FTC sues pharmacy benefits managers for inflating insulin prices: NPR

This photo shows a unit dedicated to the production of insulin pens at the plant of American pharmaceutical company Eli Lilly in Fegersheim, France, on October 12, 2015.

Frederick Florin/AFP via Getty Images

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Frederick Florin/AFP via Getty Images

Millions of people with diabetes depend on insulin to survive. For years, many have been forced to pay exorbitant prices for a product that is cheap to make. 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 (PBMs).

The FTC has taken action against the top PBMs — CVS Health’s Caremark Rx, Cigna’s Express Scripts and United Health Group’s OptumRx — alleging that the companies have created a “perverse drug discount system” that artificially inflates the cost of insulin. If the lawsuit is successful, it could further reduce costs for patients at the pharmacy.

PBMs are essentially 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 fees, which are based on a percentage of a drug’s list price. In essence, in the case of insulin, it generated higher rebates and fees for PBMs if the drug cost more.

“Even when lower list price insulins that may have been more affordable for vulnerable patients became available, PBMs systematically excluded them in favor of higher list price, deep discount insulin products,” the FTC said in a press release Friday.

The three PBMs named in the FTC lawsuit represent about 80% of the market. The lawsuit alleges that the PBMs collected billions of dollars in rebates and fees while insulin became increasingly unaffordable.

Over the past two decades, the cost of the life-saving drug has risen 600%, forcing many Americans with diabetes to ration their medication and endangering their health. In 2019, one in four insulin patients couldn’t afford their medication, the FTC said. Some people have died.

The Pharmaceutical Care Management Association, which represents PBMs, denied many of the allegations in the FTC lawsuit, including that PBM rebates correlate with higher list prices. “This action not only fails to take into account the role of the entire prescription drug supply chain, but it also ignores positive progress supported by PBMs in making insulin more affordable for patients,” the PCMA said in a statement.

Over the years, about 20 states have passed laws or programs to cap the amount patients pay for insulin. But some of the biggest changes have occurred in the past two years.

In 2022, Congress passed the Inflation Reduction Act, which capped out-of-pocket insulin costs for Medicare patients. Last year, Eli Lilly, Novo Nordisk and Sanofi — the three companies that control about 90% of the U.S. insulin supply — also pledged to cut some of their prices.

On Friday, Rahul Rao, deputy director of the FTC’s Bureau of Competition, said the investigation into PBMs shed light on the “concerning and active role” the three manufacturers played in making insulin unaffordable for many people with diabetes. Rao said the three companies further inflated the list price of their insulin products “in response to PBMs’ demands for higher discounts.”