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 PBM, Cigna's Evernorth/Express Scripts PBM and UnitedHealth's Optum Rx PBM had accepted money in the form of cash "rebates" from drugmakers in exchange for keeping lower-cost insulin off their 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".
For example, 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) 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 PBM will not be forced to rely exclusively on 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 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. This will determine if the litigation against the PBMs should be handled by the FTC, or the U.S. Department of Justice's Antitrust Division. Administrative Courts are considered separate from ordinary courts of law. The FTC complaint had not yet been made public because it was reportedly still undergoing redactions.
Officials said they 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 Novo Nordisk Insulin Aspart Injection if they put Novolog or Fiasp on-formulary.
- 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 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 peer-reviewed academic 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 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 same practices are being applied to every prescription drug class sold (to one degree or another) in the U.S.
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 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 abandoning the rebate-contracting sales model for the insulin therapeutic class of drugs. While they had abandoned the rebate-contracting for insulin, drug companies are continuing to use the rebate-contracting sales model for other classes of drugs. One reason they decided 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 be forced to actually PAY MEDICAID, and pharma would never do that.
Predictably, the PBMs had different opinions. 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):
The lawsuit "continues a troubling pattern from the FTC of unsubstantiated and ideologically-driven attacks on pharmacy benefit managers," Cigna Chief Legal Officer Andrea Nelson said. The company intends to "protect our ability to lower drug costs" for clients and members, she said.
The suit "demonstrates a profound misunderstanding of how drug pricing works," Elizabeth Hoff, a spokesperson for UnitedHealth's Optum Rx, said in an email.
CVS Health spokesperson 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 low 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.
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