America's FTC Sues Insulin Middlemen Who 'Artificially Inflated' Drug Price (npr.org) 44
Friday America's Federal Trade Commission brought action against three companies for "anticompetitive and unfair" practices "that have artificially inflated the list price of insulin."
For years, many of the millions of Americans who need insulin to survive "have been forced to pay exorbitant prices for a product that's inexpensive to make," writes NPR. "Now, the federal government is targeting one part of the system behind high insulin prices." While out-of-pocket costs have gone down for many people to $35 a month, questions remain on how the drug became so expensive in the first place. In a new lawsuit filed Friday, the Federal Trade Commission said it's going after one link in the chain: pharmacy benefit managers. The FTC brought action against the top pharmacy benefit managers (PBMs) — CVS Health's Caremark Rx, Cigna's Express Scripts, and United Health Group's OptumRx — saying the companies created a "perverse drug rebate system" that artificially inflates the cost of insulin. If the suit is successful, it could further drive down costs for patients at the pharmacy counter.
PBMs are essentially the middlemen between drug manufacturers and insurance providers. Their job is to reduce drug prices. But the process is complex and opaque, and critics say they're actually driving prices up for patients. The FTC said a big issue 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 costed more, it generated higher rebates and fees for PBMs. "Even when lower list price insulins became available that could have been more affordable for vulnerable patients, the PBMs systemically excluded them in favor of high list price, highly rebated insulin products," the FTC said in a press release on Friday.
The three PBMs named in the FTC lawsuit make up about 80% of the market. According to the suit, the PBMs collected billions of dollars in rebates and fees while insulin became increasingly unaffordable. Over the last two decades, the cost of the lifesaving drug shot up 600% — forcing many Americans with diabetes to ration their medication and jeopardize their health. In 2019, one 1 of 4 insulin patients was unable to afford their medication, according to the FTC. Some people have died.
The FTC's statement says the companies "have abused their economic power by rigging pharmaceutical supply chain competition in their favor, forcing patients to pay more for life-saving medication... While PBM respondents collected billions in rebates and associated fees according to the complaint, by 2019 one out of every four insulin patients was unable to afford their medication..."
"[A]ll drug manufacturers should be on notice that their participation in the type of conduct challenged here raises serious concerns, and that the Bureau of Competition may recommend suing drug manufacturers in any future enforcement actions."
For years, many of the millions of Americans who need insulin to survive "have been forced to pay exorbitant prices for a product that's inexpensive to make," writes NPR. "Now, the federal government is targeting one part of the system behind high insulin prices." While out-of-pocket costs have gone down for many people to $35 a month, questions remain on how the drug became so expensive in the first place. In a new lawsuit filed Friday, the Federal Trade Commission said it's going after one link in the chain: pharmacy benefit managers. The FTC brought action against the top pharmacy benefit managers (PBMs) — CVS Health's Caremark Rx, Cigna's Express Scripts, and United Health Group's OptumRx — saying the companies created a "perverse drug rebate system" that artificially inflates the cost of insulin. If the suit is successful, it could further drive down costs for patients at the pharmacy counter.
PBMs are essentially the middlemen between drug manufacturers and insurance providers. Their job is to reduce drug prices. But the process is complex and opaque, and critics say they're actually driving prices up for patients. The FTC said a big issue 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 costed more, it generated higher rebates and fees for PBMs. "Even when lower list price insulins became available that could have been more affordable for vulnerable patients, the PBMs systemically excluded them in favor of high list price, highly rebated insulin products," the FTC said in a press release on Friday.
The three PBMs named in the FTC lawsuit make up about 80% of the market. According to the suit, the PBMs collected billions of dollars in rebates and fees while insulin became increasingly unaffordable. Over the last two decades, the cost of the lifesaving drug shot up 600% — forcing many Americans with diabetes to ration their medication and jeopardize their health. In 2019, one 1 of 4 insulin patients was unable to afford their medication, according to the FTC. Some people have died.
The FTC's statement says the companies "have abused their economic power by rigging pharmaceutical supply chain competition in their favor, forcing patients to pay more for life-saving medication... While PBM respondents collected billions in rebates and associated fees according to the complaint, by 2019 one out of every four insulin patients was unable to afford their medication..."
"[A]ll drug manufacturers should be on notice that their participation in the type of conduct challenged here raises serious concerns, and that the Bureau of Competition may recommend suing drug manufacturers in any future enforcement actions."
For reference (Score:5, Informative)
On how bad US citizens are getting ripped off.
https://www.visualcapitalist.c... [visualcapitalist.com]
Re: (Score:3)
Re: (Score:1)
Rather, it is a result of the incestuous relationship between pols and these guys. Payola in return for contributions. But I agree it is not inherently a capialist issue, would get the same with socialism and communism, for instance.
