CVS
Caremark,
Express
Scripts
and
Optum
Rx
are
fighting
back.
After
the
FTC
filed
a
lawsuit
in
September,
accusing
the
three
major
pharmacy
benefit
managers
of
engaging
in
anticompetitive
rebating
practices
tied
to
insulin,
the
defendants
have
turned
plaintiff.
In
November,
they
countersued
the
agency,
claiming
its
lawsuit
is
unconstitutional.
The
move
could
be
a
possible
delay
tactic,
as
well
as
a
message
to
the
FTC
that
they
will
leave
no
stone
unturned
in
order
to
defend
themselves,
experts
said.
However,
the
PBMs’
argument
may
not
be
the
most
persuasive,
while
also
reflecting
a
“level
of
arrogance,”
according
to
one
healthcare
attorney.
He
added
that
with
this
lawsuit,
the
PBMs
are
trying
to
“upend
an
established
agency”
that
has
been
around
a
long
time.
“[The
FTC]
exists
with
several
kinds
of
policies
or
missions
in
mind,
two
of
which
are
protecting
consumers
—
and
in
the
context
of
PBMs,
we’re
talking
about
patients
as
consumers
—
and
also
to
promote
healthy
competition.
The
PBMs
are
saying,
‘Well,
we
think
the
agency
is
essentially
entirely
unconstitutional
in
terms
of
how
it’s
structured,’
[and]
that’s
a
huge
legal
leap,”
said
Lucas
Morgan,
partner
in
Frier
Levitt’s
Healthcare
and
Life
Sciences
groups,
in
an
interview.
Still,
it’s
difficult
to
predict
who
will
come
out
on
top
in
this
battle,
particularly
with
a
more
conservative
Supreme
Court
and
a
change
in
administration.
The
PBMs’
argument
In
order
to
determine
whether
the
PBMs’
lawsuit
has
any
merit,
it’s
important
to
first
understand
why
the
FTC
sued
the
PBMs
to
begin
with.
According
to
the
FTC,
CVS
Health’s
Caremark,
Cigna’s
Express
Scripts
and
UnitedHealth
Group’s
Optum
Rx
administer
80%
of
all
prescriptions
in
the
U.S.
About
a
decade
ago,
the
three
PBMs
created
restrictive
drug
formularies
(lists
of
preferred
and
non-preferred
drugs)
to
exclude
some
medications
from
coverage,
the
FTC
argued.
This
puts
drug
manufacturers
at
risk
of
not
having
their
products
covered
for
millions
of
Americans,
and
PBMs
“began
demanding
higher
and
higher
rebates
from
drug
manufacturers
in
exchange
for
placing
those
drugs
on
their
restrictive
formularies,”
the
complaint
alleges.
Drug
manufacturers
began
increasing
the
list
price
of
their
drugs
in
response.
The
complaint
also
alleged
that
PBMs
prefer
high
list
price
insulin
products
that
have
higher
rebates
over
similar,
low
list
price
products.
For
example,
Caremark’s
2024
Standard
Control
Formulary
seems
to
favor
higher
list
price
versions
of
Tresiba,
while
excluding
the
lower-cost
options.
Similarly,
Express
Scripts’
2024
National
Preferred
Formulary
appears
to
prioritize
higher
list
price
versions
of
Tresiba
and
Semglee,
leaving
out
the
more
affordable
versions.
Optum
Rx’s
2023
Premium
Formulary
preferred
higher
list
price
versions
of
Humalog
and
Lantus,
while
excluding
their
lower-priced
alternatives
(this
was
changed
in
2024,
however).
According
to
the
PBMs,
the
FTC’s
complaint
calls
for
significant
changes
to
current
drug
rebate
contracts,
requiring
PBMs
to
overhaul
their
agreements
with
drug
manufacturers,
health
plan
sponsors
and
others.
Their
lawsuit
also
pointed
to
the
fact
that
the
FTC’s
lawsuit
is
an
administrative
proceeding
occurring
in
a
venue
that
tends
to
favor
the
FTC,
as
opposed
to
one
that’s
in
federal
district
court.
“This
sweeping
attempt
to
reshape
an
entire
industry
via
law
enforcement
would
never
pass
muster
in
a
U.S.
District
Court,”
the
PBMs
argued.
