FTC sues drug middlemen for allegedly inflating insulin prices

The Federal Trade Commission on Friday sued three large U.S. health companies that negotiate insulin prices, arguing the drug middlemen use practices that boost their profits while "artificially" inflating costs for patients. 

The suit targets the three biggest so-called pharmacy benefit managers, UnitedHealth Group's Optum Rx, CVS Health's Caremark and Cigna's Express Scripts. All are owned by or connected to health insurers and collectively administer about 80% of the nation's prescriptions, according to the FTC. 

The FTC's lawsuit also includes each PBM's affiliated group purchasing organization, which brokers drug purchases for hospitals and other health-care providers. The agency said it could recommend suing drugmakers Eli Lilly, Sanofi and Novo Nordisk in the future as well over their role in driving up list prices for their insulin products.

A CVS spokesperson said Caremark is "proud of the work" it has done to make insulin more affordable for Americans, adding that "to suggest anything else, as the FTC did today, is simply wrong."

A spokesperson for Express Scripts said the suit "continues a troubling pattern from the FTC of unsubstantiated and ideologically-driven attacks" on PBMs. It comes three days after Express Scripts sued the FTC, demanding that the agency retract its allegedly "defamatory" July report that claimed that the PBM industry is hiking drug prices.

UnitedHealth did not immediately respond to a request for comment on the suit.

PBMs sit at the center of the drug supply chain in the U.S. They negotiate rebates with drug manufacturers on behalf of insurers, large employers and federal health plans. They also create lists of medications, or formularies, that are covered by insurance and reimburse pharmacies for prescriptions. The FTC has been investigating PBMs since 2022. 

The agency's suit argues that the three PBMs have created a "perverse" drug rebate system that prioritizes high rebates from drugmakers, which leads to "artificially inflated insulin list prices." It also alleges that PBMs favor those high-list-price insulins even when more affordable insulins with lower list prices become available. 

The FTC is filing its complaint through its so-called administrative process, which initiates a proceeding before an administrative judge who would hear the case.

"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," Rahul Rao, deputy director of the FTC's Bureau of Competition, said in a statement. 

"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 continued. 

Roughly eight million Americans with diabetes rely on insulin to survive, and many have been forced to ration the treatment due to high prices, according to the FTC.

President Joe Biden's signature Inflation Reduction Act has capped insulin prices for Medicare beneficiaries at $35 per month. That policy currently does not extend to patients with private insurance.

The Biden administration and Congress have ramped up pressure on PBMs, seeking to increase transparency into their operations as many Americans struggle to afford prescription drugs. On average, Americans pay two to three times more than patients in other developed nations for prescription drugs, according to a fact sheet from the White House.

The FTC said it remains "deeply troubled" by the role insulin manufacturers play in higher list prices, arguing that they inflate prices in response to PBMs' demands for higher rebates. Eli Lilly, Sanofi and Novo Nordisk control roughly 90% of the U.S. insulin market.

For example, Eli Lilly's Humalog insulin had a list price of $274 in 2017, a more than 1,200% increase from its $21 list price in 1999, according to the FTC.

The FTC said all drugmakers should "be on notice that their participation in the type of conduct challenged here raises series concerns."

Eli Lilly, Sanofi and Novo Nordisk did not immediately respond to requests for comment.