The Federal Trade Commission is gearing up to take legal action against three major U.S. health companies for their practices as middlemen in negotiating medication prices, particularly insulin. According to a source familiar with the matter, the FTC believes that these companies are significantly inflating costs for patients. The targeted entities include UnitedHealth Group’s Optum Rx, CVS Health’s Caremark, and Cigna’s Express Scripts, all of which have ties to health insurers.
The impending lawsuits are expected to hone in on the business practices related to the rebates that pharmacy benefit managers (PBMs) broker with drug manufacturers. These rebates play a crucial role in determining the final cost of medications for consumers. CVS Caremark, one of the companies facing legal action, has defended its efforts to make insulin more affordable for individuals with diabetes. Similarly, Express Scripts has emphasized its role in combating high pharmaceutical prices while Optum Rx has yet to respond to the allegations.
PBMs serve as key intermediaries in the U.S. drug supply chain by negotiating rebates with drug manufacturers on behalf of various stakeholders such as insurers and large employers. They also curate lists of covered medications and handle reimbursements for pharmacies. The FTC’s investigation into PBMs, which dates back to 2022, has shed light on their impact on drug pricing dynamics.
The FTC’s interim report accuses the largest PBMs of manipulating the drug supply chain for their benefit at the expense of smaller pharmacies and patients. With a handful of PBMs controlling a significant portion of prescription fills in the U.S., concerns have been raised about their influence on pricing structures. While PBMs attribute high drug prices to manufacturers, the latter argue that rebates and fees demanded by middlemen force them to raise list prices.
The Biden administration and Congress have intensified their scrutiny of PBMs in an effort to increase transparency and address rising prescription drug costs. The Inflation Reduction Act, spearheaded by President Biden, has capped insulin prices for Medicare beneficiaries at $35 per month, but this policy does not currently extend to patients with private insurance. The broader goal is to bring U.S. drug pricing more in line with that of other developed nations.
The impending lawsuits against major U.S. health companies underscore the complexities of the pharmaceutical ecosystem and the pivotal role played by PBMs in shaping drug prices. As regulatory agencies and policymakers continue to investigate and intervene in this space, the ultimate goal is to ensure fair pricing practices that benefit both businesses and consumers.