The Federal Trade Commission filed a lawsuit against the largest PBMs, following its July report exposing the ‘opaque’ business practices of the ‘powerful middlemen.’
The Federal Trade Commission filed an administrative lawsuit Friday against the three largest pharmacy benefit managers—Caremark Rx, Express Scripts and Optum Rx—and their affiliated group purchasing organizations. The regulator argued the firms are responsible for inflating the cost of prescription drugs, such as insulin, and preventing patients’ access to lower-cost products.
The FTC’s complaint, filed under its administrative process, not a federal court, alleges that the big three PBMs, which the FTC stated administer about 80% of all prescriptions in the U.S., have “abused their economic power by rigging pharmaceutical supply chain competition in their favor, forcing patients to pay more for life-saving medication.”
After investigating the business practices of PBMs for two years, the FTC released an interim report in July, arguing that the “powerful middlemen” are inflating drug costs and “squeezing Main Street pharmacies.”
All three of the PBMs cited in the case dispute the allegations. In an administrative lawsuit, the defendants can either settle with the FTC or contest the charges to be heard before an administrative law judge. Earlier this week, another PBM, Express Scripts, filed a pre-emptive lawsuit against the FTC in U.S. District Court, claiming the FTC’s July report was “unfair, biased, erroneous and defamatory.”
The FTC’s administrative complaint alleges that the named PBMs created a perverse drug rebate system that prioritizes high rebates from drug manufacturers, leading to artificially inflated insulin list prices.
An administrative complaint is typically a proceeding that is brought to seek review of an agency’s decision, which is referred typically to a third-party independent administrative law judge who conducts a fact-finding hearing. This is different to a civil case that is brought to a county or circuit court, which typically involves a civil dispute between two parties over decisions that involve application of statute or law, according to law firm Lewis, Longman & Walker, P.A.
“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,” said Rahul Rao, deputy director of the FTC’s Bureau of Competition, in a statement. “Caremark, ESI, and Optum—as medication gatekeepers—have extracted millions of dollars off the backs of patients who need life-saving medications. 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.”
The FTC’s Bureau of Competition also expressed concern about the role that drug manufacturers like Eli Lilly, Novo Nordisk and Sanofi play in allegedly driving up drug prices.
The FTC stated that all drug manufacturers should be on notice that their participation in the type of conduct challenged in the lawsuit raises “serious concerns,” and that the Bureau of Competition may recommend suing drug manufacturers in any future enforcement actions.
In response to the FTC filing, Andrea Nelson, the chief legal officer of the Cigna Group—which owns Express Scripts—said, “This action continues a troubling pattern from the FTC of unsubstantiated and ideologically-driven attacks on pharmacy benefit managers, following the FTC’s biased and misleading July 2024 report, which Express Scripts demanded the Commission retract earlier this week. Once again, the FTC—a government agency funded by taxpayer dollars—is proving that the FTC does not understand drug pricing and instead is choosing to ignore the facts and score political points, rather than focus on its duty to protect consumers.”
A spokesperson at Caremark, owned by CVS, stated, “CVS Caremark is proud of the work we have done to make insulin more affordable for all Americans with diabetes. To suggest anything else, as the FTC did today, is simply wrong. We stand by our record of protecting American businesses, unions, and patients from rising prescription drug prices.”
The Caremark spokesperson also argued that any action that limits the use of PBM negotiating tools would “reward the pharmaceutical industry and return the market to a broken state.”
Elizabeth Hoff, a spokesperson at Optum Rx, said in a statement, “This baseless action demonstrates a profound misunderstanding of how drug pricing works. For many years, Optum Rx has aggressively and successfully negotiated with drug manufacturers and taken additional actions to lower prescription insulin costs for our health plan customers and their members, who now pay an average of less than $18 per month for insulin.”
The ERISA Industry Committee, an advocacy organization that represents large U.S. employers, announced Thursday that it is pushing Congress to consider PBMs as fiduciaries under ERISA, as PBMs play a significant role in negotiating prescription drug costs for plan sponsors managing health plans.
If subject to the same ERISA fiduciary standards as plan sponsors, ERIC argued that PBMs would effectively be required to act in the best interest of plan participants and help keep plan costs low. In addition, they would not be able to engage in self-dealing or other profiteering tactics, as ERIC alleges they do today.
Source: Plansponsor
