FTC Sues Pharmacy Benefit Managers for Inflating Insulin Prices

Drug pricing middlemen accused of anti-competitive practices that drive up costs for consumers who rely on common & lifesaving drug

Cantwell's Bipartisan Pharmacy Benefit Managers Transparency Act would hold PBMs accountable for deceptive practices

Today, the Federal Trade Commission (FTC) announced that the organization filed legal action against the country's three largest prescription drug benefit managers (PBMs)-Caremark Rx, Express Scripts and OptumRx-for engaging in anti-competitive and unfair practices that inflated the price of insulin drugs, blocked patients' access to more affordable products and shifted the cost of high insulin list prices to vulnerable patients. U.S. Senator Maria Cantwell (D-Wash.), Chair of the Senate Committee on Commerce, Science and Transportation, applauded the FTC's action:

"Today's FTC action against the three biggest PBMs for manipulating the price of insulin-a drug that millions of Americans cannot live without-is a big step to help patients," Sen. Cantwell said. "I know of Washingtonians who have had to choose between insulin or paying rent-while PBMs pocket billions. We cannot allow PBMs to raise prices to sky high levels. I hope the FTC will order the PBMs to stop their unfair practices that drive up insulin prices and I also hope that Congress will pass my Pharmacy Benefit Manager Transparency Act that will make PBMs' unfair spread pricing and claw backs permanently unlawful."

According to data from the American Diabetes Association, approximately 536,600 adults in Washington state, or 8.7% of the adult population, have been diagnosed with diabetes.

PBMs were initially formed to process claims and negotiate lower drug prices with drug makers. Today, they administer prescription drug plans for hundreds of millions of Americans, and just three PBMs control nearly 80 percent of the entire prescription drug market. They serve as middlemen, managing every aspect of the prescription drug benefits process for health insurance companies, self-insured employers, unions, and government programs.

Currently, PBMs operate out of the view of regulators and consumers-setting prescription costs, deciding what drugs are covered by insurance plans and how they are dispensed-pocketing unknown sums that might otherwise be passed along as savings to consumers and undercutting local independent pharmacies. This lack of transparency makes it impossible to fully understand if and how PBMs might be manipulating the prescription drug market to increase their profits and drive up drug costs for consumers.

Sen. Cantwell introduced the Pharmacy Benefit Manager Transparency Act in May 2022 with Sen. Chuck Grassley (R-Iowa) and has continued to advocate for increased federal oversight of PBMs, including on the Senate floor in June, in a letter to FTC Chair Lina Khan in January, and in a press conference at a Seattle pharmacy last October. The bill has been endorsed by more than 200 organizations across the country, including AARP. The bill also has strong bipartisan support, with 10 Republican and four Democratic cosponsors. Last March, the bill passed the Senate Commerce Committee 18-9. The legislation awaits a full vote in the Senate.

The Pharmacy Benefit Manager Transparency Act would:

• Prohibit unfair or deceptive practices.
• • Block PBMs from engaging in spread pricing, unfairly reducing or clawing back drug reimbursement payments to pharmacies, and unfairly charging pharmacies more to offset federal reimbursement changes.
• Incentivize fair and transparent PBM practices.
• • Provide exceptions to liability for PBMs that pass along 100% of rebates to health plans or payers and fully disclose prescription drug rebates, costs, prices, reimbursements, fees, and other information to health plans, payers, pharmacies, and federal agencies.
• Improve transparency and competition by requiring PBMs to report:
• • The amount of money they obtain from spread pricing, pharmacy fees, and clawbacks.
  • Any differences in the PBMs' reimbursement rates or fees PBMs charge affiliated pharmacies and non-affiliated pharmacies.
  • Whether and why they move drugs in formulary tiers to increase costs.
• Direct the Federal Trade Commission (FTC) to report to Congress its enforcement activities and whether PBMs engage in unfair or deceptive formulary design or placement.
• • Authorize the FTC and state attorneys general to enforce the bill.
  • Protect whistleblowers from being fired or reprimanded for bringing violations to light.

In Washington state and across the nation, PBMs are contributing to a hostile business ecosystem, especially for independent community pharmacies. In 2023, the state saw the closure of 60 pharmacies and in the last 18 months a record 83 pharmacies have closed in the state. These closures have a significant impact on Washington consumers. A recent analysis by the Associated Press found that Washington state is the 6^th worst in the nation pharmacy access. There are currently only three 24-hour pharmacies open in the entire western side of the state, none of which are in Seattle.

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