Published on Apr 22, 2024
CVS Health (CVS), Cigna (CI) and UnitedHealth Group (UNH)—which operate the three largest U.S. pharmacy benefit managers—are targeted in a lawsuit the FTC is preparing that alleges the companies’ PBM units engineered a scheme to trade rebates for favored positioning of brand-name versions of insulin over less expensive biosimilars, sources familiar with the matter said.
Representatives of each of the PBMs recently met with FTC officials about the agency’s concerns, sources said. The agency’s commissioners haven’t voted yet on the matter, and changes to the suit are still possible.
In the suit, the agency would accuse CVS Caremark, Cigna’s Express Scripts and UnitedHealth’s Optum of accepting rebates on brand-name insulin drugs made by Eli Lilly (LLY), Novo Nordisk (NVO) and Sanofi (SNY) in exchange for putting the drugs on the PBMs’ formularies—the lists of medicines covered by the insurers, sources said. Drugmakers consider placement on formularies as essential to the success of many of their products.
But the inclusion of these brand name insulin products comes at the expense of cheaper biosimilar versions of insulin, according to sources familiar with the FTC’s concerns. Among the brand name insulin products are Eli Lilly’s Humalog and Basalgar; Novo Nordisk’s Novolog, Levemir and Tresiba; and Sanofi’s Lantus and Toujeo.
Among the most prominent biosimilars are Viatris’ Semglee and Lilly’s own Rezvoglar, both of which serve as substitutes for Lantus. Biosimilars are made from living organisms and share some characteristics with the biological drugs they compete against but aren’t the same in structure. Lilly, Novo Nordisk and Sanofi also make unbranded, cheaper versions of their insulin products that aren’t biosimilars.
The agency has several statutes under which it could bring the suit, sources said: FTC staff attorneys have even looked into whether the rebates violate the Robinson-Patman Act, according to sources familiar with communications between the FTC and the PBMs. The act prohibits product providers from giving special pricing to some buyers but not others.
A CVS spokesperson said that although the company regularly participates in meetings with FTC staff, it isn’t aware of any pending agency lawsuits. Caremark members, including those in prescription plans with high deductibles, pay on average under $29 for a 30-day supply of insulin, the spokesperson said.
“We work to provide our members affordable access to their medications,” the CVS spokesperson said. “Drug companies alone are responsible for the prices they set. We welcome any action on their part that reduces the cost of insulin and other medications.”
The FTC declined to comment. Spokespeople for Cigna, UnitedHealth, Lilly, Novo Nordisk and Sanofi didn’t respond to requests for comment.
The agency has been investigating the alleged conduct of the “Big Three” PBMs regarding insulin makers for more than a year now, the sources said. The cost of insulin—the most common treatment for diabetes—has skyrocketed over the past two decades, drawing scrutiny from legislators and the White House. Pressure from the Biden administration contributed to Lilly, Novo Nordisk and Sanofi last year cutting the list prices of some of their most popular insulin products.
But the price decreases didn’t discourage the agency’s probe of the tying-and-bundling behavior. In a 2022 policy statement, the FTC said it’s scrutinizing “exclusionary” rebate schemes—where brand-name drugmakers pay PBMs for preferential treatment and, in turn, the drugmakers drive up the sticker prices of their products to the detriment of patients.
“[S]ome have suggested that high rebates and fees to PBMs and other intermediaries may incentivize higher list prices for insulin and discourage coverage of the lowest-cost insulin products,” the FTC wrote.
According to the agency, the arrangements may violate federal antitrust laws that prohibit restraint of trade, unlawful monopolization, exclusive dealing and unfair methods of competition. They could also violate the commercial bribery provision of the Robinson-Patman Act, the FTC said in its statement.
The lawsuit is separate from the FTC’s ongoing 6(b) probe of PBMs, which are hired to manage prescription benefits for health plans. The industry’s critics have accused PBMs of pocketing rebates they get from pharmaceutical companies on some drugs rather than using the discounts to lower the cost of the medicines.
FTC Chair Lina Khan is a longtime critic of the PBMs, and it’s possible that the agency may make additional moves against the industry before the end of the year.
In the past few years, state lawsuits have included accusations against the major PBMs and insulin makers that are similar to those in the FTC suit. Dozens of these complaints have been rolled into multi-district litigation in federal court in New Jersey. Those lawsuits accuse the PBMs and
drugmakers of colluding to increase insulin prices, in violation of unjust enrichment, civil conspiracy and racketeering laws, as well as state consumer protection and antitrust laws.
