Allegations of Inflating Insulin Prices Lead to FTC Lawsuit against Drug Middlemen

• The FTC filed a lawsuit against three major US health companies that deal with insulin pricing, alleging that the drug distributors increase their profits by "artificially" raising the cost for patients.
• The suit aims at the three largest pharmacy benefit managers, namely Optum Rx, Caremark of CVS Health, and Express Scripts of Cigna, along with their associated group purchasing organizations.
• In the future, the FTC may suggest legal action against Eli Lilly, Sanofi, and Novo Nordisk, who produce insulin.

The FTC filed a lawsuit against three major US health companies that deal with insulin pricing, alleging that the drug distributors increase their profits by "artificially" raising the cost for patients.

The three largest pharmacy benefit managers, Optum Rx, Caremark, and Express Scripts, are targeted by the suit. These companies, which are owned by or linked to health insurers, collectively manage approximately 80% of the nation's prescriptions, as per the FTC.

The lawsuit filed by the FTC involves not only the PBMs but also their associated group purchasing organizations, which facilitate drug purchases for hospitals and other healthcare providers.

In the U.S., PBMs play a crucial role in the drug supply chain. They negotiate rebates with drug manufacturers on behalf of insurers, large employers, and federal health plans. Additionally, they create formularies, which are lists of medications covered by insurance, and reimburse pharmacies for prescriptions. The FTC has been investigating PBMs since 2022.

The PBMs have created a "perverse" drug rebate system that prioritizes high rebates from drugmakers, leading to "artificially inflated insulin list prices." Additionally, the agency's suit alleges that PBMs favor those high-list-price insulins even when more affordable insulins with lower list prices become available.

Insulin drug costs have increased dramatically for millions of American diabetics over the past decade, putting many vulnerable patients at risk, according to Rahul Rao, deputy director of the FTC's Bureau of Competition.

Rao stated that the FTC's administrative action aimed to put an end to the Big Three PBMs' exploitative conduct and was an important step in fixing a broken system. This fix could have a ripple effect beyond the insulin market and restore healthy competition to drive down drug prices for consumers.

The FTC expressed its ongoing concern about the role of insulin manufacturers such as , Danish company Novo Nordisk, and French drugmaker Sanofi in contributing to higher list prices, as these companies account for approximately 90% of the U.S. insulin market.

The FTC's Bureau of Competition may recommend suing drugmakers who engage in conduct similar to that challenged here, as the FTC has stated that all drugmakers should be aware of the serious concerns raised by their participation in such conduct.