This photo shows a unit that produces insulin pens at the US pharmaceutical company Eli Lilly’s factory in Fegersheim, France, on October 12, 2015. Frédéric Florin/AFP via Getty Images Hide caption
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Frederic Florin/AFP via Getty Images
Millions of people with diabetes need insulin to live. For years, many of them have been forced to pay exorbitant prices for a product that’s cheap to produce. Now the federal government is targeting part of the system behind soaring insulin prices.
While out-of-pocket costs for many people have fallen to as low as $35 a month, questions remain about why the drug became so expensive in the first place. In a new lawsuit filed Friday, the Federal Trade Commission said it will go after one link in the chain: pharmacy benefit management companies (PBMs).
The FTC filed suit against the major PBMs — CVS Health’s Caremark Rx, Cigna’s Express Scripts, and UnitedHealth Group’s OptumRx — alleging that the companies created “unfair drug rebate schemes” that artificially inflate insulin prices, which, if successful, could further lower the costs patients pay over the counter.
PBMs are essentially middlemen between pharmaceutical companies and insurance companies. Their job is to lower drug prices. But the process is complicated and opaque, and critics say they actually drive up prices for patients.
The FTC said a big problem is that PBMs’ revenues are tied to kickbacks and commissions that are based on a percentage of a drug’s list price — essentially, in the case of insulin, the higher the drug’s price, the higher the PBMs’ kickbacks and commissions.
“Even when more affordable insulin became available to vulnerable patients, PBMs systematically filtered it out, prioritizing instead higher list-priced, deeply discounted insulin products,” the FTC said in a press release on Friday.
The three PBMs named in the FTC lawsuit control roughly 80% of the market, and the lawsuit alleges that they collected billions of dollars in kickbacks and fees as insulin became increasingly unaffordable.
Over the past two decades, the price of life-saving drugs has risen by 600%, forcing many Americans with diabetes to skimp on medication and put their health at risk. According to the FTC, one in four insulin patients couldn’t afford their medication in 2019. Some have died.
PCMA, which represents PBMs, denied many of the allegations in the FTC’s lawsuit, including that PBM rebates are correlated with higher list prices. “Not only does this action fail to accurately take into account the role of the entire prescription drug supply chain, it ignores the positive progress being made in making PBM-backed insulin more affordable for patients,” PCMA said in a statement.
To date, about 20 states have enacted laws or programs to limit patient copayments for insulin, but some of the most significant changes have occurred in the past two years.
In 2022, Congress passed the Inflation Control Act, which caps out-of-pocket costs for insulin for Medicare patients. Last year, Eli Lilly, Novo Nordisk and Sanofi, the three companies that control about 90% of the U.S. insulin supply, also pledged to lower some of their prices.
On Friday, Rahul Rao, deputy director of the FTC’s Bureau of Competition, said the investigation into the PBMs revealed that the three companies played a “disturbing, active role” in putting insulin out of reach for people with diabetes. Rao said the three companies further increased the list prices of their insulin products “in response to PBMs’ demands for increased rebates.”
