FTC Sues CVS, Cigna, UnitedHealth Over Insulin Prices

The agency said it filed a complaint in its administrative tribunal alleging that CVS’s Caremark, Cigna’s Express Scripts and UnitedHealth’s Optum Rx accepted money from drugmakers in exchange for keeping cheaper insulin on their approved drug lists . Also named were company-affiliated group purchasing organizations that have begun in recent years to negotiate rebate payments with drugmakers.

The enforcement action is part of a growing conflict between the FTC and the three pharmacy benefit managers that together control about 80 percent of prescriptions filled in the US. As the companies have merged with larger health conglomerates that also own insurers, pharmacies and medical clinics, they have faced increasingly intense pressure in Washington.

Drug holders favored versions of insulin with higher upfront prices and larger rebate payments from drug companies, which shifted more costs onto patients, the FTC alleged. PBMs collected billions in rebates and fees as the list price of a common insulin, Humalog, rose 1,200 percent between 1999 and 2017, the agency said.

He did not make his file immediately available, but described it in materials distributed to reporters. The administrative complaint begins a process in which the allegations will be adjudicated in a formal hearing before an administrative law judge, the agency said.

Shares of the parent companies of major PBMs fell on the news, with CVS down 1.8% at 12:58 p.m. Cigna and UnitedHealth both fell less than 1 percent.

An FTC official said the case alleges that PBM’s discounting practices amount to unfair competition. The official, who was not authorized to speak publicly on the matter, said the agency hopes the enforcement action will lead to lower list prices not just for insulin but for other drugs as well.

Cost Reduction

Pharmacy administrators have defended their programs, saying they protect Americans from rising drug costs. If the lawsuit succeeds, it could lead to higher prices, Cigna Chief Legal Officer Andrea Nelson said in an emailed statement.

The lawsuit “continues a troubling pattern within the FTC of baseless and ideologically driven attacks on pharmacy benefit managers,” Nelson said. The company plans to “protect our ability to lower drug costs” for customers and members, she said.

CVS said its members already pay less than $25 for insulin, on average. The company blamed drugmakers for the price hikes and said it had negotiated discounts to lower costs for members.

“Any action that limits the use of these PBM negotiation tools would reward the pharmaceutical industry and return the market to a damaged state,” spokesman David Whitrap said in an email.

The cost “demonstrates a profound misunderstanding of how drug pricing works,” Elizabeth Hoff, spokeswoman for UnitedHealth’s Optum Rx, said in an email. Insulin costs for its members are less than $18 a month, on average, because of its negotiations with drugmakers, she said.

Clarity needed

Lawmakers from both parties have questioned PBM practices and called for new laws to mandate more transparency, policies that could get a vote in the lame-duck session after the US presidential election. The FTC, led by Chairwoman Lina Khan, spent years investigating the industry and in a July report accused the big PBMs of driving up prescription costs and favoring their own pharmacies.

PBMs argue that the FTC’s July report cherry-picked examples rather than looking at all the data.

Cigna called the report “defamatory” in a lawsuit against the FTC this week and took out a full-page ad in the Wall Street Journal as part of a campaign to refute it. Pharmacy benefit groups argue that almost all rebates from drug manufacturers are passed on to customers, who can use them to offset other health care costs.

Three of the five FTC commissioners voted to file the administrative complaint, while two recused themselves.

Caremark, Express Scripts, and Optum Rx are the three largest PBMs. The companies negotiate with drugmakers and manage prescription plans for employers and health insurers, influencing which drugs are available at what price to tens of millions of Americans.

Facing increasing scrutiny from Washington, PBMs have launched a pushback campaign. They hired an outside firm that pooled the companies’ data and produced a report that refuted arguments that the industry was driving up costs. Drug brokers say they are a necessary counterweight to drug companies’ unchecked power to set prices.

Insulin dominance

The insulin market is dominated by three manufacturers: Eli Lilly & Co., Sanofi SA and Novo Nordisk A/S. While the FTC did not take action against those companies today, the agency said they should be “on notice” and could face future enforcement action.

Since Lilly developed the first commercial insulin a century ago, it has become one of the world’s most sought-after drugs, helping diabetics control blood sugar when their bodies either don’t make enough of the hormone or are resistant to it. US Medicare spending on insulin topped $13 billion in 2017, up more than eightfold from a decade earlier.

Last year, Lilly and Sanofi pledged to cap patient costs for some insulin products at $35 a month, heeding US President Joe Biden’s call for a nationwide cap. Novo also lowered list prices for its most commonly used insulin. For patients with Medicare prescription drug plans, out-of-pocket costs for insulin are now capped at $35 per month under the Inflation Reduction Act.

A Lilly representative said the company has been cutting insulin prices since 2017 and that the FTC’s complaint focuses on aspects of health care that the drugmaker has long sought to reform.

(Add stock price in sixth paragraph, PBM comment in eighth through 11th paragraphs)

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