Federal regulator sues big pharma middlemen over insulin pricing • Ohio Capital Journal

The state antitrust authority sued three giant healthcare companies on Friday, accusing their middlemen of driving up insulin prices since 2012.

The Federal Trade Commission alleges that the middlemen — known as pharmacy benefit managers, or PBMs — exploited their size to force patients to buy more expensive versions of the life-saving drug by not covering the cost of cheaper versions.

“The FTC alleges that the three PBMs created a perverse drug rebate system that favored deep discounts from drug manufacturers, resulting in artificially inflated list prices for insulin,” the agency said in a statement announcing the lawsuit. “The lawsuit alleges that even when insulins became available at lower list prices that would have been more affordable to vulnerable patients, the PBMs systematically excluded them in favor of insulin products with high list prices and deep discounts. These strategies have allowed the (healthcare giants) to line their pockets while forcing certain patients to pay higher out-of-pocket costs for insulin medications, the FTC's lawsuit alleges.”

Each of the three largest PBMs – CVS Caremark, OptumRx and Express Scripts – is owned by a company that also owns a major health insurer – Aetna, UnitedHealth and Cigna. They also own mail-order and retail pharmacies, as well as health care providers such as physician offices.

Each of these conglomerates is among the 16 largest companies in the country, and together their PBMs control access to drug care for about 80% of insured patients.

On behalf of insurers, PBMs create pharmacy networks, reconcile transactions, and determine how much they will reimburse their own and competing pharmacies for the drugs they dispense.

The FTC's lawsuit focuses on another function of PBMs: They decide which drugs are covered by insurance while negotiating rebates and other concessions with manufacturers. The system is often opaque, and critics – including the FTC – say the conglomerates pocket much of the money.

The PBMs, for their part, say they are using their size to force drug manufacturers to offer discounts that they then pass on to their customers.

“The FTC's action ignores the significant progress PBMs have made in reducing costs in the insulin market and is another example of the agency conducting a biased investigation with predetermined, anti-industry outcomes – driven by the self-serving agendas of special interests and designed to misrepresent the role and value of pharmacy benefit managers,” said the Pharmaceutical Care Management Association, an industry group. said in response to the lawsuit.

It continued: “Not only does this measure fail to take into account the role of the entire prescription drug supply chain, it also ignores the positive progress supported by PBMs to make insulin more affordable for patients. Contrary to the rhetoric, the current insulin market actually works: PBMs are taking advantage of increased competition to lower insulin prices and are doing their part to make insulin affordable for patients through innovative programs.”

The FTC's lawsuit had not been posted on its website as of Monday afternoon, but the statement announcing it said that by demanding ever-increasing rebates from insulin manufacturers, pharmacy benefit managers are dramatically increasing list prices and, in turn, the cost of deductibles and copayments for many diabetics.

Because of rebates and other benefits, PBMs do not pay list prices but are often used to determine co-payments at the pharmacy counter. A 2020 analysis by the Schaeffer Center at the University of California found that each $1 increase in the discount corresponds to an increase in the list price of $1.17.

The FTC said a change in PBM practices in 2012 caused insulin prices to spike. Before that, the covered drug lists – or drug schedules – were relatively open to everyone, the statement said.

“According to the complaint, that changed when the PBMs took advantage of their size and threatened to exclude certain drugs from the drug directory in order to get drug manufacturers higher discounts in exchange for favorable placement in the drug directory,” the FTC's statement said. “Securing drug directory coverage was critical for drug manufacturers to reach patients with private health insurance, the FTC alleges.”

Insulin prices have skyrocketed, in one case from $122.59 in 2012 to $289.36 in 2018, the statement said.

The FTC didn't just criticize pharmacy middlemen, saying, “PBMs are not the only potentially culpable actors – the Bureau also remains deeply concerned about the role that drug manufacturers such as Eli Lilly, Novo Nordisk and Sanofi play in driving up the list prices of life-saving drugs like insulin. In fact, all drug manufacturers should be aware that their involvement in the type of conduct challenged here raises serious concerns and that the Bureau of Competition may recommend suing drug manufacturers in future enforcement actions.”

The lawsuit comes as the FTC is conducting a comprehensive investigation into the practices of the large PBMs and the healthcare conglomerates that own them. In July, it issued a scathing interim report saying the companies appear to be engaged in anti-competitive practices that increased drug prices and harm patients.

Last week, Express Scripts filed a lawsuit to stop the investigation, claiming it was defamatory. To support its claim, the lawsuit relies on an industry-funded study conducted by an economist. who earned more than $100 million in a career where we support mega-mergers.

Under the leadership of Lina Khan, the FTC is trying to move beyond 40 years of lax antitrust enforcement.

Alvaro Bedoya, another commissioner, said the main goal of antitrust law in the United States is to Treat consumers and small market participants fairlyBut since the 1970s, some economists have argued that the real goal is efficiency and that larger players are often better able to achieve it. A long period of corporate mergers followed.

In an interview Khan was asked on CBS's “60 Minutes” on Sunday night if she thought big players were more efficient than small ones. There has to be strong competition, she said.

“Even if these efficiencies were achieved, if the (merged) company were not controlled by competition, it would have no incentive to pass those benefits on to consumers because they might have nowhere else to go,” she said.

When asked whether the greed of large American corporations was responsible for some of our ongoing post-pandemic inflation, Khan said there was no doubt about it.

“We've seen some executives boast on quarterly earnings calls about how inflation is having a great impact on their bottom line,” she said.