After the FTC filed a lawsuit in September, accusing the three major pharmacy benefit managers of anticompetitive rebating practices related to insulin, the defendants reversed roles and became plaintiffs. In November, they countersued the agency, arguing that its lawsuit is unconstitutional.
\nThe post The Big 3 PBMs Are Countersuing The FTC. Does Their Argument Have Any Teeth? appeared first on Above the Law.<\/p>\n
CVS Caremark, Express Scripts and Optum Rx are fighting back.\u00a0<\/p>\n
After the FTC filed a lawsuit<\/a> 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.<\/p>\n The move could be a possible delay tactic, as well as a message to the FTC that they will leave no stone unturned in orderto defend themselves, experts said. However, the PBMs\u2019 argument may not be the most persuasive, while also reflecting a \u201clevel of arrogance,\u201d according to one healthcare attorney.<\/p>\n He added that with this lawsuit, the PBMs are trying to \u201cupend an established agency\u201d that has been around a long time.<\/p>\n \u201c[The FTC] exists with several kinds of policies or missions in mind, two of which are protecting consumers \u2014 and in the context of PBMs, we\u2019re talking about patients as consumers \u2014 and also to promote healthy competition. The PBMs are saying, \u2018Well, we think the agency is essentially entirely unconstitutional in terms of how it\u2019s structured,\u2019 [and] that\u2019s a huge legal leap,\u201d said Lucas Morgan, partner in Frier Levitt\u2019s Healthcare and Life Sciences groups, in an interview.\u00a0<\/p>\n Still, it\u2019s difficult to predict who will come out on top in this battle, particularly with a more conservative Supreme Court and a change in administration.<\/p>\n The PBMs\u2019 argument<\/strong><\/p>\n In order to determine whether the PBMs\u2019 lawsuit has any merit, it\u2019s important to first understand why the FTC sued the PBMs to begin with.\u00a0<\/p>\n According to the FTC, CVS Health\u2019s Caremark<\/a>, Cigna\u2019s Express Scripts<\/a> and UnitedHealth Group\u2019s Optum Rx<\/a> 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 \u201cbegan demanding higher and higher rebates from drug manufacturers in exchange for placing those drugs on their restrictive formularies,\u201d the complaint alleges. Drug manufacturers began increasing the list price of their drugs in response.\u00a0<\/p>\n The complaint also alleged that PBMs prefer high list price insulin products that have higher rebates over similar, low list price products.\u00a0\u00a0<\/p>\n For example, Caremark\u2019s 2024 Standard Control Formulary seems to favor higher list price versions of Tresiba, while excluding the lower-cost options. Similarly, Express Scripts\u2019 2024 National Preferred Formulary appears to prioritize higher list price versions of Tresiba and Semglee, leaving out the more affordable versions. Optum Rx\u2019s 2023 Premium Formulary preferred higher list price versions of Humalog and Lantus, while excluding their lower-priced alternatives (this was changed in 2024, however).<\/p>\n According to the PBMs, the FTC\u2019s 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\u2019s lawsuit is an administrative proceeding occurring in a venue that tends to favor the FTC, as opposed to one that\u2019s in federal district court.<\/p>\n \u201cThis sweeping attempt to reshape an entire industry via law enforcement would never pass muster in a U.S. District Court,\u201d the PBMs argued. \u201cIt 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 30years, 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.\u201d<\/p>\n The PBMs called the administrative proceeding \u201cfundamentally unfair\u201d and said it violates the constitution in three ways:<\/p>\n The PBMs\u2019 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\u2019 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\u2019 deductibles on the list price versus the net cost after rebates. This \u201cwould completely reshape how plan sponsors design prescription drug coverage in the United States,\u201d PBMsargued in the lawsuit.<\/p>\n 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 \u201cany action that limits the use of PBM negotiating tools would reward the pharmaceutical industry and return the market to a broken state.\u201d<\/p>\n A spokesperson for Express Scripts argued that the FTC is \u201ctrying 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.\u201d<\/p>\n A spokesperson for Optum Rx, Elizabeth Hoff, said the lawsuit ultimately aims to require the FTC to resolve its claims\u201cin a fair and unbiased forum instead of a proceeding where the FTC serves as prosecutor, judge and jury in violation of bedrock Constitutional principles.\u201d<\/p>\n The FTC dismissed the lawsuit brought forth by the PBMs as a distraction.<\/p>\n \u201cIt 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,\u201d said Douglas Farrar, an FTC spokesperson, in an email.<\/p>\n Does the PBMs\u2019 argument have any teeth?<\/strong><\/p>\n 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\u2019s complaint against the PBMs reflects the \u201challmark\u201d mission of the FTC: protecting consumers and ensuring healthy competition.<\/p>\n 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.<\/p>\n \u201cI think that it\u2019s pretty easy for the FTC to establish that the work they\u2019re doing in this case does align with promoting healthy competition,\u201d Morgan said.<\/p>\n 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.<\/strong><\/p>\n He added that the PBMs\u2019 lawsuitseems to be a tactic to \u201cgum up the system with lawsuits\u201d to slow down the process.\u00a0<\/p>\n\n