US FTC sues insulin brokers for ‘artificially inflating’ drug prices

On Friday, the U.S. Federal Trade Commission charged three companies with “anticompetitive and unfair” practices “that artificially inflated the list price of insulin.”

For years, many of the millions of Americans who rely on insulin to survive “have been forced to pay exorbitant prices for a product that is cheap to make,” NPR reports. “Now the federal government is targeting part of the system behind high insulin prices.”

While the co-pay has dropped to $35 a month for many people, questions remain about how the drug became so expensive in the first place. In a new lawsuit filed Friday, the Federal Trade Commission said it is targeting one link in the chain: pharmacy benefit managers. The FTC has taken action against the top pharmacy benefit managers (PBMs) — CVS Health’s Caremark Rx, Cigna’s Express Scripts and United Health Group’s OptumRx — saying the companies have created a “perverse drug discount system” that artificially inflates the cost of insulin. If the lawsuit is successful, it could further drive down costs for patients at the pharmacy counter.

PBMs essentially serve as middlemen between drugmakers and insurance companies. Their job is to lower drug prices. But the process is complex and opaque, and critics say they actually drive up prices for patients. The FTC said a major problem is that PBMs’ revenues are tied to rebates and reimbursements, which are based on a percentage of a drug’s list price. In essence, insulin generated bigger rebates and reimbursements for PBMs if the drug cost more. “Even when lower list price insulins that could have been more affordable for vulnerable patients became available, PBMs systematically excluded them in favor of insulin products with high list prices and steep rebates,” the FTC said in a news release Friday.

The three PBMs named in the FTC lawsuit account for about 80% of the market. According to the lawsuit, the PBMs have collected billions of dollars in rebates and fees while insulin has become increasingly unaffordable. Over the past two decades, the cost of the life-saving drug has increased by 600%, forcing many Americans with diabetes to ration their medication and endangering their health. In 2019, one in four insulin patients could no longer afford their medication, the FTC said. Some have died.
The FTC’s statement said the companies “abused their economic power by manipulating competition in the pharmaceutical supply chain to their advantage, forcing patients to pay more for lifesaving medications… While PBM respondents received billions in rebates and associated fees, according to the complaint, one in four insulin patients could no longer afford their medications in 2019…”

“(A)ll pharmaceutical manufacturers should be aware that their participation in the type of conduct challenged here raises serious concerns and that the Bureau of Competition may recommend that pharmaceutical manufacturers be targeted in future enforcement actions.”