“It
is
therefore
unsurprising
that
the
Commission
brought
this
action
in
its
own
captive
tribunal,
where
the
Commission
decides
the
allegations
and
the
claims,
sets
the
rules,
does
the
fact-finding,
chooses
what
the
law
is,
and
determines
the
outcome.
Indeed,
in
the
past
30
years,
the
Commission
has
found
a
violation
in
every
action
brought
before
it
in
its
administrative
proceeding,
even
as
it
notches
many
high-profile
losses
when
it
litigates
in
federal
courts.”
The
PBMs
called
the
administrative
proceeding
“fundamentally
unfair”
and
said
it
violates
the
constitution
in
three
ways:
-
It
involves
private
rights
that
should
be
handled
in
federal
court
by
an
independent
judge,
not
within
the
Commission’s
own
in-house
process -
It
protects
its
Commissioners
and
administrative
law
judges
(ALJs)
from
presidential
removal,
which
undermines
democratic
accountability
and
the
executive
branch’s
authority -
It
lacks
impartiality,
with
the
same
Commissioners
acting
as
both
prosecutors
and
judges,
thereby
violating
the
Due
Process
Clause
of
the
Fifth
Amendment
The
PBMs’
lawsuit
also
argues
that
the
FTC
is
attacking
a
segment
of
the
drug
distribution
and
benefit
process
that
lowers
drug
costs
and
that
it
is
seeking
to
interfere
with
PBMs’
ability
to
bring
costs
down.
For
example,
the
FTC
seeks
to
ban
PBMs
from
designing
or
assisting
with
designing
a
benefit
plan
that
bases
patients’
deductibles
on
the
list
price
versus
the
net
cost
after
rebates.
This
“would
completely
reshape
how
plan
sponsors
design
prescription
drug
coverage
in
the
United
States,”
PBMs
argued
in
the
lawsuit.
In
separate
statements,
the
PBMs
made
similar
arguments
and
pointed
the
finger
at
drug
manufacturers.
David
Whitrap,
vice
president
of
external
affairs
at
CVS
Health,
said
that
its
members
pay
less
than
$25
for
insulin
and
noted
that
“any
action
that
limits
the
use
of
PBM
negotiating
tools
would
reward
the
pharmaceutical
industry
and
return
the
market
to
a
broken
state.”
A
spokesperson
for
Express
Scripts
argued
that
the
FTC
is
“trying
to
prevent
us
from
doing
a
job
we
have
done
well
for
many
years:
putting
pressure
on
pharmaceutical
manufacturers
to
lower
drug
costs
and
help
Americans
live
healthier
lives.”
A
spokesperson
for
Optum
Rx,
Elizabeth
Hoff,
said
the
lawsuit
ultimately
aims
to
require
the
FTC
to
resolve
its
claims
“in
a
fair
and
unbiased
forum
instead
of
a
proceeding
where
the
FTC
serves
as
prosecutor,
judge
and
jury
in
violation
of
bedrock
Constitutional
principles.”
The
FTC
dismissed
the
lawsuit
brought
forth
by
the
PBMs
as
a
distraction.
“It
has
become
fashionable
for
corporate
giants
to
argue
that
a
110-year-old
federal
agency
is
unconstitutional
to
distract
from
business
practices
that
we
allege,
in
the
case
of
PBMs,
harm
sick
patients
by
forcing
them
to
pay
huge
sums
for
life
saving
medicine.
It
will
not
work,”
said
Douglas
Farrar,
an
FTC
spokesperson,
in
an
email.
Does
the
PBMs’
argument
have
any
teeth?
While
the
PBMs
are
arguing
that
the
administrative
proceeding
is
inappropriate
for
this
case,
Morgan
of
Frier
Levitt
thinks
the
FTC
is
justified
in
its
actions.
He
noted
that
the
FTC’s
complaint
against
the
PBMs
reflects
the
“hallmark”
mission
of
the
FTC:
protecting
consumers
and
ensuring
healthy
competition.
Morgan
said
that
patients
are
possibly
overpaying
for
drugs
they
need
to
survive,
spurring
the
agency
to
action.
Similarly,
the
agency
was
driven
to
address
how
lopsided
the
influence
of
the
PBMs
are
with
the
big
three
controlling
80%
of
the
marketplace.
