Well, it finally happened on Friday, September 20, 2024.
Specifically, the U.S. Federal Trade Commission (FTC) filed a complaint in Administrative Court alleging that CVS Health's Caremark Pharmacy Benefit Manager ("PBM") business, rival Cigna's Evernorth/Express Scripts PBM and another rival UnitedHealth's Optum Rx PBM business had collectively accepted money in the form of multimillion dollar cash "rebates" from drugmakers in exchange for keeping lower-cost insulin off their preferred drug formularies (lists of approved drugs). The lawsuit also named their respective affiliated "Group Purchasing Organizations" [GPOs] — started in recent years to negotiate cash rebate payments with drugmakers — known as Zinc Health Services, Ascent Health Services, and Emisar Pharma Services respectively, which they now use primarily for "rebate aggregation".
The FTC complaint is over the PBMs' role in distorting the U.S. insulin market. It claims that the PBMs' practice of demanding ever-larger cash rebates from drug companies in order to preclude all legitimate competition (from less expensive unbranded insulins and true biosimilars alike) had resulted in artificially-inflated costs for patients and employer health insurance plan sponsors alike, and had more broadly distorted the market for prescription drugs sold in the U.S.
The FTC's "Interim Report" https://www.ftc.gov/news-events/news/press-releases/2024/07/ftc-releases-interim-staff-report-prescription-drug-middlemen documented various PBM practices which it said had spiked the U.S. cost of insulin by over 1200% (one thousand two hundred per cent) over the past two decades (see https://www.rand.org/pubs/research_reports/RRA788-2.html for more). For its part, Cigna's Express Scripts PBM business sued the FTC in what some analysts described as a baseless lawsuit effectively demanding the FTC remove the Interim Report, calling the report's conclusion "defamatory".
But a recent FormularyWatch article (see https://www.managedhealthcareexecutive.com/view/can-express-scripts-win-its-lawsuit-against-the-ftc- for the article) entitled "Can Express Scripts Win its Lawsuit Against the FTC?", and the one-word conclusion of that article was NO. The article concludes that the Express Scripts lawsuit was "on a fast track towards dismissal, devoid of any legal foundation or public policy merit."
It is worth acknowledging that the FTC has several legal authorities that may apply to these practices, including Section 5 of the FTC Act, Section 3 of the Clayton Antitrust Act, Section 2 of the Robinson-Patman Act, and the Sherman Act.
For several years, I have predicted the FTC litigation was coming (catch one of my posts HERE for more) when the FTC voted (unanimously, and on a bipartisan basis) in 2022 to initiate a comprehensive 6(b) study of the Pharmacy Benefit Manager (PBM) Industry which was referred to as "FTC Matter No. P221200". Curiously, the FTC decided to release an "Interim Report" (rather than a full report) on its previously-announced PBM 6(b) study, although its litigation against the PBMs will not be forced to rely exclusively upon the FTC's own research (more on that in a second). Still, for patients stuck paying too much for prescriptions, it has taken simply too long to reach this point, only now the long-awaited litigation is finally here.
The FTC filed its legal complaint in Administrative Court which accused CVS Health's Caremark PBM business, Cigna's Express Scripts PBM business, and UnitedHealth's OptumRx PBM business unit of creating a "perverse" system of prescription drug rebates that favored insulins that was sold at much higher list prices in order to "line their pockets" with rebates (paid by drug companies to secure preferred positioning on drug formularies) at the expense of patients, who were forced to pay more than they should have for the medication. From my perspective, that sounds completely right based on my personal experience, hence there's nothing defamatory about it.
"As the complaint explains, the PBMs have created and manage a system in which drug manufacturers compete for formulary placement by raising (not lowering) drug list prices so they can feed the higher rebates that PBMs demand," Rahul Rao, FTC Bureau of Competition Deputy Director, wrote in a statement (see https://www.ftc.gov/news-events/news/press-releases/2024/09/ftc-sues-prescription-drug-middlemen-artificially-inflating-insulin-drug-prices for the statement). "This perverse system results in billions of dollars in rebates and fees for the PBMs and their health plan sponsor clients — but does so at the expense of certain vulnerable diabetic patients who must pay significantly more out-of-pocket for their critical medications [such as those with high-deductible insurance plans]."
