Big Pharma and the FTC Battle Over Insulin Prices and Constitutional Rights
The legal fight over the high cost of insulin, a life-saving drug for millions of Americans, has continued to intensify. The three major players in the pharmaceutical benefit management (PBM) industry, CVS, Cigna, and UnitedHealth, have filed suit against the Federal Trade Commission (FTC). The core of the controversy involves allegations of inflating insulin prices, and how the U.S. Constitution should apply.
FTC Allegations
In September, the FTC filed suit against the PBM arms of these companies—Caremark (CVS), Express Scripts (Cigna), and Optum Rx (UnitedHealth). The lawsuit claims their practices with drug manufacturers have driven up the price of insulin, burdening patients who rely on the drug to survive. The case is being heard in the FTC’s in-house administrative court, which operates differently from standard federal courts.
The FTC argues that the PBMs’ negotiating tactics, such as demanding rebates and discounts in exchange for favorable placement on drug formularies, incentivize drugmakers to raise prices and limit access to less expensive alternatives. Critics argue this system harms consumers, particularly those already struggling with high healthcare costs. The FTC’s move is part of a larger agenda of scrutiny of PBMs, which control an estimated 80% of U.S. prescriptions.
PBMs Fight Back: The Constitutional Argument
CVS, Cigna, and UnitedHealth have responded with a lawsuit of their own, filed in the Eastern Missouri U.S. District Court. The companies claim the FTC’s case violates their constitutional right to due process under the Fifth Amendment, and in acting as both prosecutor and judge through its administrative court, the FTC undermines constitutionally fundamental principles of fairness and accountability.
The PBMs assert that the FTC’s structure itself is unconstitutional, as its commissioners and judges are “unconstitutionally insulated from removal by the President,” shielding them from democratic oversight. They argue that cases involving private rights, such as this one, should be tried in federal courts, not administrative courts, which they call “fundamentally unfair.”
The FTC’s Response
FTC spokesperson Douglas Farrar dismissed the PBMs’ constitutional claims as a diversion tactic, shifting attention away from their alleged harmful practices.
“It 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” Farrar said.
Adding another layer to the tension, the PBMs also have sought to recuse FTC Chair Lina Khan and two other commissioners from the case, citing alleged bias against PBMs.
The Bigger Picture: PBMs and Rising Drug Costs
This legal battle takes place against the backdrop of increasing criticism of PBMs. While these middlemen claim to lower drug costs by negotiating discounts, they have also been accused of contributing to the skyrocketing prices of medications. Practices like rebating—where PBMs secure discounts from drugmakers in exchange for favorable formulary placement—can lead to higher list prices,.
Independent pharmacies also have accused PBMs of wielding excessive market power to enforce damaging contracts. With three PBMs controlling the lion’s share of U.S. prescriptions, the FTC’s concerns about market consolidation and lack of competition are front and center.
Multi-District Litigation (MDL) Lawsuits
Additionally, in late 2023, lawsuits against insulin manufacturers and PBMs consolidated into a multi-district litigation (MDL) case pending in the United States District Court of New Jersey (Case 2:23-md-03080-BRM-RLS. This is a federal case, so any group or individual in the United States with a qualifying claim may join the lawsuit. The MDL establishes three litigation tracks:
- Self-Funded Payer Track
- State Attorney General Track
- Third-Party Payer Class Track
These tracks aim to address the injustices of the insulin pricing scheme by seeking:
- Injunctive relief– to halt predatory pricing practices and protect self-funded plans and their members from further harm.
- Reimbursement– for those who have overpaid due to artificially inflated insulin prices.
- Seizure of illicit revenues– amassed by PBMs and manufacturers.
- Punitive damages– to deter similar misconduct in the future.
Who Can Join?
The burden of exploitative insulin pricing falls heavily on self-funded healthcare plans and their members/patients, including self-funded U.S. government entities and unions at the state, county, and city levels. These groups and the individuals in them have a unique opportunity to hold insulin manufacturers and PBMs accountable by joining the litigation.
Generally, you may qualify if you:
- Are a diabetic patient (or are an insurer of one) who has paid for insulin out-of-pocket or through insurance;
- Are part of a self-funded health plan that has incurred increased costs due to high insulin prices; or
- Represent a health plan or organization whose inflated prices have been impacted financially.
The outcome of these lawsuits will have far-reaching implications—not just for the PBMs and the FTC, but for millions of Americans who rely on affordable medications. If the PBMs succeed in their constitutional challenge, it could reshape how regulatory agencies pursue enforcement actions in the future.
On the other hand, if the FTC prevails, it could set a precedent for stricter oversight of PBMs and potentially bring relief to millions of patients burdened by high drug costs.
The state of insulin, as well as other prescription pricing is undergoing significant changes due to these legal challenges and regulatory interventions.
If you represent an affected entity or want to learn more about filing a claim, reach out to our team here at Herd Law Firm at 713-955-3699 or charles.herd@herdlawfirm.com for more information about filing a claim!
12/4/2024
Link to CVS, ExpressScripts, and Optum Rx Complaint v. FTC.
Image Source: Unsplash
