FTC sues PBMs over 'perverse' rebate system
The Federal Trade Commission (FTC) has sued the top three pharmacy benefit managers (PBMs) in the US for operating a "perverse drug rebate system" that it claims artificially inflated the prices of insulin products.
The lawsuit – which has been anticipated since the FTC published a damning report on the PBM sector in July – names CVS Health's Caremark, UnitedHealth Group's Optum, and Cigna's Express Scripts Inc (ESI), a trio that collectively administers around 80% of prescriptions in the US market.
It claims that the PBMs have been rigging pharma supply chain competition in their favour in pursuit of profit, impairing patients' access to lower list price insulin products, and shifting the cost of high insulin list prices to vulnerable patients.
The lawsuit comes just after Cigna/Express Scripts filed a legal pre-emptive strike of its own, seeking a retraction of the FTC's report on the sector and accusing the financial regulator of "unfair, biased, erroneous, and defamatory" rhetoric against the PBM sector.
The FTC alleges that the three PBMs set up a system that prioritises high rebates from drug manufacturers, so even when lower list price insulins became available, they were systemically excluded from formularies in favour of "high list price, highly rebated insulin products."
That in turn meant that the PBMs were able to "line their pockets," while some patients were forced to pay higher out-of-pocket costs for their insulin, it claims.
"Caremark, ESI, and Optum – as medication gatekeepers – have extracted millions of dollars off the backs of patients who need life-saving medications," said Rahul Rao, deputy director of the FTC's Bureau of Competition.
The regulator also fired a shot across the bows of insulin manufacturers like Eli Lilly, Novo Nordisk, and Sanofi, saying that the PBMs are "not the only potentially culpable actors" for driving up prices of insulin products, and also hinted that the action could extend beyond insulin products.
"All drug manufacturers should be on notice that their participation in the type of conduct challenged here raises serious concerns, and that the Bureau of Competition may recommend suing drug manufacturers in any future enforcement actions," it said.
Express Scripts said the legal action was "reckless" and accused the FTC of not understanding how drug pricing works in the US and scoring political points.
"The fact is that in the unlikely event the FTC succeeds in its suit and forces PBMs to include drugs on formulary, even if they have higher net costs for plan sponsors – and regardless of whether they are clinically necessary – the FTC will drive drug prices higher in this country," claimed Andrea Nelson, chief legal officer at Cigna.
CVS Caremark said that preventing PBMs from negotiating drug prices will only benefit pharma companies, while the Pharmaceutical Care Management Association (PCMA), a trade organisation representing PBMs, insisted that it's made strenuous efforts to reduce insulin prices that have been ignored by the FTC.
The FTC's action has been welcomed by some lawmakers, including US Rep Buddy Carter (R-Ga) – a pharmacist by trade – who said: "What PBMs are doing to all patients, especially those who rely on insulin, is criminal. I applaud FTC Chair Lina Khan for taking this critical step and sending a message that PBMs' days of abusing patients are coming to an end. It is time to bust this monopoly up for good."