Re: (Score:1)
In pure, socialism we've seen what happens .. the government will produce insulin of low and cheap quality and their own regulatory agency will certify it as safe. As it won't really benefit politicians to spend money for long term, there will be no money spent on research to develop artificial pancreas or elimination of insulin dependency. Socialism is capitalism wherein one entity controls both the regulation and the production, and often the media too .. so you wouldn't even know that people are getting
Re: (Score:2)
Except there already are companies that manufacture insulin and epi-pens at low cost and passed clinical trials in several countries decades ago. Some even have a major presence in US
Interlarding throughout (Score:2)
Insulin is only one facet of the middle middle middleman in healthcare, each taking their cut of the revenue stream.
Hedge / private equity funds taking over
- dental practices - https://corient.com/insights/a... [corient.com]
- dialysis practices - https://www.scientificamerican... [scientificamerican.com]
- hospitals - https://hms.harvard.edu/news/w... [harvard.edu]
and a lot more of the medical industry.
What's the common factor?
The actual customers usually do not pay their own bills. The government low income health subsidy programs do, or insurance companies
Re: (Score:2)
Speaking of tax, in civilised countries tax is used to provide medicine for chronic illnesses at zero cost to the unfortunate user. Some of these medicines cost a hell of a lot more than insulin to manufacture.
Re: (Score:2)
Capitalism exists as a bit player in this scenario but it's really more about socialized or mandated medial insurance making the costs of products opaque while the institutions regulating this have been captured. Corporatism run amok would be a far better description IMO.
Re: (Score:2)
There are seriously broken parts of US patent system as well. The FDA actually approved generic insulin, which should theoretically drive prices down, as it did with asthma inhalers. Unfortunately, with asthma inhalers, George W Bush banned CFC propellant 2 years before HFA was supposed to be out of patent, promising that inhaler prices would drop after a couple of years of pain... well yeah, that never happened. The manufacturers reformulate the HFA propellant every 10 years, get it approved within 7 and i
Re: (Score:2)
This is incorrect. Barrier to entry and excess govt regulation has led to these high prices. If we could go on ebay and buy cheap imported insulin powder, the price would be much lower.
About time (Score:3, Interesting)
Re: (Score:2)
This has been a hidden, complex arrangement that is so opaque and difficult to unravel, that these PBMs have been able to rip off consumers for decades. Before anyone objects, this is not capitalism.
I don't know how this came about, but wouldn't be surprised if it was someone telling an insurance company they could save money by outsourcing work (to them of course) to coordinate dealing with the various pharmaceutical companies instead of having employees for that ...
Re: (Score:2)
The people the insurance companies outsourced the negotiations with the drug companies with started out helpful. After corporate mergers and Venture Capital buyouts, there were only three firms left. And they realized they could use their positions as middlemen to make a lot of money.
For example, Advair Diskus is a "name brand" asthma inhaler. Available through my insurance company at $400 per month, because of PBM markups. GoodRx does a better job negotiating (which tells you something about the PBM ro
Re: (Score:2)
Thanks for the background.
BTW, I looked up Advair Diskus (Fluticasone/Salmeterol) on Mark Cuban's Cost Plus Drugs [costplusdrugs.com] site (mfg cost + 15% markup, + $5 pharmacy labor) and both it and a generic are available available in several dosages: 100-50mcg, 250-50mcg, 500-50mcg
- Brand [costplusdrugs.com]: 60 doses, 100-50 mcg, $94.70 ($78.00+$11.70+$5)
- Generic [costplusdrugs.com]: 60 doses, 100-50 mcg, $63.40 ($50.78+$7.62+$5.00)
Plus $5 shipping.
Re: About time (Score:2)
Perhaps it goes toward the "free" pharmaceuticals that the people who hit their out-of-pocket maximum get. I would think that if you were so aware of deductibles and pricing, you would have considered that.
Re: (Score:2)
You'd have to explain which tenets in capitalism strictly forbid this, especially given several cheerleading capitalism uber alles actively indirectly advocate for several aspects of this (lack of regulation, let the market decide, etc.).
Re: (Score:2)
You'd have to explain which tenets in capitalism strictly forbid this, especially given several cheerleading capitalism uber alles actively indirectly advocate for several aspects of this (lack of regulation, let the market decide, etc.).
Use of the coercive power of government to create artificial barriers of entry to the market.
One of the feedback mechanisms in capitalism is that high profits entice other firms to enter the market for the high-profit good or service (or a similar good or service that's a reasonable substitute), increasing supply and reducing prices
Next question, please.
Re:About time (Score:5, Interesting)
In countries that don't subject their citizens & healthcare services to so called "free market" capitalism, medicines are typically a fraction of the cost.
Re: (Score:2)
Exactly what coercive power of the government forces the use of PBMs and exactly how is it an artificial barrier to entry anymore than any contract agreement between businesses?
Another aspect of capitalism is to maintain monopoly and noting specifically forbids business from lobbying the government to do so (money is speech).
Further, capitalism isn't a direct substitution for markets.
Not impressed.
