FTC Chairwoman Lena Khan testifies during the House Appropriations Subcommittee on Financial Services and General Government hearing titled “FTC Fiscal Year 2025 Request” in the Rayburn Building on Wednesday, May 15, 2024.
Tom Williams | Cq-roll Call, Inc. | Getty Images
CVS Health, UnitedHealth Group and Cigna They are calling on Federal Trade Commission Chairwoman Lena Khan and other commissioners to recuse themselves from a lawsuit accusing the companies and other drug middlemen of increasing their profits while inflating Americans' insulin costs.
In separate motions filed Tuesday night with the Federal Trade Commission, the companies argued that the three commissioners have a track record of making public statements suggesting serious alleged bias against so-called corporate pharmacy benefit managers.
The companies accused Khan, as well as Commissioners Alvaro Bedoya and Rebecca Kelly Slaughter, of incorrectly asserting that PBMs are “price gougers” with too much control over prices and access to drugs like insulin. CVS said those statements show that commissioners “prejudged this matter,” so their involvement in the case “violates due process.”
“If the opposite of ‘full fairness’ is ‘blatant bias,’ the three commissioners would easily meet even that standard,” CVS wrote in a 23-page proposal.
Meanwhile, UnitedHealth's 17-page motion said, “Any judge who made these comments about a litigant at the outset of a lawsuit would immediately need to be recused due to blatant bias.”
In one of the three motions filed, Cigna said Khan “prejudged the facts and law of this action.”
“I have repeatedly and incorrectly asserted that OMB controls drug prices and patients’ access to medications,” Cigna said.
The FTC filed its complaint through what is called the administrative process, which begins a case before an administrative judge at the agency who will hear the case and issue an opinion. The FTC commissioners then vote on that opinion.
The FTC on Wednesday declined CNBC's request for comment on the proposal.
Other corporate giants, incl Amazon and deadShe has lobbied unsuccessfully for Khan to be removed from previous cases or investigations, citing concerns about their objectivity. Khan has resisted those calls, saying she has not prejudged any issue or set of facts.
The FTC filed the suit last month against the three largest PBMs, CVS Health's Caremark, UnitedHealth Group's Optum Rx, and Cigna's Express Scripts. They are all owned by or affiliated with health insurers, and collectively administer about 80% of the nation's prescriptions, according to the Federal Trade Commission.
PBMs are at the center of the U.S. drug supply chain, negotiating drug discounts with manufacturers on behalf of insurance companies, creating lists of preferred drugs covered by health plans and reimbursing pharmacies for prescriptions. The FTC has been investigating PBMs and their role in insulin prices since 2022.
The agency's lawsuit says the three insulin management companies created a “harmful” system that prioritized high rebates from manufacturers, “artificially inflating list prices for insulin.” The lawsuit also alleges that PBMs favor higher-priced insulin even when lower-priced insulin becomes available.
The lawsuit also includes PBM's group purchasing organization, or GPO, which brokers drug purchases for hospitals and other health care providers. Zinc Health Services serves as the GPO for Caremark, while Emisar Pharma serves as the GPO for OptumRx. Ascent Health Services is Cigna's GPO.
The lawsuit is just one of many headwinds CVS faces. The company's shares are down more than 20% this year as it faces runaway medical costs in the insurance sector and pharmacy reimbursement pressure.
CVS has engaged consultants in a strategic review of its business, which may include separating the company's insurance business from retail pharmacies. It is unclear where Caremark would fall in the event of a breakup.
A general view shows the CVS Health Customer Support Center sign at CVS Health Corp's CVS headquarters in Woonsocket, Rhode Island, US on October 30, 2023.
Faith Ninevagi | Reuters
In the motion filed Tuesday, CVS alleged that Khan defamed PBMs throughout her entire career. For example, the company cited a 2022 statement in which Khan said PMS “effectively determines what medications are prescribed, which pharmacies patients can use, and how much patients will pay at the pharmacy.”
CVS similarly pointed to Slaughter's previous comments about PBMs' allegedly “disturbing,” “unacceptable” and “corrupt” discounting practices, and how they believe they create “competitive distortions in drug markets.” Meanwhile, the company cited Bedoya's suggestions that “a large portion of the blame” for insulin price increases falls on rebates demanded by supply management companies.
CVS called the three commissioners' previous statements “incorrect assertions” about Caremark and other PBMs.
The healthcare giant also alleged that during the FTC's investigation, the three commissioners attended closed-door events to help raise funds for anti-PBM lobbyists. Organizers of those events vilified PBMs as “vampires” and “vampires,” CVS argued in the motion.
The Biden administration and lawmakers from both parties have stepped up pressure on drug administration companies, seeking to increase transparency in their business practices as many patients struggle to afford prescription drugs. Americans pay on average two to three times what patients in other developed countries pay for prescription drugs, according to a White House fact sheet.
