Federal regulator takes big pharma middlemen to court over insulin prices • Ohio Capital Journal

A government antitrust watchdog on Friday sued three major health care companies, accusing their drug brokers of causing skyrocketing insulin prices since 2012.

The Federal Trade Commission alleges that the middlemen — known as pharmacy benefit managers, or PBMs — have used their size to force patients to buy more expensive versions of life-saving drugs while keeping cheaper versions out of their reach.

“The FTC alleges that the three PBMs created a perverse drug rebate system that prioritizes high rebates from drug manufacturers, leading to artificially high insulin prices,” the agency said in a statement announcing the lawsuit. “The complaint alleges that even when insulins with lower list prices became available that could be more affordable for vulnerable patients, the PBMs systematically excluded them in favor of insulin products with high list prices and deep rebates. These strategies allowed (the health care conglomerates) to line their own pockets while some patients were forced to pay higher out-of-pocket costs for insulin medications, the FTC alleges in the complaint.”

Each of the three largest PBMs — CVS Caremark, OptumRx and Express Scripts — is owned by a company that also owns a large health insurer — Aetna, UnitedHealth and Cigna, respectively. They also own mail-order and retail pharmacies and health care providers such as physician offices.

Each of these conglomerates is among the 16 largest companies in the country, and their pharmaceutical benefit managers collectively control access to medicines for about 80% of insured patients.

On behalf of insurers, PBMs create networks of pharmacies, agree on transactions and determine how much to reimburse their own pharmacies and competing pharmacies for the drugs they dispense.

The FTC lawsuit focuses on another function of PBMs — deciding which drugs will be covered by insurance, while negotiating rebates and other discounts with the companies that make them. The system is often opaque, and critics — including the FTC — say conglomerates pocket most of the money.

PBMs, in turn, argue that they use their size to force drugmakers to provide discounts that they pass on to their customers.

“The FTC’s action ignores the significant progress that PBMs have made in lowering costs in the insulin market and is yet another example of the agency pursuing a biased investigation with a predetermined, anti-industry outcome — driven by special interest agendas and designed to misrepresent the role and value of pharmacy benefit managers,” said the Pharmaceutical Care Management Association, an industry group. he said in response to the lawsuit.

He added that “not only does this action fail to take into account the role of the entire prescription drug supply chain, but it also ignores the positive progress that PBMs are supporting in making insulin more affordable for patients. Contrary to the rhetoric, the current insulin market actually works, and PBMs are effectively leveraging greater competition to drive down insulin prices and are doing their part to make insulin affordable for patients through innovative programs.”

The FTC lawsuit was not posted on its website Monday afternoon. But the statement announcing it said that by demanding ever-larger rebates from insulin manufacturers, pharmacy benefit managers are drastically raising list prices and, in turn, deductibles and coinsurance costs for many diabetes patients.

Because of rebates and other discounts, PBMs don’t pay list prices, but they are often used to determine pharmacy out-of-pocket costs. A 2020 analysis by the Schaeffer Center at the University of California found that every $1 increase in discounts correlates with a $1.17 increase in list prices.

The FTC found that a change in PBM practices in 2012 led to a sharp increase in insulin prices. Previously, their lists of covered drugs — or formularies — were relatively open to anyone who wanted to come, the statement said.

“According to the complaint, that changed when PBMs, using their size, began threatening to exclude certain drugs from the prescription drug list in order to obtain higher rebates from drug manufacturers in exchange for favorable placement on the prescription drug list,” the FTC said in a statement. “Securing prescription drug list coverage was critical for drug manufacturers to gain access to patients with commercial health insurance, the FTC alleged.”

Insulin prices have skyrocketed — in one case, from $122.59 in 2012 to $289.36 in 2018, the statement said.

The FTC not only criticized pharmaceutical middlemen, saying, “PBMs are not the only potentially guilty actors—the Bureau also remains deeply concerned about the role that drugmakers like Eli Lilly, Novo Nordisk, and Sanofi are playing in raising the retail prices of life-saving drugs like insulin. Indeed, all drugmakers should be aware that their participation in the type of conduct at issue here raises serious concerns and that the Bureau of Competition could recommend that drugmakers be sued in any future enforcement actions.”

The lawsuit comes as the FTC is conducting a major investigation into the practices of large PBMs and the health care conglomerates that own them. In July, the FTC issued a scathing interim report that found the companies had apparently engaged in anticompetitive practices that They raised the prices of medicines and harmed patients.

Last week, Express Scripts sued to stop the investigation, saying it was defamatory. To support its claim, the lawsuit relies on industry-funded research that was conducted by economist who earned over $100 million in a career supporting large-scale mergers.

Under the leadership of Chairwoman Lina Khan, the FTC is trying to end 40 years of lax antitrust enforcement.

Another commissioner, Alvaro Bedoya, said that the primary purpose of antitrust law in the United States is treat consumers and small market players fairly. But starting in the 1970s, some economists argued that the real goal was efficiency, and larger entities were often better at doing that. A long period of mergers followed.

IN interview aired Sunday night on CBS’s “60 Minutes,” Khan was asked if she agreed that big players are more efficient than small ones. There has to be strong competition, she said.

“Even if those benefits do occur, if the (merged) company is not deterred by competition, it will have no incentive to pass those benefits on to consumers because those consumers may have nowhere else to go,” she said.

Asked whether the greed of large American corporations is to blame for our persistent post-pandemic inflation, Khan said he had no doubt about it.

“We’ve seen some executives brag at press conferences that inflation is helping their bottom line,” she said.