This photo shows a unit dedicated to the production of insulin pens at the plant of the American pharmaceutical company Eli Lilly in Fegersheim, France, October 12, 2015.
Frederick Florin/AFP via Getty Images
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Frederick Florin/AFP via Getty Images
Millions of people with diabetes rely on insulin to survive. For years, many have been forced to pay exorbitant prices for a product that is inexpensive to make. Now the federal government is targeting a sector of the system that is driving high insulin prices.
Although many people’s out-of-pocket costs have been reduced to $35 a month, questions remain about why the drug has become so expensive. In a new complaint filed Friday, the Federal Trade Commission said it is going after one link in the chain: pharmacy benefit managers (PBMs).
The FTC has filed suit against the major PBMs — CVS Health’s Caremark Rx, Cigna’s Express Scripts and United Health Group’s OptumRx — claiming the companies created a “perverse drug discount system” that artificially inflates the price of insulin. If the lawsuit succeeds, it could further reduce costs for patients at the pharmacy counter.
PBMs are effectively middlemen between drugmakers and insurers. Their mission is to lower drug prices. But the process is complex and opaque, and critics say they actually drive up prices for patients.
The FTC said one of the main problems is that PBMs’ revenue is tied to rebates and fees, which are based on a percentage of a drug’s list price. Essentially, in the case of insulin, when the drug costs more, it generates higher rebates and fees for PBMs.
“Even when lower-list-priced insulins became available and might have been more affordable for vulnerable patients, PBMs systematically excluded them in favor of high-list-priced, deeply discounted insulin products,” the FTC said in a press release Friday.
The three PBMs named in the FTC complaint represent about 80% of the market. According to the complaint, the PBMs reaped billions of dollars in rebates and fees as insulin became increasingly unaffordable.
Over the past two decades, the cost of this life-saving drug has increased by 600%, forcing many Americans with diabetes to ration their medications and put their health at risk. In 2019, according to the FTC, one in four patients taking insulin couldn’t afford their medication. Some people died.
The Pharmaceutical Care Management Association, which represents PBMs, denied many of the allegations in the FTC complaint, including that PBM rebates are tied to higher list prices. “This action not only fails to accurately account for the role of the entire prescription drug supply chain, but also ignores the positive progress, championed by PBMs, in making insulin more affordable for patients,” the PCMA said in a statement.
Over the years, about 20 states have passed laws or programs aimed at limiting the amount patients pay for insulin. But some of the biggest changes have come in the last two years.
In 2022, Congress passed the Inflation Reduction Act, which capped Medicare patients’ out-of-pocket costs for insulin. Last year, Eli Lilly, Novo Nordisk, and Sanofi—the three companies that control about 90% of the U.S. insulin supply—also pledged to cut some of their prices.
On Friday, Rahul Rao, deputy director of the FTC’s Bureau of Competition, said the PBM investigation highlighted the “concerning and active role” played by the three manufacturers in making insulin unaffordable for many people with diabetes. Rao said the three companies further inflated the list prices of their insulin products “in response to PBMs’ demand for higher discounts.”
