The Federal Trade Commission is preparing to sue CVS and two of the other largest pharmacy benefit managers in the United States over their business practices when negotiating drug prices, including costs for insulin.
Here’s what consumers should know about pharmacy benefit managers and the FTC’s findings.
What is the Federal Trade Commission investigating when it comes to pharmacy benefit managers?
For more than two years, the FTC has been investigating whether pharmacy benefit managers steer patients away from more affordable medicines, particularly with insulin.
It’s important to note that the market for pharmacy benefit manager services is extremely concentrated, with just three firms that control the majority of the market. All major PBM services operate their own mail-order pharmacies and specialty pharmacies (like those that specialize in drugs that are high in cost, for example). They don’t typically operate their own retail pharmacies, but CVS Health’s PBM service, CVS Caremark, is an exception.
Advertisement
What are pharmacy benefit managers?
Pharmacy benefit managers play a central role in the drug price supply chain, acting as middlemen between drug companies, insurers, and pharmacies by serving as chief negotiators, administrators, and decision-makers about which drugs will be the most easily attainable by consumers. PBMs also create and maintain formulas, which is a list of prescription medications a health insurance plan will cover. Each plan is different, but they categorize prescription drugs into four tiers based on out-of-pocket costs, drug availability, and clinical effectiveness;
- Tier 1: Most generic drugs. These have the lowest copayment costs.
- Tier 2: Brand-name drugs that are more affordable with medium copayment costs.
- Tier 3: Brand-name drugs that have a generic version available. These usually have the highest copayment costs.
- Tier 4: These are typically specialty drugs that treat severe health issues.
How do I know what tier my prescription is and how much it might cost?
Most insurance plans post the information online. The cost of a prescription drug will vary depending on which tier the drug was classified in and what insurance plan a patient is on.
Does this mean generic drugs are not as good as brand-name drugs?
The FDA requires drugs to have the same risks, dosage, and clinical benefits as the brand name.
Are there benefits to pharmacy benefit managers?
The Pharmaceutical Care Management Association, which represents the industry, said on its website that pharmacy benefit manager services save patients an average of $1,040 per year. CVS Caremark also said it helps lower out-of-pocket prescription costs by allowing members to use its proprietary online search tool for savings options that work with their prescription plan.
Advertisement
What has the FTC’s investigation into pharmacy benefit managers found so far?
The FTC published a report earlier this month that detailed some of its interim findings, which said the nation’s top PBMs lean on their hold over the market to profit off of patients and independent pharmacists.
What companies are expected to be listed as defendants in the FTC’s suit?
The largest pharmacy benefit managers: UnitedHealth Group, Optum Rx, Cigna Group’s Express Scripts, and Woonsocket-based CVS Health’s CVS Caremark. Together, these organizations handle approximately 80 percent of the nation’s prescriptions. Each are also tightly integrated with health insurance companies. The impending lawsuit will largely focus on the costs of insulin, according to reporting in the Wall Street Journal.
Why are insulin costs under fire by federal regulators?
The industry’s three largest insulin makers — Novo Nordisk, Sanofi, and Eli Lilly — are also facing criticism from the FTC regarding their rebate negotiation process.
Rebates are price concessions paid to drug manufacturers to an insurance company or pharmacy benefits manager. Rebates can be passed on from pharmacy benefits managers to insurers.
In 2022, President Joe Biden signed legislation that capped out-of-pocket payments for insulin to $35 per month for Medicare patients. Prior to Biden’s cap, list prices for insulin, which treats diabetes, increased every year from 2010 through 2019, according to a 2023 study.
A vial of insulin costs about $8 to manufacture, researchers estimate. But Sanofi’s Lantus costs $292 per vial, Nordisk’s NovoLog listed theirs for $289, and Eli Lilly’s Humalog for $66.40.
Advertisement
Novo Nordisk, which is based in Lexington, Mass., is also the maker of diabetes and weight-loss drug Ozempic, which has also been scrutinized for its cost. Ozempic, which is injected once a week, can cost more than $1,000 per month and most insurance companies aren’t yet covering these drugs.
How has the industry responded to the FTC investigation and pending lawsuit?
Jessica Melugin, director of the Center for Technology and Innovation at the Competitive Enterprise Institute, called the FTC’s report “clickbait” that lacks economic evaluation. Others in the industry also slammed the FTC report, claiming it lacked details.
In a statement to the Wall Street Journal last week, a CVS Caremark spokesperson said the group is “proud of the work we have done to make insulin more affordable for all Americans with diabetes, and we stand by our record of protecting American businesses, unions and patients from rising prescription-drug prices.”
How has the debate over pharmacy benefit managers turned political?
In Washington, D.C., there’s been a new appetite to implement policy or enforce antimonopoly policies to help curb drug prices.
“The United States cannot continue to pay, by far, the highest prices in the world for prescription drugs while drug companies and PBMs make billions in profits,” said Vermont Senator Bernie Sanders — who chairs the Senate Health, Education, Labor, and Pension Committee — in 2023.
How have local governments responded to the work of pharmacy benefit managers?
The market has faced increased scrutiny from local and state governments. Earlier this year, the City of Boston filed a new lawsuit that alleged that several pharmacy benefit managers collaborated with opioid manufacturers and accused them of ignoring evidence of opioid misuse in pursuit of profit.
Alexa Gagosz can be reached at [email protected]. Follow her @alexagagosz and on Instagram @AlexaGagosz.