FTC Intends to Sue Biggest Pharmacy Benefit Managers for Unfair Negotiating Tactics

The Federal Trade Commission (FTC) is preparing to sue the 3 biggest pharmacy benefit managers (PBMs) for their role in negotiating unfair drug prices for patients and driving up the prices of key drugs like insulin, the details of which were released in an interim report by the Commission, according to multiple sources.^1-5

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The report analyzed the practices of PBMs, writing that they exercised their immense influence to hike up the prices of drugs that patients rely on while simultaneously disadvantaging independent pharmacies and patients across the country.²

CVS Health’s Caremark, Cigna Group’s Express Scripts, and UnitedHealth Group’s OptumRx are some of the largest health care firms in the country; these 3 firms are poised to be challenged by the FTC in court for their allegedly unfair business practices.³

In a statement released regarding the interim report, the National Community Pharmacists Association (NCPA) called for continued investigations and federal action, saying the report “should leave no doubt that these massive health care conglomerates are creating unfair advantages for themselves that are driving up costs for consumers, limiting consumer choices, and killing access to quality pharmacy care.”⁴

One key profit source for PBMs, the rebates that drug companies pay to acquire certain medications on a list of covered drugs, are a target for federal officials and patient advocacy groups due to the propensity of these rebates to inflate drug costs. A lawsuit against these PBMs could be filed within the month.⁵

In a statement from FTC Chair Lina M. Khan, as well as Commissioners Alvaro M. Bedoya and Rebecca Kelly Slaughter, they wrote that “Pharmacists from West Virginia to Texas have written to the FTC, expressing concern that PBMs’ business practices are creating risk for their patients while squeezing independent pharmacies that have served their communities for decades.”⁶

Insulin has been a particular point of tension between large drug companies and the federal government, as the Biden administration has made it a priority to push antitrust regulations and lower the price of the lifesaving drug.⁵ Due to the passing of the Inflation Reduction Act in 2022, the price of insulin for Medicare patients was capped at $35; the Biden administration has encouraged this cap to apply to private insurance companies as well.⁷

The CEO of NCPA, B. Douglas Hoey, MBA, has praised the release of the interim report and called for “definitive action” to reign in the practices of PBMs, saying “the FTC must continue its investigation and pursue the information that the PBMs have so far defiantly withheld. Patients and community pharmacies need this fight to be finished, and need it urgently.”⁴

The FTC has enforcement authority and can initiate an enforcement action using a judicial or administrative action if it has “reason to believe” that the law is is being or has been violated, according to their website. Section 5(a) of the FTC Act details that “unfair or deceptive acts or practices in or affecting commerce…are…declared unlawful,” which include “such acts or practices…that cause or are likely to cause reasonably foreseeable injury within the United States.”^5,8

An unfair act, according to the Commission and 15 U.S.C. Sec. 45(n), is one that “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.”⁸

JC Scott, president and CEO of the Pharmaceutical Care Management Association (PCMA), a trade group representing PBMs,⁵ decried the findings of the interim report in a statement, writing that “the report completely overlooks the volumes of data that demonstrate the value that PBMs provide to America’s health care system by reducing prescription drug costs and increasing access to medications.”⁹

Some PBMs still have not fully complied with the FTC’s requests for data and information surrounding their business practices for their investigation. Besides the reported desire of the FTC to sue the 3 largest PBMs, the FTC suggested in their interim report that additional judicial actions may be necessary to compel companies to fully comply with their order.²

References

1. Whyte, L E and Matthews, A W. FTC to sue drug managers over insulin prices. The Wall Street Journal. Updated July 10, 2024. Accessed July 11, 2024. https://www.wsj.com/health/pharma/ftc-to-sue-drug-managers-over-insulin-prices-b46af71f?st=edj2se1di4w1fz9&reflink=desktopwebshare_permalink

2. Halpern, L. FTC report acknowledges impact pharmacy benefit managers have on cost, accessibility of prescription drugs. Pharmacy Times. Published July 9, 2024. Accessed July 11, 2024. https://www.pharmacytimes.com/view/ftc-report-details-impact-pharmacy-benefit-managers-have-on-cost-accessibility-of-prescription-drugs

3. Roush, T. FTC will sue pharmacy middlemen over inflated insulin prices, report says. Forbes. Updated July 11, 2024. Accessed July 10, 2024. https://www.forbes.com/sites/tylerroush/2024/07/10/ftc-will-sue-pharmacy-middlemen-over-inflated-insulin-prices-report-says/

4. National Community Pharmacists Association. Scathing FTC interim report on PBMs warrants further investigations, immediate action by policymakers and regulators. Released July 9, 2024. Accessed July 11, 2024.

5. Sisco, J. Feds poised to sue pharmacy gatekeepers over high drug costs. Politico. Updated July 10, 2024. Accessed July 11, 2024. https://www.politico.com/news/2024/07/10/ftc-pharmacy-insulin-drug-00167342

6. Federal Trade Commission. Statement of Chair Lina M. Khan joined by Commissioners Alvaro M. Bedoya & Rebecca Kelly Slaughter regarding the pharmacy benefit managers interim staff report, commission file no. P221200. Released July 9, 2024. Accessed July 11, 2024. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.ftc.gov/system/files/ftc_gov/pdf/Khan-Bedoya-Slaughter-Statement-Pharmacy-Benefit-Managers-Report.pdf

7. Cubanski J, Neuman T, Freed M. Explaining the prescription drug provisions in the Inflation Reduction Act. KFF. Published January 24, 2023. Accessed July 11, 2024. https://www.kff.org/medicare/issue-brief/explaining-the-prescription-drug-provisions-in-the-inflation-reduction-act/

8. Federal Trade Commission. A brief overview of the Federal Trade Commission’s investigative, law enforcement, and rulemaking authority. Updated May 2021. Accessed July 11, 2024. https://www.ftc.gov/about-ftc/mission/enforcement-authority

9. Pharmaceutical Care Management Association. PCMA statement on FTC interim PBM report. Released July 9, 2024. Accessed July 11, 2024. https://www.pcmanet.org/press-releases/pcma-statement-on-ftc-interim-pbm-report/07/09/2024/