The following article was originally published in the Ohio Capital Journal and published on News5Cleveland.com under a content-sharing agreement.
The three largest pharmacy benefit managers — or PBMs — earlier this month went to court to quash a suit by the Federal Trade Commission over their pricing practices regarding the diabetes drug insulin.
The three PBMs — CVS Caremark, OptumRx and Express Scripts — are part of even larger health conglomerates that are active in many parts of the health care sector. And the FTC, one of the federal government’s antitrust watchdogs, in September sued, saying the rebates the PBMs extract from drugmakers raise out-of-pocket costs for many of the most vulnerable diabetics.
In a filing in the U.S. District Court for the Eastern District of Missouri seeking dismissal of the suit, the big PBMs accuse the antitrust agency of seeking “to restrict plaintiff PBMs’ ability to negotiate lower prices for their plan sponsor clients.”
It also accuses the FTC of improperly claiming “roving license to define practices as unfair based on its own subjective policy preferences.”
The PBMs represent health insurers in drug transactions, and together, the big three control access to about 80% of insured Americans. Because they control so much of that marketplace, and because they are part of companies that do so many other things, they’re suspected of numerous conflicts.
For example, they each own mail-order pharmacies and CVS owns the biggest retail chain. Because they determine how much to reimburse pharmacies for drugs they dispense, the companies are, in effect, deciding how much to pay themselves and their competitors.
On behalf of insurers — including those owned by the same parent company — they also control which drugs are covered and which ones carry the lowest copayments.
The FTC suit says that starting around 2012, the big PBMs started abusing that ability in a way that was particularly harmful to those who need insulin to stay alive. That’s when PBMs started actively excluding some low-cost insulin products from their formularies, or lists of covered drugs, the FTC said.
The companies that make the drug have a powerful interest in having their products covered by insurance, and they pay big money to PBMs in the form of non-transparent rebates and fees to do so. As those payments have gone higher, drugmakers have been shown to raise their list prices in response.
In its lawsuit against the PBMs, the FTC said that dynamic has created a perverse incentive for PBMs to chase rebates by pushing list prices even higher.
Those are the prices you pay if you don’t have insurance. But even if you do, they are often the prices on which your coinsurance and deductibles are based, so the crummier your insurance, the higher those out-of-pocket costs are going to be, the FTC suit against the PBMs says.
It is asking the court to prohibit the practice by no longer basing rebates on list prices. The FTC suit also demands that out-of-pocket costs be based on the net prices insurers pay for drugs, not inflated list prices.
For their part, the PBMs say those changes would blow up the whole system.
“The commission would upend present-day drug rebate contracts, forcing the PBMs to revamp their entire contracting framework and countless contracts with drug manufacturers, health plan sponsors and other private parties,” the companies’ filing seeking dismissal of the FTC proceeding said.
