TL/DR –
Pharmacy benefit managers (PBMs) Express Scripts, Caremark, and OptumRx have sued the Federal Trade Commission (FTC), alleging unconstitutional attempts to reform the industry. The FTC had accused the PBMs of unfair rebating practices that increased insulin prices, thus reducing patient access to lower-priced products and transferring high insulin costs to vulnerable patients. The PBMs argue that the FTC is seeking to “upend present day drug rebate contracts,” requiring them to overhaul their entire contracting framework and numerous contracts with drug manufacturers, health plan sponsors, and other private parties.
FTC Faces Lawsuit from Big Three PBMs Over Drug Rebate Contracts
Pharmacy benefit managers (PBMs) Express Scripts, Caremark, and OptumRx are taking legal action against the Federal Trade Commission (FTC) to challenge what they call an attempt to “upend present day drug rebate contracts.”
The lawsuit, filed on Tuesday, November 19, in a Missouri federal court, is a response to FTC’s own lawsuit against these same PBMs—the three largest in the country. The FTC’s lawsuit, filed in September, accused the PBMs of anticompetitive and unfair rebating practices related to insulin prices.
The FTC alleges the PBMs and their affiliated group purchasing organizations (GPOs) have inflated the cost of insulin, limited patient access to lower priced drugs, and passed the cost burden to vulnerable patients. According to the FTC’s administrative complaint, these PBMs have manipulated the pharmaceutical supply chain to their advantage, forcing patients to pay more for necessary medication.
Collectively, Express Scripts, Caremark, and OptumRx—known as the “Big Three”—administer about 80% of all prescriptions in the U.S. While the FTC’s original investigation was focused on only insulin costs, the commission now seeks to implement changes affecting all drugs.
The Implications of the Lawsuit
The PBMs, which are vertically integrated with the country’s largest insurers—Express Scripts with Cigna, Caremark with CVS Health, and OptumRx with UnitedHealth Group—are arguing that the FTC’s actions are an unconstitutional attempt to reform the industry.
They claim the FTC is trying to overhaul current drug rebate contracts and force PBMs to revamp their entire contracting framework, affecting contracts with drug manufacturers, health plan sponsors, and others. The PBMs also argue that the FTC is overstepping its bounds and attempting to define what it considers unfair practices based on its own subjective preferences.
The PBMs are seeking a declaratory judgment to deem the FTC’s proceedings as unlawful.
Looking at the Bigger Picture
In July, the FTC released a report on pharmacy benefit managers, titled “Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies.” Following the report, Express Scripts sued the FTC.
The report, which was the outcome of a two-year investigation into PBM practices, concluded that PBMs are “powerful middlemen” that are inflating drug costs and putting pressure on local pharmacies.
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