FTC sues 3 largest PBMs and their GPOs, alleging they inflated insulin prices
The Federal Trade Commission took legal action against Caremark Rx, Express Scripts, and Optum Rx Friday, claiming the pharmacy benefit managers have engaged in anticompetitive and unfair rebating practices that artificially inflated the list price of insulin products. The complaint also names the PBMs’ affiliated group purchasing organizations (GPOs).
The FTC filed an administrative complaint alleging the PBMs, which collectively control an estimated 80% of prescriptions in the U.S., and their GPOs (Zinc Health Services, Ascent Health Services, and Emisar Pharma Services) “have abused their economic power by rigging pharmaceutical supply chain competition in their favor, forcing patients to pay more for life-saving medication,” the commission said in a press release.
According to the FTC, the PBMs “created a perverse drug rebate system that prioritizes high rebates from drug manufacturers,” causing artificially inflated list prices. In the complaint, the FTC alleged that the PBMs systemically excluded lower-priced insulins in favor of those with higher list prices, which generate higher rebates and fees for the PBMs and their GPOs. Such strategies “allowed the PBMs and GPOs to line their pockets while certain patients are forced to pay higher out-of-pocket costs” for insulin, the FTC said.
Rahul Rao, deputy director of the FTC’s Bureau of Competition, said in the press release, “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. Caremark, [Express Scripts], and Optum — as medication gatekeepers — have extracted millions of dollars off the backs of patients who need life-saving medication.”
The FTC explained that although the higher rebates PBMs collected should have significantly lowered the cost of insulin products for patients at the point of sale, “certain vulnerable patients, such as [those] with deductibles and coinsurance, often must pay the unrebated higher list price …. Indeed, they may pay more out of pocket for their insulin drugs than the entire net cost of the drug to the commercial payer.”
The commission noted that insulin prices began increasing in 2012 when PBMs started creating exclusionary drug formularies. Prior to that, formularies had been more open, covering many drugs.
Deputy Director Rao said in a statement issued Friday that although insulin manufacturers Eli Lilly, Sanofi, and Novo Nordisk are not named in the case, “all drug manufacturers should be on notice that their participation in the type of conduct alleged [in the complaint] can raise serious concerns, with a potential for significant consumer harm.”
Rao added that the Bureau of Competition reserves the right to recommend naming drug manufacturers as defendants in future enforcement actions involving similar conduct.
The FTC’s vote to file an administrative complaint was 3-0-2; two commissioners recused themselves. A redacted version of the complaint could be made public early this week.
In a separate statement issued Friday, the Pharmaceutical Care Management Association (PCMA), a lobbying organization for PBMs, laid the blame for high insulin prices on drug manufacturers.
“If the FTC had considered the role of the entire supply chain, the commission may have accurately diagnosed the lack of insulin competition in the period analyzed as a result of Big Pharma’s anti-competitive tactics and found that prices on brand-name insulin products increased at manufacturer discretion, since rebates are uncorrelated to higher list prices,” the organization said.
“Decisions from Big Pharma companies to lower the price of some insulin products last year, following increased Congressional scrutiny and public outcry, underscore that drug companies can decide to lower prices at any time,” PCMA added.
The Inflation Reduction Act capped insulin prices at $35 per month for Medicare enrollees, starting in January 2023. In the months that followed, the three primary manufacturers of insulins marketed in the U.S. lowered their prices on certain insulin products for patients with private insurance.
Our Take: The conflict between the FTC and the nation’s top PBMs, which has been simmering for the last couple of years since the commission began its investigation of the PBM industry, is poised to escalate — though the outcome of the election in November could influence the fate of legal actions initiated by either side.
On Tuesday, Express Scripts filed a lawsuit against the FTC claiming the report the commission released in July on its investigation findings is “filled with lies and misleading claims.”
In a press release, Evernorth Health Services, Cigna’s subsidiary that includes Express Scripts, said the FTC’s report “disregarded the millions of documents and terabytes of data produced by Express Scripts and other PBMs.” Express Scripts called the report defamatory and said it is interfering with the company’s business relationships.
Among the various measures of relief Express Scripts is seeking, the PBM is asking the court to issue an order vacating and setting aside the report, as well as an order requiring the FTC to remove the report from its websites. The company is not seeking financial damages.
Regarding Express Script’s lawsuit, Fierce Healthcare cited comments made early last week by Alden Abbott, who served as the FTC’s general counsel from 2018 until early 2021. While Abbott said assertions made in the FTC’s report regarding the competitive impact of PBMs were “economically unsupported,” he also said there may not be a basis for a lawsuit yet because the FTC has not taken legal action based on the report.
Now that the commission has taken legal action, we’ll see what happens next.
