The FTC action would target often high costs by trying to curb rebates it says drug makers pay to steer patients to their brand name products.
The Federal Trade Commission is getting ready to sue big health care companies, claiming that they are illegally maximizing profits by steering patients to high-cost drugs, according to four people with direct knowledge of the case discussions.
The pending case would target large pharmaceutical intermediaries owned by UnitedHealth Group, CVS and Cigna, claiming that they pushed patients to brand-name drugs, including insulin, according to the four people.
Lawmakers on Capitol Hill, federal regulators and patient advocates have focused on a key profit source for the middlemen: the rebates drug companies pay to get certain medications on a list of covered drugs. They say those rebates can inflate the cost of drugs.
A lawsuit could be filed as soon as this month, said the four people, granted anonymity to discuss a confidential matter, though no final decision has been made. The action is just the latest effort to take aim at high drug costs in the U.S., where patients and insurers spend more on medicine than other countries. Drug manufacturers and the middlemen who determine which drugs will be covered by insurance have been pointing the finger at each other as the reason for the high prices.
In recent weeks executives and lawyers for the three companies met with the three Democratic FTC commissioners in a bid to stave off a lawsuit. The agency’s two Republicans — Melissa Holyoak and Andrew Ferguson — are recused because of previous work on similar investigations as solicitors general in Utah and Virginia, respectively.
An FTC spokesperson declined to comment.
Greg Lopes with the Pharmaceutical Care Management Association, a trade group for PBMs, said they “have a proven track record of lowering prescription drug costs” and put the blame on drug companies who “alone have the power to set their list prices, and they continue to set them high.”
Express Scripts spokesperson Justine Sessions also blamed drugmakers and noted that average insulin prices from her company are under $25.
“We will defend the use of these tools vigorously as we continue working to safeguard our clients and their members from drugmaker price gouging,” CVS spokesperson David Whitrap said.
An Optum spokesperson declined to comment.
The lawsuit would be the latest in a string of actions in the pharma sector. On Tuesday, the agency released a highly critical 71-page report on PBMs. In December, it blocked Sanofi’s exclusive license for a rival drug still in development, and last summer it sued to block Amgen’s takeover of Horizon Therapeutics on the theory that the company would have been better positioned to offer exclusionary rebates to PBMs (the companies later settled the case).
The drug makers are also under scrutiny as part of the FTC probe of insulin prices but it couldn’t be learned whether they would also be named in a lawsuit.
Sanofi spokesperson Adam Gluck said his company works to offer the lowest prices possible, but “Following through on that commitment requires Sanofi to navigate a complex environment. Under the current system, fees and savings negotiated by health insurance companies and PBMs through rebates are not consistently passed through to patients in the form of lower co-pays or coinsurance. As a result, patients’ out-of-pocket costs continue to rise while - between 2012 and 2022 – the average net price of our insulins declined by 58%.”
A spokesperson for Novo Nordisk declined to comment. A spokesperson for Eli Lilly did not respond for comment.
The White House has made a crackdown on anticompetitive conduct a centerpiece of its domestic economic policy, with antitrust enforcers at the FTC and Justice Department, as well as agencies across government working to lower prices on a range of critical goods. The FTC is tackling grocery costs while the DOJ is taking on airlines.
Insulin, used by millions of Americans, has taken center stage in the high-stakes battle over health care costs. Though prescribed for the past 100 years, only three companies supply insulin in the U.S. and much of that is higher-cost branded versions, despite the increasing availability of lower-price generic options.
In a joint op-ed with Sen. Bernie Sanders (I-Vt.), President Joe Biden called out Novo Nordisk and Eli Lilly specifically for high prices on new diabetes drugs like Ozempic and Mounjaro.
Diabetic patients describe having to ration the drug because of the cost, which in recent years had ballooned to hundreds of dollars each month. Coupled with lower prices in much of the world and the existence of many inexpensive options, patient advocates have pointed to the insulin market as evidence of a broken health care system.
Congress capped insulin prices for Medicare patients at $35 per month in the Inflation Reduction Act, and Biden has urged lawmakers to expand the cap to private insurance plans. Biden highlighted that push in his State of the Union address earlier this year, and former President Donald Trump has also sought to take credit for lowering insulin costs.
But the FTC continues to believe that the companies deprive patients of lower cost alternatives, the four people said.
The out-of-pocket Medicare cap only shifts costs from the individual to the insurer, which can pass on the cost to taxpayers and employers. That can take the form of higher premiums for beneficiaries.
The FTC has several options for a lawsuit. They include a so-called section 5 case under the FTC Act, which can be broader than specific antitrust laws, as well as the Robinson-Patman, a Depression-era law primarily targeting discriminatory discounting between suppliers and retailers, but which also includes an anti-kickback provision.
The FTC is not taking issue with “[G]ood faith rebates and fees’’ it said in a 2022 policy paper on PBMs and the insulin market. However, they “may incentivize PBMs and other intermediaries to steer patients to higher-cost drugs over less expensive alternatives,” the agency said. “This practice could lead to increased costs for both patients and payers, including increased out-of-pocket costs at the point of sale. It may also insulate more expensive drugs from competing with less expensive alternatives.”
While PBMs are intermediaries between drugmakers and payers, Optum Rx, Caremark and Express Scripts are all part of conglomerates that include large insurers and pharmacy operations. The three process nearly 80 percent of prescription claims in the U.S., according to the initial results of the broader study of the PBM industry the FTC released earlier this week.
Those relationships create a complex market with often conflicting incentives, according to the report, which says “amidst increasing vertical integration and concentration, these powerful middlemen may be profiting by inflating drug costs and squeezing Main Street pharmacies.”
While the report is focused on the relationships between PBMs and pharmacies, the FTC said it has evidence that “brand manufacturers and PBMs may be entering into rebate contracts designed to cut off access to generic and biosimilar competitors.”
Reporters: JOSH SISCO, David Lim
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