“I
think
that
it’s
pretty
easy
for
the
FTC
to
establish
that
the
work
they’re
doing
in
this
case
does
align
with
promoting
healthy
competition,”
Morgan
said.
Another
reason
that
the
FTC
is
targeting
the
PBMs
is
because
they
are
part
of
vertically
integrated
large
healthcare
companies
with
insurance
operations,
said
Dr.
Adam
Brown,
an
emergency
physician
and
founder
of
healthcare
advisory
firm
ABIG
Health,
as
well
as
a
professor
of
practice
at
the
University
of
North
Carolina.
He
added
that
the
PBMs’
lawsuit
seems
to
be
a
tactic
to
“gum
up
the
system
with
lawsuits”
to
slow
down
the
process.
Brown
noted
that
there
are
reports
of
situations
in
which
PBMs
are
directing
patients
to
higher
cost
medications
when
there
are
other
drugs
that
are
cheaper,
while
the
PBM
is
“reaping
the
benefit,”
referencing
a
New
York
Times
report.
Patients
for
Affordable
Drugs,
a
patient
advocacy
organization,
echoed
Brown’s
comments,
arguing
that
the
three
PBMs
are
using
the
lawsuit
against
the
FTC
as
a
way
to
avoid
accountability.
“Make
no
mistake,
this
countersuit
is
a
distraction
from
the
real
issue:
PBMs
exploit
their
outsized
influence
in
the
pharmaceutical
supply
chain
to
boost
profits
at
the
expense
of
American
patients,”
said
Merith
Basey,
executive
director
of
Patients
for
Affordable
Drugs,
in
an
email.
“Let’s
be
clear
though
PBMs
are
not
the
only
culprits
when
it
comes
to
high
prices,
however,
drug
manufacturers
remain
a
driving
force
in
ensuring
Americans
pay
the
highest
prices
in
the
world
for
their
medications.”
When
it
comes
to
drug
manufacturers,
the
organization
argued
that
they
play
a
significant
role
in
drug
prices
by
setting
inflated
list
prices,
which
the
FTC’s
complaint
also
noted.
For
example,
Ely
Lilly’s
Humalog
list
price
has
increased
from
$21
in
1999
to
$274
in
2017.
It’s
hard
to
predict
for
sure
what
the
outcome
of
this
legal
battle
will
be
due
to
the
current
political
environment,
experts
noted.
There
is
a
chance
this
case
could
make
its
way
to
the
Supreme
Court,
which
is
more
conservative,
according
to
Morgan.
“I
think
that
the
current
Supreme
Court
would
be
interested
in
the
opportunity
to
review
a
case
like
this,”
he
said.
“I
think
that’s
potentially
where
this
is
headed,
is
trying
to
see
how
quickly
the
PBMs
can
get
this
in
front
of
the
Supreme
Court
and
say
it’s
time
to
take
a
look
at
the
FTC.
Now
I’m
not
suggesting
that
means
the
Supreme
Court
would
just
entirely
upend
the
FTC,
but
perhaps
they
suggest
that
certain
structures
or
setups
in
the
FTC
are
a
problem
from
a
constitutional
standpoint.”
That’s
assuming
that
the
case
gets
up
to
the
nation’s
highest
court
to
begin
with.
With
a
change
in
administration,
a
case
like
this
tends
to
lose
momentum,
especially
if
a
new
agency
head
is
named
and
Lina
Khan
departs.
A
more
conservative
FTC
may
not
be
as
interested
in
cracking
down
on
large
corporations.
But
even
that
isn’t
guaranteed
because
the
previous
Trump
administration
did
express
concerns
over
PBM
practices,
and
scrutinizing
the
causes
and
the
players
contributing
to
high
drug
pricing
is
a
bipartisan
priority.
“You
have
the
bipartisan
support,
but
you
also
have
bipartisan
concern
throughout
the
country
from
voters
saying,
‘Hey,
there
are
a
lot
of
things
we’re
not
going
to
agree
on,
but
one
thing
we
can
agree
on
is
we
have
concerns
about
the
cost
of
healthcare
in
the
United
States,’
and
that’s
what
this
all
comes
back
to,”
Morgan
said.
Photo:
Valerii
Evlakhov,
Getty
Images
Chris