FTC lawsuit claims pharmaceutical middlemen manipulate insulin market

The federal government is suing some of the big pharmaceutical companies that provide benefits over a drug rebate system that regulators say has led to skyrocketing prices for insulin for diabetes patients.

Three companies that process about 80% of prescriptions in the United States — Caremark, Express Scripts and OptumRx — have engaged in anticompetitive practices that drive up prices, the Federal Trade Commission alleged in a lawsuit filed Friday.

Pharmacy benefit managers, or PBMs, manage prescription drug coverage for insurers, large employers, and other clients. They create formularies, or lists of covered drugs, and negotiate discounts on drug prices.

The FTC found that the three companies’ discounting practices led to artificially high list prices for people. List prices are what a drugmaker initially sets for a product, and people who don’t have insurance or plans with high deductibles sometimes have to pay for prescriptions.

The price of insulin has become an important campaign issue in this year’s presidential election.

For years, pharmacy benefit managers have been the target of anger from politicians, patients and others. But PBMs have said they play an important role in controlling drug costs and pass on most of the discounts they negotiate to their customers.

Some of the pharmacy benefit managers (PBMs) cited by the FTC said in statements that the government’s actions indicate it does not understand how drug pricing works.

But the FTC found that the current system prioritizes insulins that have high list prices and excludes cheaper products. This, the FTC said, has helped PBMs and their group purchasing organizations “line their pockets while some patients are forced to pay higher out-of-pocket costs” for insulin, which is used by people with diabetes.

Caremark said Friday it is negotiating big discounts for its customers and helping its members make insulin affordable.

According to Express Scripts, the FTC has chosen to “ignore the facts and score political points rather than focus on its duty to protect consumers.”

Optum called the FTC’s accusations baseless and said PBMs “provide a critical counterweight to the unchecked monopoly power of pharmaceutical companies to set and raise drug prices.”

The FTC began investigating the PBMs more than two years ago and has said it will seek a range of information about how they do business. The Wall Street Journal reported in July that the FTC plans to sue three large PBMs over their drug-price negotiation tactics.

That same month, the FTC released a report describing PBMs as powerful middlemen that “stand to profit by inflating drug prices and squeezing Main Street pharmacies.” Express Scripts said earlier this week it wants that report retracted and is suing the agency.