Express Scripts sues Federal Trade Commission over PBM report

Photo: Chris Ryan/Getty Images

Express Scripts by Evernorth, a Cigna company, is suing the Federal Trade Commission, demanding that it retract a July report on the pharmacy benefit manager industry.

The FTC report on pharmacy benefit managers was the result of a two-year investigation into PBM practices and concluded that PBMs are "powerful middlemen" that are inflating drug costs and squeezing Main Street pharmacies.

Express Scripts is demanding that the FTC retract its report, claiming it's filled with "false and misleading claims" about the PBM industry.

"The FTC has taken unconstitutional actions in publishing a report that ignores the evidence provided by our company and other PBMs, demonstrates clear ideological bias and advances a false and damaging narrative – a narrative that could harm the healthcare system by removing essential checks and balances, which would result in higher drug prices for American consumers," said Andrea Nelson, chief legal officer for The Cigna Group.

WHAT'S THE IMPACT

After cooperating with the FTC's study, Express Scripts said the report disregarded millions of documents and terabytes of data produced by the company and other PBMs. It accused the report of being riddled with "false statements" and "misleading insinuations."

Express Scripts claims it achieved approximately $38 billion in savings for clients last year, and said drug manufacturers, not PBMs, set the prices of their drugs. The company said it negotiates with drug manufacturers to lower the net cost of drugs for plan sponsors.

The PBM also said it has implemented programs designed to shield patients from high list prices and has supported access to lower-cost generics and biosimilars.

"PBMs have no incentive to see list prices rise," according to Express Scripts. "List prices for branded drugs with rebates have grown less, not more, than list prices for branded drugs with no rebates."

For its part, the FTC said in July that it was preparing to sue the largest three pharmacy benefit managers over their negotiations over prices for drugs, including insulin. 

The three largest PBMs are UnitedHealth Group's OptumRx, Cigna's Express Scripts and CVS Health's CVS Caremark. These three account for an estimated 80% of prescriptions.

The report claimed that because of a highly concentrated market, PBMs can exercise significant power over Americans' access to drugs and the prices they pay. According to the report, PBMs have "opaque contractual relationships"; wield power over independent pharmacies, with about 10% of rural pharmacies closing between 2013 and 2022; and pursue vertical integration, which in the FTC's view "likely creates the ability and incentive for PBMs to increase utilization of certain drug products at affiliated pharmacies to generate the greatest revenue and profits for their respective conglomerates."

THE LARGER TREND

Claiming that its old policy statements no longer reflect current market dynamics, the FTC voted in 2023 to rescind its prior statements of advocacy for pharmacy benefit managers, effectively ending the agency's previously stated endorsement of PBMs.

The FTC's statement warns against relying on nine advocacy letters published or issued between 2004 and 2014 that advocated against proposals to increase regulatory oversight and transparency of PBMs. The statement also cautions against reliance on a 2004 joint report with the Department of Justice and a 2005 FTC study, as these reports "may no longer accurately reflect the current PBM industry," according to the FTC.

Pharmacy benefit managers are the middlemen that are hired to negotiate rebates and fees with drug manufacturers, create drug formularies and surrounding policies, and reimburse pharmacies for patients' prescriptions. The largest pharmacy benefits managers are now vertically integrated with the largest health insurance companies and wholly owned mail order and specialty pharmacies.

"In these roles, pharmacy benefit managers often have enormous influence on which drugs are prescribed to patients, which pharmacies patients can use, and how much patients ultimately pay at the pharmacy counter," the FTC said. "Many of these functions depend on highly complicated, opaque contractual relationships that are difficult or impossible to understand for patients and independent businesses across the prescription drug system."

Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.