FTC Chair Lina Khan testifies during the House Appropriations Subcommittee on Financial Services and General Government hearing titled “Fiscal Year 2025 Application for the Federal Trade Commission,” in the Rayburn building, Wednesday May 15, 2024.
Tom Williams | Cq-roll Call, Inc. | Getty Images
CVS Health And UnitedHealth Group demand that Federal Trade Commission Chairwoman Lina Khan and two other commissioners recuse themselves from suit accusing companies and other pharmaceutical middlemen of increasing their profits while inflating the costs of insulin for Americans.
In separate petitions filed Tuesday evening with the FTC, CVS and UnitedHealth argued that the three commissioners have extensive histories of making public statements indicating “serious bias” against so-called pharmacy benefit managers of the companies.
The companies accused Khan, along with Commissioners Alvaro Bedoya and Rebecca Kelly Slaughter, of falsely asserting that PBMs are “crooks” who have significant control over pricing and access to drugs like insulin . CVS said these statements demonstrate that the commissioners “prejudged this matter” such that their participation in the matter “violates due process.”
“If the opposite of ‘total fairness’ is ‘blatant bias,’ all three commissioners would easily meet even that standard,” CVS wrote in a 23-page motion.
Meanwhile, UnitedHealth’s 17-page motion said: “Any judge who makes these remarks about a litigant at the start of a trial should immediately recuse himself or herself for blatant bias.” »
The FTC on Wednesday declined CNBC’s request for comment on the motion.
Other corporate giants, including Amazon And Metaunsuccessfully lobbied to have Khan disqualified from previous cases or investigations, citing concerns about her objectivity. Khan has resisted those calls, saying she has never prejudged any case or set of facts.
The FTC filed a lawsuit last month against the three largest PBMs, CVS Health’s Caremark, UnitedHealth Groupof Optum Rx and CignaThe express scripts of. All are owned or linked to health insurers and collectively administer about 80% of the nation’s prescriptions, according to the FTC.
The FTC filed its complaint through its so-called administrative procedure, which initiates proceedings before an administrative law judge who would hear the case.
PBMs are at the center of the U.S. drug supply chain, negotiating drug discounts with manufacturers on behalf of insurers, creating lists of preferred drugs covered by health plans, and reimbursing pharmacies for prescriptions. The FTC has been studying PBMs and their role in insulin prices since 2022.
The agency’s lawsuit argues that the three PBMs created a “perverse” system that prioritizes high manufacturer discounts, leading to “artificially inflated list prices for insulin.” The suit also alleges that PBMs favor high list price insulins, even when lower list price insulins become available.
The lawsuit also includes group purchasing organizations affiliated with each PBM, or GPO, which negotiate drug purchases for hospitals and other health care providers. Zinc Health Services functions as the GPO for Caremark, while Emisar Pharma acts as the GPO for OptumRx. Ascent Health Services is the GPO of Cigna.
The lawsuit is just one of many headwinds facing CVS. The company’s shares have fallen more than 20% this year as it grapples with soaring medical costs in its insurance segment and pressure on pharmacy reimbursement.
CVS has engaged advisors in a strategic review of its operations, which could potentially involve separating the company’s insurer from its retail pharmacies. It’s unclear where Caremark would stand in the event of a breakup.
A general view shows a CVS Health customer support center sign at CVS Health Corp headquarters in Woonsocket, Rhode Island, United States, October 30, 2023.
Faith Ninivaggi | Reuters
In Tuesday’s motion, CVS alleged that Khan defamed PBMs throughout his professional career. For example, the company cited a statement 2022 in which Khan said PBMs “virtually determine what medications are prescribed, which pharmacies patients can use, and how much patients will pay at the pharmacy counter.”
CVS also highlighted Slaughter’s previous comments about PBMs’ allegedly “disturbing,” “unacceptable” and “rotten” rebate practices, and how she believes they create “competitive distortions in pharmaceutical markets.” At the same time, the company cited Bedoya’s suggestions that “a significant portion of the responsibility” for the rising price of insulin rests on rebates demanded by PBMs.
CVS called the three commissioners’ prior statements “incorrect assertions” about Caremark and other PBMs.
The healthcare giant also claimed that during the FTC investigation, all three commissioners attended closed-door events to help raise money for anti-PBM advocacy groups. Organizers of these events vilified PBMs as “leeches” and “vampires,” CVS argued in the motion.
The Biden administration and lawmakers on both sides have stepped up pressure on PBMs, seeking to increase transparency of their business practices as many patients struggle to afford prescription drugs. Americans pay on average two to three times more than patients in other developed countries for prescription drugs, a study finds. information sheet from the White House.