Note that an Administrative Court is a type of specialized court on administrative law, particularly disputes concerning the exercise of public power. Their role is to ascertain that official acts are consistent with the law. Matt Stoller who is research director of the American Economic Liberties Project, wrote what this means:
The FTC isn't using its authority under the Sherman Act, but a special authority to bar "unfair methods of competition," known as Section 5. It is also doing a case under its Administrative Court, so that it'll move quickly and not be bogged down for years in a Federal docket. The specific claims are that the Big Three paid off manufacturers to "inflate insulin list prices," they sought to restrict "access to more affordable insulins," and they shifted "the cost of high list price insulins to vulnerable patient populations."
Officials expected the redacted version of its complaint to be made public on Monday, September 23, 2024, but I only discovered the link to it on the FTC's Rahul Roa's LinkedIn page, which can be read at https://www.ftc.gov/legal-library/browse/cases-proceedings/221-0114-caremark-rx-zinc-health-services-et-al-matter-insulin, although the complaint reads much like the Interim Report.
The FTC's Notice of Contemplated Relief is as follows:
- Prohibit Respondents [the big PBMs] from excluding or disadvantaging low Wholesale Acquisition Cost (WAC) versions of high WAC drugs made by the same manufacturers whenever the Respondent covers the high WAC drug on a formulary. In other words, the PBMs would not be permitted to exclude lower-priced versions of insulins such as Lilly's "unbranded" (sold under the generic drug name) version called Lilly Insulin Lispro Injection if they put branded Humalog on-formulary. Ditto for Novo Nordisk Insulin Aspart Injection/Novolog/Fiasp and Winthrop by Sanofi's Insulin Glargine Injection/Lantus, or Biocon's Unbranded Insulin Glargine/Semglee or others which could emerge. The unbranded insulins were intended as a work-around to help the many patients harmed by the PBM rebating price distortions.
- Prohibit Respondents from accepting compensation based on a drug's list price or a related benchmark. This is a big one, and is at the source of most of the big PBMs' revenues.
- Prohibit Respondents from designing—or assisting with designing—a benefit plan that bases patients' deductibles or coinsurance on the list price, rather than the lower realized "net" cost after rebates. Another big deal; again, the bogus list prices are often what patients' cost-sharing and co-pays are based upon.
- Order any other relief appropriate to correct or remedy the Respondents' violations. This would be seeking the Courts to make these relief efforts to happen.
But we also know that the insulin therapeutic class has an abundance of third-party data including from the FTC's own 6(b) study, some of which was published as an "Interim Report", as well as from the Senate Finance Committee Report, plus independent, academic peer-reviewed research such as the research undertaken by University of Southern California and even from an audit undertaken by the U.S. Office of Personnel Management Office of the Inspector General's Office of Audits (conducted on behalf of the American Postal Workers Union Health Plan's Pharmacy operations as administered by Cigna's Express Scripts, Inc.) and ALL of that third-party data and research is admissible in court, and can be used by FTC in its litigation against the PBMs.
However, more broadly, assuming the FTC proves it is being done for insulin, it is believed the very same practices are being applied to every prescription drug class sold (to one degree or another) in the U.S. Of course, insulin became the poster-child for the most dysfunctional U.S. prescription drug market, although there have been other notable examples including epinephrine injection pens (EpiPens) which had suffered from a similar fate in recent years.
We also know that the FTC lawsuit would argue that CVS Caremark, Cigna Express Scripts and United Health's OptumRx had engaged "in anticompetitive and unfair rebating practices," leading to the artificial insulin price inflation, as well as impairing access to lower-cost drugs (including both unbranded "authorized generics" and legitimate biosimilars), and shifting "high insulin list prices to vulnerable patients," according to the FTC statement (see https://www.ftc.gov/news-events/news/press-releases/2024/09/ftc-sues-prescription-drug-middlemen-artificially-inflating-insulin-drug-prices for the announcement).
As described in the FTC's complaint, one PBM Vice President acknowledged that this strategy allowed the Big Three PBMs to continue to "drink down the tasty ... [cash] rebates" on high list price, highly rebated insulins.
Of course, in March 2023, in rapid succession, Eli Lilly & Company, Inc. https://www.prnewswire.com/news-releases/lilly-cuts-insulin-prices-by-70-and-caps-patient-insulin-out-of-pocket-costs-at-35-per-month-301758946.html, followed by Novo Nordisk, Inc. https://www.prnewswire.com/news-releases/novo-nordisk-to-lower-us-prices-of-several-pre-filled-insulin-pens-and-vials-up-to-75-for-people-living-with-diabetes-in-january-2024-301771409.html, and then Sanofi Aventis LLC https://www.globenewswire.com/en/news-release/2023/03/16/2629188/0/en/Press-Release-Sanofi-cuts-U-S-list-price-of-Lantus-its-most-prescribed-insulin-by-78-and-caps-out-of-pocket-Lantus-costs-at-35-for-all-patients-with-commercial-insurance.html all collectively announced they were slashing insulin list prices (Lilly was effectively abandoning the rebate-contracting sales model for the insulin therapeutic class of drugs).
