October 09, 2024

The Federal Trade Commission (FTC) recently filed a complaint against three pharmacy benefit managers (PBMs) and their affiliated group purchasing organizations (GPOs) alleging the entities engaged in anticompetitive and unfair rebating practices that have artificially inflated the list price of insulin drugs.

In the administrative complaint, the FTC alleges that the PBMs have engaged in practices that violate Section 5 of the FTC Act which prohibits "unfair methods of competition" and "unfair or deceptive acts or practices" in or affecting commerce. Specifically, the agency claims the named PBMs created a “perverse drug rebate system” which prioritizes high rebates from drug manufacturers, leading to artificially inflated insulin list prices. The complaint contends that the rebate system has shifted the focus away from lowering drug costs, stating that PBMs "extracted increasingly higher rebates from insulin manufacturers in exchange for favorable formulary placement." The complaint also charges that, even when lower priced yet clinically equivalent insulins became available, the PBMs systemically excluded them in favor of high list price, highly rebated insulin products.

This action by the FTC is a continuation of significant scrutiny of PBMs – specifically the three largest PBMs named in this latest lawsuit – that we have seen for some time now. Under the Biden administration, the FTC has adopted a more aggressive stance that, while generally characterized towards consumer protections and fostering competition, has raised concerns among businesses about overregulation.

The Business Group and other stakeholders have anticipated this action related to insulin for several months. (See: What Your CEO is Reading: PBMs – Continued Inquiry, Important Themes, New Risks, Oversimplification, and the Extent of Government Oversight)

While appropriate government oversight is necessary to maintain a fair marketplace, the current approach risks creating an environment where businesses may feel hampered by excessive intervention, potentially affecting their ability to thrive, innovate, and compete globally. An example of this includes the FTC’s July report describing, in rather pointed language, the alleged practices by PBMs that it asserts drive drug price inflation. Express Scripts, one of the three PBMs named in the July report and the insulin lawsuit, filed their own lawsuit in September claiming that July report was "unfair, biased, erroneous, and defamatory."

The Business Group will continue to track and engage on these issues on behalf of our members.

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