New FTC Lawsuit Against PBMs Has Broad Implications for Pharmaceuticals, Ted Okon Says

On Friday, the Federal Trade Commission (FTC) escalated its investigation into pharmacy benefit managers (PBMs) with a new lawsuit against the 3 largest PBMs over their insulin prices.¹ The move came just days after Express Scripts sued the FTC over a report criticizing PBMs and asserting PBMs have driven up costs.^2,3

Ted Okon, MBA, executive director of Community Oncology Alliance

Ted Okon, MBA, executive director of the Community Oncology Alliance (COA), spoke with The American Journal of Managed Care^® (AJMC^®) about how the new FTC lawsuit against PBMs for their pricing practices for insulin could affect insulin prices and pricing for other pharmaceuticals in the future.

This interview was been edited for clarity.

AJMC: What was your first reaction to the FTC decision to take legal action against the three largest PBMs?

Okon: Not surprised at all. I know we at COA have met with the FTC and their attorneys on a whole host of PBM issues, and I'm not surprised that they basically filed a lawsuit against top 3 PBMs, and specifically related to insulin, where there's a lot of good data. And I'm not surprised, as well, that I think at least Express Scripts probably had an inkling that was coming, which is why they sort of jumped to get their lawsuit against the FTC filed before the FTC lawsuit against Express Scripts and the 2 other top PBMs.

Let me tell you one thing because you asked me about the PBMs. What's very interesting, very interesting here, is that it was specifically also against their 3 group purchasing organizations (GPOs). So those PBMs have corporately affiliated GPOs, 2 of which are offshore. And the speculation is the reason they are offshore is not for tax advantages, but to basically shield what is going on through those offshore entities.

AJMC: What are your thoughts on potential policy changes or reforms that could arise from this legal action? Do you believe the case will lead to meaningful changes in how drug prices are negotiated and set?

Okon: Well, first of all, I think the FTC picked an area where there has been a lot of press. There has been a lot of focus on insulin, and I think they picked that area as sort of a lead case against the PBMs, and I would imagine that it's an area where they have some really good data. Actually, some of that you may see redacted in the FTC lawsuit... And I think that this lawsuit, combined with everything else that's going on, the multitude of bills, especially the Senate Finance Committee bill and the Energy and Commerce Committee bill passed that hopefully will, in whole or part, get in end-of-year legislation during the lame duck session of the Congress.

And I think that when you look at the idea that there was recently a US House Committee on Oversight and Accountability hearing where the chairman, not only during the hearing, reminded the 3 CEOs of the top PBMs, that they were under oath and should consider what they're saying, but then he wrote each of them a letter telling them basically he suggested changing their testimony because of what they said versus what he believes is the truth. And they've all, by the way, the 3 CEOs said, "We're not changing anything."

So, there is just a crescendo of things that are happening, and I think this FTC lawsuit is just another nail in the coffin, so to speak, on these top PBMs. And I believe that this lawsuit, along with all the other things that are happening, will lead to basically curbing these PBMs and ultimately helping reduce the cost of drugs.

AJMC: How do you think the FTCs complaint might affect public perception of PBMs and their role in the rising cost of insulin and other medications? Do you think this could lead to increased regulatory scrutiny of PBMs moving forward?

Okon: Well, I think that number 1, only a couple of years ago, no one including many members of Congress, knew what a PBM was. Now, everybody does in Congress. I can't imagine 1 member of Congress doesn't know what a PBM is. And it's a bipartisan issue in a Congress that is very partisan and split along party lines. So, I think it's significant that if you look at, for example, the Oversight Committee hearing, you see that it wasn't just the Republicans hammering away, but it's the Democrats hammering away.

I think it's also instructive that, although the FTC has said, basically, drug companies aren't off the hook, they're going after just the PBMs. This is just a sea change [compared with] a number of years ago, when all the focus, especially from the Democratic side of the aisle, was on the pharmaceutical companies, not the PBMs. Now there is, and not to let the pharmaceutical companies off the hook, but there is just this intense pressure on the PBM.

So, as I said before, I think that this combined, the FTC report, the FTC lawsuit, the Oversight Committee report, the bills that have passed out of committee, is just putting extreme pressure on getting something done about these PBMs. So I think it's only a matter of time. And I don't think it's just regulatory in terms of what's happening, but I think it's statutory, meaning laws that ultimately [will] be placed.

You know, the one area that, ironically enough, that is not being touched by the government is Medicare Part D. Literally, the most unbelievable hands-off approach by CMS to policing anything Medicare Part D. So, right now, pharmacists all across the country are suffering from just absurdly low reimbursement, often below acquisition cost at the hands of the PBMs, especially Express Scripts. I just heard a report of 2 pharmacies in North Carolina, independent pharmacies, that are going to go out of business. And so it's ironic that CMS has told us they're not doing anything. There's something called the noninterference clause, and they said they can't do anything. And so, the PBMs are running rampant and wild in Medicare Part D. And that's something that even the Senate Finance Chairman Ron Wyden (D, Oregon) has written to the CMS administrator saying, "You have to do something about this." But other than that, there's just, there's just extreme pressure at the state level, at the federal level, both with Congress and now the FTC.

AJMC: Do you think big pharma companies are on the chopping block next?

Okon: I don't really know. I think again, it's significant that the FTC has basically gone after the PBMs now. And I think, frankly, in going after the PBMs, it may be a little bit of a warning to the pharmaceutical companies to do their part here, but I think by and large, the fact that they've chosen to go after the PBMs is very, very significant. And you know, it's harder when you think about going after the drug companies, and where the FTC has commented is having the drug companies, in essence, not play ball with the PBMs in terms of their request for rebates. But that's again, the PBMs that are basically asking for the rebates, which is, quite frankly, a form of extortion, to say, we will favor your drug over another drug, your form of insulin over another form of insulin. So although, certainly the drug companies have their part in this, it's clearly the PBMs, which is clearly why the FTC chose to go after the PBMs in this lawsuit.

And again, I want to underscore that this is not just the PBMs, it's also apparently their GPOs, 2 of which are offshore. I can't even tell you how significant that is in this process.

References

1. Jeremias S. FTC takes legal action against 3 largest PBMs over insulin costs. AJMC. September 20, 2024. Accessed September 24, 2024. https://www.ajmc.com/view/ftc-takes-legal-action-against-3-largest-pbms-over-insulin-costs

2. Express Scripts sues FTC, demands withdrawal of PBM report. Express Scripts. Press release. September 17, 2024. Accessed September 24, 2024. https://www.evernorth.com/articles/express-scripts-sues-ftc-demands-withdrawal-pbm-report

3. Caffrey M. FTC finds PBMs drive up drug costs, squeeze out competitors. AJMC. July 9, 2024. Accessed September 24, 2024. https://www.ajmc.com/view/ftc-finds-pbms-drive-up-drug-costs-squeeze-out-competitors