While it was a blow to the PBM-promoted rebate-contracting sales model for insulin, drug and medical device companies are nevertheless continuing to use the rebate-contracting sales model for other classes of drugs (and devices such as Continuous Glucose Monitoring systems or CGMs), and some of the same companies are using them on GLP-1 inhibitors prescribed for Type 2 diabetes and obesity, which remains a huge problem.
One reason the insulin-makers decided they were able to abandon rebate-contracting sales for insulin was because a provision of the American Rescue Plan of 2021 https://www.kff.org/policy-watch/what-are-the-implications-of-the-recent-elimination-of-the-medicaid-prescription-drug-rebate-cap/ meant they would suddenly be forced to actually PAY MEDICAID (the provision eliminated a cap on rebates which are payable to Medicaid), and pharma would never do that.
Predictably, the PBMs had different opinions on the FTC litigation. For example, Bloomberg Law reported (see https://www.bloomberg.com/news/articles/2024-09-20/ftc-sues-drug-middlemen-over-manipulating-insulin-market for the article):
Cigna's Chief Legal Officer Andrea Nelson said the lawsuit "continues a troubling pattern from the FTC of unsubstantiated and ideologically-driven attacks on pharmacy benefit managers." She added that the company intends to "protect our ability to lower drug costs" for clients and members.A spokesperson named Elizabeth Hoff from rival UnitedHealth's Optum Rx said in an email that the suit "demonstrates a profound misunderstanding of how drug pricing works."
Finally, a CVS Health spokesperson named David Whitrap said in an email "Any action that limits the use of these PBM negotiating tools would reward the pharmaceutical industry and return the market to a broken state".
Interestingly, the FTC complaint did not exactly let the big insulin-makers off-the-hook. The vertically-integrated (with commercial healthcare insurance companies) PBMs are merely the first targets. For several years, the FTC has been warning pharma that trying to prevent competition is illegal restraint of trade which can be prosecuted. FTC Bureau of Competition Deputy Director Mr. Rao's official statement concluded by saying:
"Although not named in this case, all drug manufacturers should be on notice that their participation in the type of conduct challenged here can raise serious concerns, with a potential for significant consumer harm, and that the Bureau of Competition reserves the right to recommend naming drug manufacturers as defendants in any future enforcement actions over similar conduct."
For its part, a representative for Eli Lilly & Company told Bloomberg Law that the company has cut insulin prices since 2017 [when it became the first insulin-maker to introduce an identical, unbranded copy of Humalog sold at a lower price because there were few rebates], and that "the FTC complaint focuses on aspects of healthcare where the drugmaker has long sought to reform".
Rival Sanofi told Axios that it agrees with FTC that pharmacy benefit managers have used rebates to benefit themselves.
Author P.S., December 4, 2024: There is some speculation about the status of the FTC litigation against the big PBMs (and their respective GPOs). The law firm known as Frier Levitt have published an update on the status as of December 4, 2024. Rather than reiterate what Frier Levitt says on the litigation, its best that you read it from them directly. See https://www.frierlevitt.com/articles/update-on-ftcs-lawsuit-against-three-largest-pbms-and-their-gpos/ for its write-up. Frier Levitt partner Lucas Morgan was also interviewed on December 4, 2024 by MedCityNews in an article entitled "The Big 3 PBMs are Countersuing the FTC. Does Their Argument Have Any Teeth?" (see https://medcitynews.com/2024/12/pbms-lawsuit-ftc-drug-pricing/ for the article).
The short version of the story is lawyers suggest the PBM countersuits could be a possible delay tactic, as well as a message to the FTC that they will leave no stone unturned in order to defend themselves. The MedCityNews article includes a quote from Adam Brown, an emergency physician and founder of healthcare advisory firm ABIG Health, as well as a professor of practice at the University of North Carolina, who said the PBMs' lawsuit seems to be a tactic "to gum up the system with lawsuits" in order to slow down the process. But the PBMs' legal cases don't really seem to be working. So far, this litigation is currently moving forward, likely with the FTC's "Contemplated Relief" being implemented.
No comments:
Post a Comment