FTC to sue drug managers amid insulin price hikes

Investing.com - The Federal Trade Commission (FTC) is gearing up to sue the top three pharmacy-benefit managers (PBMs) over their strategies for negotiating drug prices, including insulin. This follows a two-year investigation into whether these companies are directing patients away from more affordable medications.

According to sources close to the matter, the FTC is planning to file lawsuits targeting business practices related to rebates negotiated with drug manufacturers. The agency is also investigating the role that insulin manufacturers play in these negotiations.

PBMs oversee prescription-drug transactions for insurers and employers, negotiating discounts with drug manufacturers on behalf of these clients.

The three largest PBMs—OptumRx, a part of Unitedhealth Group (NYSE: UNH); Express Scripts (NASDAQ: ESRX), owned by Cigna Corp (NYSE: CI); and CVS Health Corp (NYSE: CVS) Caremark, manage approximately 80% of US prescriptions.

Under pressure from Sanders and other legislators, Eli Lilly and Company (NYSE: LLY), Sanofi (EPA: SASY), and Novo Nordisk (NYSE: NVO) (CSE:NOVOb) also committed to significant price reductions on insulin last year. They now provide coupons enabling many uninsured and commercially insured patients to access insulin for $35 a month.

The prices of insulin, a vital treatment for diabetes, saw consistent annual increases from 2010 to 2019, according to a study published last year in JAMA Network Open.

However, since 2015, Pharmacy Benefit Managers (PBMs) have negotiated discounts, effectively reducing net prices.

Senator Bernie Sanders, an Independent from Vermont, criticized PBMs last year for allegedly prioritizing insulin products that offered them larger rebates, rather than focusing on those that were more cost-effective for patients.

Pharmaceutical company Lilly revealed that it launched a more affordable version of its popular insulin, but fewer insurers offered coverage for it as PBMs favored the larger rebates associated with the pricier version.

In 2022, President Biden enacted legislation that caps out-of-pocket payments for insulin at $35 a month for Medicare patients.

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The Federal Trade Commission (FTC) released an interim report on Tuesday, documenting the findings of a two-year investigation into whether PBMs end up driving up costs for their clients and, in some cases, patients at pharmacy counters. FTC Chair Lina Khan stated that the agency's examination of PBMs is aimed at making healthcare more affordable.

The companies criticized the report as flawed and misleading, maintaining that they save customers money. "FTC leadership has shown that they have predetermined conclusions that they want to advance," JC Scott, president of the Pharmaceutical Care Management Association, said in response to the FTC’s report.

Federal law allows the FTC to prosecute companies for "unfair or deceptive" trade practices or "unfair methods of competition." Legislators in the House and Senate have proposed bills to regulate PBMs’ business practices, and lobbyists for drug manufacturers have implicated PBMs as the cause of escalating drug costs.

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