Repairing Fragmented Care with Value-Based Strategies with Dr. Kamal Golla
While demand for specialty care has never been higher, this demand hasn’t resulted in better coordination among PCPs. Can value-based care bridge the gap? Our guest, Dr. Kamal Golla, senior medical director for value transformation at Evolent, thinks so. In this episode of Health Care Rounds, explore the importance of value-based care and how it can create exceptional patient experiences and better outcomes. Watch us here on YouTube or listen to Health Care Rounds wherever you get your podcasts.
What else you need to know
Walgreens sold its stake in BrightSpring Health Services, a Louisville, Ky.-based provider of home- and community-based pharmacy and health services for medically complex populations, to global investment firm KKR & Co., according to multiple news outlets. Specifically, investment funds managed by KKR and its subsidiaries entered into an agreement with Walgreens Boots Alliance (WBA) to purchase 11,619,998 shares of BrightSpring common stock in a private transaction that was expected to close on Sept. 16. BrightSpring stock closed at $13.85 per share on Sept. 13, the day the deal was announced. KKR and an affiliate of WBA bought BrightSpring in 2019 for $1.32 billion, with the Walgreens affiliate being a minority investor. BrightSpring went public in January of this year.
Johnson & Johnson received a warning letter from the Health Resources and Services Administration (HRSA) regarding the company’s plans to switch to a rebate model for two drugs in the 340B drug discount program. In August, J&J notified hospitals that, starting Oct. 15, the company would switch to a rebate model for Stelara (ustekinumab), which is indicated for treating plaque psoriasis, Crohn’s disease, and ulcerative colitis, and Xarelto (rivaroxaban), a blood thinner. Rather than providing the discounted price at the time of purchase, J&J said it would make the discount available through a rebate after hospitals purchase the drugs through wholesalers. To receive the rebates, hospitals would need to submit medical claims data and purchase data. J&J said the rebate model would improve the 340B program’s integrity, and the drugmaker offered a grace period to allow hospitals to adjust to the change.
HRSA advised J&J that the rebate model would violate the 340B statute, and implementing it could subject the company to substantial fines and termination of J&J’s drug pricing agreement. HRSA has given J&J until Sept. 30 to notify the agency that it has ceased implementation of the rebate proposal. A spokesperson for J&J told Becker’s Hospital Review the company is committed to the 340 program “as it was originally intended to serve as an important safety net program for vulnerable patients” and said transparency is vital to ensure the discounts are benefiting patients.
The Senate Committee on Health, Education, Labor, and Pensions voted unanimously on Thursday to hold Steward Health Care CEO Dr. Ralph de la Torre in civil and criminal contempt for failing to comply with a subpoena the committee issued seeking his testimony at a hearing earlier this month. “This is the first time in modern American history that the HELP Committee has issued a civil or criminal contempt resolution,” the committee noted in a press statement. On Wednesday, attorneys for the physician sent a letter to Senate officials stating that he wished to invoke his Fifth Amendment right against self-incrimination. In the letter, the attorneys reiterated Dr. de la Torre’s previous claim that he lacks authority to speak on behalf of the health system regarding its ongoing bankruptcy proceedings. The two resolutions will now be advanced to the full Senate for a vote.
Hackensack Meridian Health is partnering with K Health on the launch this fall of HMH 24/7, a new artificial intelligence-driven primary care app that will give patients access to the Edison, N.J.-based health system’s clinicians via their smartphones. The solution will integrate virtual and in-person care, Hackensack Meridian said in a news release, enabling smooth transitions for patients within the health system’s network. “The power of HMH 24/7 lies in its ability to streamline clinical processes,” the health system said, noting that the app will automate intake and data entry. Patients will have “a dedicated clinician on the platform to oversee their care journey, with every touchpoint captured in their Hackensack Meridian Health medical record.” Clinicians will have “a panoramic view of a patient’s entire health profile” for use in making data-driven decisions.
CMS has identified 741 acute care hospitals chosen for mandatory participation in the Transforming Episode Accountability Model (TEAM) episode-based alternative payment model, which will start Jan. 1, 2026, and run for five years. An Excel file of the participants can be downloaded here. The model includes the following surgical procedures: lower extremity joint replacements, hip femur fracture treatments, spinal fusions, coronary artery bypass grafts and major bowel procedures.
Mass General Brigham and Tampa General Hospital are enhancing a three-year-old collaboration between the two health systems. On Tuesday, they announced the development of new programs and services at Tampa General Hospital, including a bone marrow transplant program and a CAR-T therapy program. They also plan to increase services to support Florida’s veterans and service members through Home Base Florida; Home Base started at Massachusetts General Hospital in 2009 in partnership with the Red Sox Foundation.
What we’re reading
Case Dismissed: No Cancer Drug Delivery to Patients’ Homes. Medscape, 9.18.24
What Medicare Negotiation Tells Us About Drug Pricing In The U.S. Health Affairs, 9.13.24.
