FTC sues Big Pharma middlemen over skyrocketing insulin prices, targeting PBM practices

The suit also includes their affiliated group purchasing organizations (GPOs), accusing them of blocking patients from accessing cheaper alternatives and distorting drug markets for profit.

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The Federal Trade Commission (FTC) has taken decisive legal action against pharmacy benefit managers (PBMs), accusing them of inflating the price of insulin, a life-saving medication for millions of diabetes patients. In a landmark move, the FTC filed a lawsuit targeting the “Big Three” PBMs: CVS Health’s Caremark Rx, Cigna’s Express Scripts (ESI), and UnitedHealth Group’s OptumRx. The suit also includes their affiliated group purchasing organizations (GPOs), accusing them of blocking patients from accessing cheaper alternatives and distorting drug markets for profit.

PBMs serve as intermediaries between drug manufacturers and insurance companies, traditionally tasked with reducing drug prices by negotiating rebates and discounts. However, the FTC alleges that these PBMs have exploited their position, incentivizing manufacturers to inflate insulin prices while raking in billions of dollars in rebates and fees. This system, according to the FTC, has directly harmed patients by driving up the cost of insulin, which has risen by more than 1,200% since 1999.

The dramatic rise in insulin prices has forced many people with diabetes to ration their medication, a dangerous practice that puts their health and lives at risk. While the out-of-pocket cost for insulin has been capped at $35 a month for some patients through legislative measures, such as the Inflation Reduction Act, the core issue of inflated list prices remains unresolved. The FTC’s lawsuit seeks to address this by targeting the complex rebate schemes that PBMs use to drive up drug prices.

Rahul Rao, deputy director of the FTC’s Bureau of Competition, underscored the severity of the issue, stating, “Millions of Americans with diabetes need insulin to survive, yet for many of these vulnerable patients, their insulin drug costs have skyrocketed over the past decade thanks in part to powerful PBMs and their greed.” He added that the lawsuit marks a critical step in fixing a broken system that has enriched PBMs at the expense of patients.

One of the primary accusations against PBMs is their reliance on rebates and fees tied to the list price of drugs. In simple terms, the higher the list price of a medication, the larger the rebate PBMs receive from manufacturers. This arrangement has created a perverse incentive for PBMs to favor high-cost drugs over more affordable alternatives, leading to higher prices for consumers.

The FTC alleges that even when lower-cost insulins became available, PBMs systematically excluded them from drug formularies in favor of more expensive options that generated higher rebates. This practice has not only inflated the cost of insulin but also restricted access to more affordable medications, leaving many patients without the options they need to manage their diabetes effectively.

The FTC’s action against the Big Three PBMs could have far-reaching implications beyond the insulin market. As Rao emphasized, the lawsuit is an important step in restoring healthy competition in the pharmaceutical industry, which could drive down drug prices for consumers across the board. “The FTC’s administrative action seeks to put an end to the Big Three PBMs’ exploitative conduct and marks an important step in fixing a broken system—a fix that could ripple beyond the insulin market and restore healthy competition to drive down drug prices for consumers,” Rao said.

The lawsuit has the potential to set a precedent for other medications and expose further anti-competitive practices in the pharmaceutical industry. By targeting PBMs’ role in inflating drug prices, the FTC could pave the way for broader reforms aimed at improving transparency and reducing the cost of essential medications for millions of Americans.

While the current lawsuit focuses on PBMs, the FTC has also put insulin manufacturers—Eli Lilly, Novo Nordisk, and Sanofi—on notice for their role in the price inflation. According to the FTC, these manufacturers raised their list prices in response to PBMs’ demands for higher rebates. The agency has indicated that it reserves the right to pursue legal action against drug manufacturers in the future if they continue to engage in practices that harm consumers.

Emma Freer, a senior policy analyst for healthcare at the American Economic Liberties Project, praised the FTC’s move, noting that PBMs have long exploited their monopoly power to inflate drug prices. “The lawsuit also exposes their industrywide abuse, using insulin—the price of which has soared over 1,200% since 1999—as a flagship example of how PBMs’ rebate schemes distort markets and drive up costs for lifesaving drugs,” Freer said. She also highlighted the importance of holding insulin manufacturers accountable for their role in the crisis.

The issue of inflated insulin prices has garnered bipartisan attention in recent years. Vice President Kamala Harris has expressed interest in increasing transparency and holding PBMs accountable for their role in raising drug prices. Meanwhile, some Republicans, including House Committee on Oversight and Accountability Chairman James Comer, have also criticized PBMs and praised the FTC’s legal action.

Despite bipartisan support for addressing the issue, PBMs continue to defend their practices. Representatives from CVS Health, Cigna, and UnitedHealth have denied the allegations, arguing that the FTC misunderstands the complexities of drug pricing. The Pharmaceutical Care Management Association, which represents PBMs, has also rejected the claims, stating that there is no direct correlation between rebates and higher drug prices.

The FTC’s lawsuit against the Big Three PBMs represents a crucial step in the fight to reduce insulin prices and improve access to affordable medications for millions of Americans. By challenging the rebate schemes that have driven up the cost of insulin, the FTC hopes to restore competition in the pharmaceutical industry and protect vulnerable patients from exploitative practices. As Freer emphasized, “PBMs bear much of the blame, but the FTC is right to also put brand-name manufacturers like Eli Lilly, Novo Nordisk, and Sanofi on notice for their role in this crisis.”

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Alexandra Jacobo is a dedicated progressive writer, activist, and mother with a deep-rooted passion for social justice and political engagement. Her journey into political activism began in 2011 at Zuccotti Park, where she supported the Occupy movement by distributing blankets to occupiers, marking the start of her earnest commitment to progressive causes. Driven by a desire to educate and inspire, Alexandra focuses her writing on a range of progressive issues, aiming to foster positive change both domestically and internationally. Her work is characterized by a strong commitment to community empowerment and a belief in the power of informed public action. As a mother, Alexandra brings a unique and personal perspective to her activism, understanding the importance of shaping a better world for future generations. Her writing not only highlights the challenges we face but also champions the potential for collective action to create a more equitable and sustainable world.

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