Re: (Score:1)
In pure capitalism there is no government regulation at all, including patents, and both manufacturers and customers have perfect information of cost and pricing of all available products so any new entrant in the market knows how much things cost to make and everyone knows what he is selling his stuff for. Monopolies over resources are possible if a company owns for example, a river that is used to supply water or power, but monopolies over things like drugs or manufactured goods are harder because any ot
Re:About time (Score:4, Interesting)
In order for there to be a free market, there must be price transparency, freedom to enter and exit the market, and equal information. The pharmaceutical market scores 0 out of 3.
Re: (Score:3)
Not at all.
Auctions are an in kind market, and I have yet to hear railing against blind bidding as somehow being anti-capitalist.
Re: (Score:1)
Re: (Score:3)
To me believing in capitalism is just as much as knowing where it doesn't work and healthcare is one of those areas. It's just too inelastic and I think there is an obvious moral hazard in keeping it behind access to wealth effectively. You can still be a card-carrying capitalist and hold that opinion, we do it for lots of things already.
When you have something with effectively infinite demand (how much would you pay not to die) a market can't rally operate, or you end up with so much regulation just to p
Another solution (Score:2)
To me believing in capitalism is just as much as knowing where it doesn't work and healthcare is one of those areas. It's just too inelastic and I think there is an obvious moral hazard in keeping it behind access to wealth effectively. You can still be a card-carrying capitalist and hold that opinion, we do it for lots of things already.
When you have something with effectively infinite demand (how much would you pay not to die) a market can't rally operate, or you end up with so much regulation just to play kayfabe that there is some sort of free market that you may as well implement the universal system like the US is about 80 years late on.
One problem is that the system is set up with the wrong goals. Insurance companies see premiums as revenue and care as expense, while people see premiums as expense and care as benefits. Those two are at odds with each other, and leads to all sorts of tug-of-war problems.
A different system might identify the average age of death in the US, then penalize insurance companies for subscribers who die before that age, and reward them for subscribers who live longer.
Perhaps the US could open a term life insurance
Re: Another solution (Score:2)
This is simplistic. Healthcare is not only about longevity. Quality of life also matters greatly. My HIV drugs will likely keep me alive a long time, judging by the last 2 decades. But the other chronic conditions still lower my quality or life x and it would be much worse if they went untreated.
Insurance companies are middlemen, just like PBMs. They sit between patients and providers, such as doctors, hospitals and so on.
I can never see the best providers on the market, as some providers are exclusive to
Re: About time (Score:2)
You appear not to know who the PBM's consumers are: the corporations whose employee pharmacy benefits they manage. Those corporations haven't been ripped off at all.
Re: (Score:2)
This actually is capitalism. It is not a free market though, but the usual greedy capitalists do not want a free market.
Re: (Score:2)
It *IS* the result of a poorly regulated market combined with patents.
Incoherent (Score:2)
Something fishy with Paxlovid pricing too (Score:2)
Last week I came down with whatever strain of Covid is going around and got an RX for Paxlovid. That's gone up in price to something like $1,700. Weird thing is, almost nobody actually has to pay that price, since it's either covered by insurance or there's presently a patient assistance program if you're uninsured.
Still, it reminds me of that Star Trek Voyager episode [fandom.com], where The Doctor is kidnapped and forced to work on an alien planet that essentially had a carbon-copy of the US healthcare system.
Re: (Score:2)
Yeah, it's so they can utterly overcharge the government, like with medicare.
I remember when the mandate came down to have a epipen in with the AED (Automatic External Defibrillator). It's also about the time that epipens started being ridiculously priced.
All the above comments are right on! (Score:2)
I gotta say, that as I write this with maybe 8 comments so far, I like the discussion. We've got too many complexities that are neither red or blue, Marx nor Adam Smith, or any shade between. We can be aware of green or gold or whatever the color of money, which hides behind many veils, domestic and foreign . The above approach is way more constructive, because we can all follow the money, no matter where it goes. Scrutiny is needed to correct the failure of election cycles in government to focus on metr
"Rebate"? (Score:2)
Single Payer (Score:2, Insightful)
The only way this garbage gets solved is with a single-payer system. When you have a profit motive everything gets gamed.
Re:Single Payer; I'm OK with that; there's more. (Score:1)
Serial killers (Score:2)
These people make serial killers and mass shooters look like novices. They'll get to keep almost all their blood money, too.
The new FTC (Score:2)
Say what you will about inefficiencies of our govt., but this new FTC has been kicking ass.
Put it on the insurance companies, not the PBMs. (Score:2)
Better idea: hold the insurance companies themselves responsible for only offering the higher-priced options when lower-priced equivalent ones are available. Using a PBM is the insurance company's choice, no law requires them to do so, so let them be responsible for how their chosen PBM operates. That gives you a much clearer argument against them in court, because what legitimate reason could the insurance company have for paying more for insulin than they have to? And if they try to point the finger at th