, has helped PBMs and their purchasing groups “line their pockets while forcing certain patients to pay higher out-of-pocket costs for insulin used by people with diabetes.”

Caremark announced Friday that the company is negotiating deep discounts for its customers and helping to make insulin affordable for its members.

According to Express Scripts, the FTC has chosen to “ignore the facts and score political points instead of focusing on its duty to protect consumers.”

Optum called the FTC's allegations baseless and said PBMs are “the most important counterweight to the otherwise unchecked monopoly power of pharmaceutical companies to set and raise drug prices.”

The FTC launched an investigation into the PBMs more than two years ago and announced it would seek a range of information about their business practices. The Wall Street Journal reported in July that the FTC planned to sue the three major PBMs over their drug price negotiation tactics.

That same month, the FTC released a report describing PBMs as powerful middlemen that “may profit by driving up drug prices and squeezing downtown pharmacies.” Express Scripts said earlier this week that it was retracting the report and suing the agency.