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USA | Jul 11, 2024

FTC to sue drug middlemen over insulin prices, source says

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Signage for Cigna is pictured at a health facility in Queens, New York City, U.S., November 30, 2021. (Photo: REUTERS/Andrew Kelly/File)

The Federal Trade Commission (FTC) is planning to sue UnitedHealth, Cigna and CVS Health—the three largest pharmacy-benefit managers (PBMs)— over tactics for negotiating drug prices including insulin, a person familiar with the matter told Reuters

In the United States, PBMs act as middlemen between drug companies and consumers. They negotiate fees and volume-based discounts known as rebates with drug manufacturers, create lists of medications that are covered by insurance, and reimburse pharmacies for prescriptions.

The three biggest PBMs are UnitedHealth’s Optum unit, CVS Health’s CVS Caremark and Cigna’s Express Scripts.

“Any action that limits the use of these PBM negotiating tools would reward the pharmaceutical industry and return the market to a broken state, leaving American businesses and patients at the mercy of the prices drugmakers set,” a CVS spokesperson said, adding that the company will defend the use of these tools vigorously.

The corporate logo of the UnitedHealth Group appears on the side of one of their office buildings in Santa Ana, California, U.S., April 13, 2020. (Photo: REUTERS/Mike Blake/File)

UnitedHealth declined to comment, while Cigna did not immediately respond to a Reuters request for comment.

The Wall Street Journal first reported the FTC’s move.

The FTC is also looking at drug makers as part of the insulin probe, the source said. The three largest insulin makers include Sanofi, Novo Nordisk and Eli Lilly.

The FTC on Monday released an interim staff report detailing how prescription drug middlemen profited at the expense of patients by inflating drug costs.

The report, which is part of an ongoing inquiry launched in 2022 by the FTC, details how increasing vertical integration and concentration has enabled the six largest PBMs to manage nearly 95 per cent of all prescriptions filled in the United States.

FTC Commissioner nominee Lina M Khan testifies during a Senate Commerce, Science, and Transportation Committee hearing on the nomination of Former Senator Bill Nelson to be a NASA administrator, on Capitol Hill in Washington, DC, USA, April 21, 2021. (Photo: Graeme Jennings/Pool via REUTERS)

“The FTC’s interim report lays out how dominant pharmacy benefit managers can hike the cost of drugs —including overcharging patients for cancer drugs,” said FTC Chair Lina M Khan. “The report also details how PBMs can squeeze independent pharmacies that many Americans — especially those in rural communities — depend on for essential care. The FTC will continue to use all our tools and authorities to scrutinise dominant players across health care markets and ensure that Americans can access affordable health care.”

This power structure has been found to have dire consequences. According to the report, nearly 30 per cent of Americans surveyed reported rationing or even skipping doses of their prescribed medicines due to high costs.

The interim report also finds that PBMs hold substantial influence over independent pharmacies by imposing unfair, arbitrary, and harmful contractual terms that can impact their ability to stay in business.

A general view shows a sign of CVS Health Retail Pharmacy Customer Care Center at CVS headquarters of CVS Health Corp in Woonsocket, Rhode Island, USA, October 30, 2023. (Photo: REUTERS/Faith Ninivaggi/FIle)

The commission’s interim report stems from special orders the FTC issued in 2022 and 2023 under Section 6(b) of the FTC Act, to the six largest PBMs. The staff report finds that the top six PBMs processed more than 90 per cent of the 6.6 billion prescriptions dispensed in 2023.

The top three PBMs processed nearly 80 per cent of the approximately 6.6 billion prescriptions dispensed by US pharmacies in 2023.

Vertically integrated PBMs appear to have the ability and incentive to prefer their affiliated businesses, creating conflicts of interest that can disadvantage unaffiliated pharmacies and increase prescription drug costs. These practices have allowed pharmacies affiliated with the three largest PBMs to retain high dispensing revenue over their estimated drug acquisition costs, including nearly US$1.6 billion in excess revenue on two specific cancer drugs in under three years.

Evidence suggests that PBMs and brand pharmaceutical manufacturers sometimes enter agreements to exclude lower-cost competitor drugs from the PBM’s formulary in exchange for increased rebates from manufacturers.

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