FTC Takes Legal Action Against Top PBMs Over Insulin Pricing Practices
Key Insights
The Federal Trade Commission has filed a complaint against the three largest pharmacy benefit managers - CVS Caremark (search), Express Scripts (search), and Optum Rx (search) - alleging they artificially inflated insulin costs for patients.
The targeted PBMs control 80% of US prescriptions, with the FTC investigation revealing concerning practices that have contributed to insulin gross sales doubling from $13 billion to $27 billion between 2012-2019.
Industry experts, including Ted Okon of Community Oncology Alliance, view this action as a significant step toward PBM reform, particularly noting concerns about offshore group purchasing organizations and their role in drug pricing.
The Federal Trade Commission (FTC) has launched legal action against the nation's three largest pharmacy benefit managers (PBMs), accusing them of manipulating insulin prices and forcing patients to pay higher costs to increase their profits. The administrative complaint targets CVS Health's Caremark, Cigna's Express Scripts (search), and UnitedHealth's Optum Rx (search), which collectively control 80% of prescription management in the United States.
Impact on Insulin Pricing and Patient Access
The investigation reveals a troubling trend in insulin pricing over the past decade. From 2012 to 2019, gross sales for four leading insulin products in the US more than doubled from $13 billion to $27 billion. However, net sales after rebates and discounts actually decreased by approximately 40%, dropping from $8 billion to $5 billion. By 2019, price concessions exceeded 80%, with over two-thirds negotiated between manufacturers and commercial or Medicare Part D plans through PBMs.
The consequences of these pricing practices have been severe for patients. According to a JAMA study, one in five US adults with diabetes (search) under 65 years old reported rationing insulin due to cost concerns. These individuals, notably, are not protected by the $35 out-of-pocket limits established for Medicare beneficiaries through the Inflation Reduction Act.
PBM Business Practices Under Scrutiny
The FTC's action follows a comprehensive 2022 investigation that required the six largest PBMs to submit detailed records about their business practices. Ted Okon, MBA, executive director for the Community Oncology Alliance (COA), noted the significance of the FTC's focus on PBMs' group purchasing organizations (GPOs).
"What's very interesting here is that it was specifically also against their three group purchasing organizations, two of which are offshore," Okon explained. "The speculation is the reason they are offshore is not for tax advantages, but to basically shield what is going on through those offshore entities."
Industry Response and Reform Proposals
David Eagle, MD, chair of Legislative Affairs and Patient Advocacy at New York Cancer & Blood Specialists, emphasized that the current PBM model is fundamentally broken. "PBMs benefit from promoting the most expensive products on their formulary so they capture higher rebates. It's not just true for insulin—it's true for a lot of drugs—and it's definitely true for oncology drugs too," Eagle stated.
Julie Reed, executive director of the Biosimilars Forum, has called for urgent reforms to address what she describes as PBMs' monopolistic practices. She emphasizes that current transparency efforts, while important, are insufficient to address the systemic issues in drug pricing.
Recent Manufacturer Response
In response to mounting pressure, major insulin manufacturers have taken steps to address pricing concerns. Eli Lilly and Company, Novo Nordisk, and Sanofi have all announced significant reductions in their insulin list prices. However, experts maintain that comprehensive PBM reform remains essential for lasting change in drug pricing and accessibility.