Healthcare giant sues to stop antitrust investigation into pharmaceutical brokers • Ohio Capital Journal

The owner of one of the three largest drug brokers in the United States filed a lawsuit Tuesday to thwart an attempt by the Federal Trade Commission to investigate industry practices. But the lawsuit relies on research the healthcare conglomerate helped pay for and conducted by an economist who has enriched himself arguing for massive mergers.

In July, the FTC issued devastating interim report alleging that Cigna/Express Scripts, CVS Health and UnitedHealth Group apparently used their pharmacy benefit managers, or PBMs, to inflate drug prices and ultimately worsen patient outcomes. In response, Cigna/Express Scripts sued, saying the FTC’s findings were “false and defamatory.”

The company is asking the United States District Court for Eastern Missouri to find that the FTC’s interim report is “not in the public interest,” vacate the report, and is seeking “FTC Chairwoman Linna M. Khan Recuses Herself from All Commission Actions Relating to Express Scripts.”

The healthcare conglomerate — the 16th-largest company by revenue in the United States — argued that it and other large PBMs were actually lowering drug costs, pointing to research by an economist who has earned more than an estimated $100 million in his career arguing for megamergers.

PBMs owned by health care giants—CVS Caremark, Express Scripts and OptumRx—control about 80% of their market. They represent insurers in pharmacy deals, determining which drugs are covered. They create networks of pharmacies. And they use a secretive system to determine how much to reimburse pharmacies for the drugs they dispense.

For years their critics have accused them of conflict of interest.

Each PBM owns a mail-order pharmacy, and parent company CVS Caremark owns the largest brick-and-mortar retailer. So they use secret price lists to decide how much to reimburse their own pharmacies — and their competitors — for drugs.

As an example of the apparent arbitrariness of PBM pricing, a recent analysis of Medicare data showed that CVS-owned plans were paying 501 different prices for the same medicine.

Also controversial are the practices of large PBMs regarding brand-name drugs, which are typically covered by patents and much more expensive than generics. Because the middlemen control access to so many patients, the manufacturers of such drugs have strong incentives to pay large rebates to PBMs in exchange for getting their products on covered drug lists or formularies, and for their drugs to have the lowest copays.

Scientific studies have shown that the growth of often secret discounts correlate with even greater increases in the list prices of drugsThere are also concerns that as conglomerates increasingly own intermediaries, pharmacies, health insurers and suppliers such as doctor’s offices, they are using such “vertical integration” to unfairly advantage their various business units at the expense of their competitors.

An FTC interim report at the center of the Express Scripts lawsuit finds that healthcare companies are using their size and reach to harm consumers.

In its lawsuit, Express Scripts alleged that it and other large PBMs actually helped consumers by using their power to squeeze discounts from drugmakers. They have“Over the past decade, plan sponsors and their members have lost tens of billions of dollars in drug costs,” the lawsuit says.

As evidence, he cites a 17-page report titled “An Economic Analysis of Criticisms Against Pharmaceutical Benefits Managers.”

The report disputes that rebates and other PBM practices raise drug costs, as critics claim. Tellingly, it says the studies are funded by the same people the FTC is investigating — Cigna/Express Scripts, United Group/OptumRx and CVS/Caremark.

And this was done by Compass Lexecon, a company that pays a lot of money to scientists who have repeatedly written papers on large mergers, ProPublica investigation completed in 2016

By claiming that such mergers create “efficiencies” that benefit consumers, the authors have a conflict of interest, the investigation shows. The researchers “transformed their field with academic work showing that mergers create efficiencies of scale that benefit consumers,” the investigation found. “But they earn their most lucrative days by lending their academic authority to mergers proposed by their corporate clients.”

In the case of the study cited in the FTC lawsuit, the author was University of Chicago economist Dennis W. Carlton. A ProPublica investigation uncovered evidence that he charged at least $1,350 an hour for such work and estimated that he had earned more than $100 million during his merger-supporting career. And that was eight years ago.

Meanwhile, it is becoming increasingly difficult for poor and disabled people to find a pharmacy.

“In the face of increasing vertical integration and concentration, these powerful middlemen can profit by inflating drug prices and squeezing money out of main street pharmacies,” reads the executive summary of the FTC report, which Express Scripts seeks to overturn.

Independent and small pharmacies have been closing for years, with many citing the practices of large PBMs as the reason. This has raised concerns that apothecary deserts can multiply, making it difficult or impossible for people without transportation to see a doctor and discuss their medications or chronic conditions such as diabetes or hypertension.

Those concerns have intensified with the announcement this year that Rite Aid and Walgreens plan to close thousands of pharmacies — including hundreds in Ohio and Michigan. Dave Burke, executive director of the Ohio Pharmacists Association, said the announcement of Walgreens’ closure particularly concerned him about the PBMs’ practices making the pharmaceutical business unsustainable.