In the wake of its flawed, misleading, and biased report about the pharmacy benefit management (PBM) industry, the Federal Trade Commission (FTC) has taken legal action that inappropriately blames high insulin prices on PBMs like Express Scripts.
Express Scripts is deeply concerned that the FTC, a government agency funded by taxpayer dollars, continues to get an important issue such as drug pricing so irresponsibly wrong. Over the last decade, Express Scripts has saved plan sponsors and their members billions of dollars by lowering the net cost of drugs, including insulin, and by lowering out-of-pocket spending.
This lawsuit continues a troubling pattern from the FTC of unsubstantiated and ideologically driven attacks on pharmacy benefit managers. If successful – which appears unlikely – the ultimate result could be higher net prices for plan sponsors and consumers.
The U.S. Chamber of Commerce, The Wall Street Journal’s editorial board, and the Pharmaceutical Care Management Association (PCMA) were among those voicing concerns about the FTC’s action, the agency’s impartiality, and the unintended consequences such as higher premiums that Americans could face as a result.
Their comments are excerpted below.
U.S. Chamber of Commerce
How the FTC’s Latest Health Care Lawsuit Sets a Potentially Dangerous Precedent
The Chamber raised concerns about the FTC’s bias and motives:
- “Several commissioners have openly expressed outright disdain against PBMs and drug manufacturers. … the level of prejudgment shown by commissioners, who are supposed to enforce the law objectively, undermines the agency’s credibility.”
- “The FTC’s timing – less than two months before the election – and recent behavior suggests that this lawsuit is driven more by political motives than by a genuine effort to enforce the nation’s competition laws.”
It also criticized the FTC’s decision to file the action as an administrative lawsuit:
- “Its own hand-picked administrative law judge will issue an initial non-binding decision, and its commissioners will serve as the judges. The decision to avoid federal court draws out the process and prevents the parties from reaching a neutral federal court until appeal.”
- “Federal courts are increasingly questioning the constitutionality of this administrative model. The FTC’s decision to file suit internally, despite prior statements from commissioners, will only amplify allegations of a ‘kangaroo court’ against the agency.”
The Wall Street Journal
The FTC’s Anti-PBM Suit Could Mean Higher Health Premiums
In its editorial, The Wall Street Journal questions the FTC’s timing:
- “Congress has been debating how to regulate PBMs, but [FTC Chair Lina] Khan isn’t waiting. She’s seeking to effectively ban PBM rebates by deeming them an ‘unfair method of competition’ under the Federal Trade Commission Act. You have to smile at Ms. Khan portraying big drug makers as victims in her suit.”
It also reminds readers that drug rebates currently benefit the federal government and Medicare recipients:
- “If rebates are a problem, why does Congress require them for government plans?”
- “The Trump Administration tried to ban rebates in Medicare, but the Congressional Budget Office estimated it would substantially raise senior premiums and increase government spending by $170 billion over 10 years. Congress blocked the rule. Yet now Ms. Khan wants to ban rebates in private insurance.”
The Pharmaceutical Care Management Association (PCMA)
Statement On FTC Enforcement Action
PCMA pointed out that the FTC is willfully ignoring the PBM industry’s success in lowering the price of insulin, with average out-of-pocket costs dropping from $25.79 to $18.64 between 2019 and 2023.
- “The FTC’s action is yet another example that the agency is running a biased investigation with predetermined anti-industry outcomes – driven by the self-serving agendas of special interests and designed to misrepresent the role and value of pharmacy benefit managers.”
It also stressed that drug manufacturers, not PBMs, keep prices high:
- “If the FTC had considered the role of the entire supply chain, the commission may have accurately diagnosed the lack of insulin competition in the period analyzed as a result of Big Pharma’s anti-competitive tactics and found that prices on brand name insulin products increased at manufacturer discretion, since rebates are uncorrelated to higher list prices.”
- “Decisions from Big Pharma companies to lower the price of some insulin products last year, following increased Congressional scrutiny and public outcry, underscore that drug companies can decide to lower prices at any time.”
Law360
FTC’s Report Criticizing Drug Middlemen Is Flawed
In an article published by Law360, a former economic adviser at the FTC pointed to multiple flaws in the way the FTC has evaluated and commented on PBMs while noting the agency’s “anti-PBM narrative.”
- “Why is the FTC concerned with PBMs’ bargaining leverage when similar leverage exits in countless other settings? PBMs’ bargaining leverage may benefit consumers. After all, if PBMs can negotiate lower reimbursement rates with unaffiliated pharmacies, the resulting cost savings may be passed on to employers and patients.”
- “PBMs negotiate contracts with pharmaceutical companies to determine how much health plans and patients pay for drugs. Does the report mean to suggest that health plans could save money by not negotiating contracts with pharmaceutical companies?”
The article also questions the FTC’s assertions that PBMs are responsible for the closure of retail pharmacies, including pharmacies in rural communities.
- “It suggests that the ‘combination of consolidation and vertical integration’ may have enabled PBMs to squeeze unaffiliated pharmacies, resulting in below-cost reimbursement and subsequent exits by these pharmacies. The report offers no evidence of a significant decline in the number of retail pharmacies. It shows only a 2.8% decline, from about 62,800 to 61,100, in the number of physical retail pharmacies during the 2013-2022 period.”
- “There is no reason to believe that the decline in the number of rural pharmacies had anything to do with PBMs as there are plausible alternative explanations. The decline in the number of rural pharmacies may be attributed to changes in population, high costs of serving low density populations and competition from online pharmacies. For example, according to World Bank data, the share of the U.S. population living in rural areas fell during the 2013-2022 period from 18.7% to 16.9%, or about a 10% decline.”
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