The Biden administration’s antitrust scrutiny of the life sciences industry continued this week as the Federal Trade Commission (FTC) filed an administrative complaint against the nation’s largest pharmacy benefit managers (PBMs) and their affiliated group purchasing organizations (GPOs).1 The PBMs are Caremark Rx, Express Scripts, and OptumRx.
The complaint alleges the respondents violated Section 5 of the FTC Act by unfairly preferring insulin products with high list prices and high rebates, excluding low list price insulin products from their formularies, and unfairly shifting costs to patients. Notably, the FTC asserts all three counts under Section 5, rather than the Sherman or Clayton Acts. Extending the reach of the antitrust laws in this manner has been a consistent objective of the Biden Administration, which was also reflected in the FTC’s 2022 policy statement which stated “that Section 5 reaches beyond the Sherman and Clayton Acts to encompass various types of unfair conduct that tend to negatively affect competitive conditions.”2
The FTC’s primary allegation is that the PBMs threatened to exclude drugs from formularies in order to increase the rebates they received from manufacturers. Further, the FTC alleges the PBMs pursued high list cost insulin products knowing it “led to higher out-of-pocket costs for certain patients.” While the complaint focuses on insulin, it identified conduct pertaining to Humira as well, which is well-known for treating arthritis, as evidence that PBMs will likely continue to prefer drugs with high list prices over low list price drugs.
The complaint does not name any drug manufacturers as respondents, but FTC Bureau of Competition Deputy Director Rahul Rao issued a statement warning manufacturers. The statement asserts that “all drug manufacturers should be on notice that their participation in the type of conduct challenged here can raise serious concerns, with a potential for significant consumer harm, and that the Bureau of Competition reserves the right to recommend naming drug manufacturers as defendants in any future enforcement actions over similar conduct.”3
The complaint follows the FTC’s interim report and staff presentation on how PBMs inflate the costs of drugs,4 as well as several other examples of the Biden administration heavily scrutinizing the life sciences sector. Other examples from the past two years include:
- the FTC suing U.S. Anesthesia Partners (USAP) and Welsh Carson, alleging they engaged in an anticompetitive scheme to consolidate anesthesia practices.5
- the FTC sued to preliminary enjoin an exclusive license between Sanofi, a large pharmaceutical company, and Maze Therapeutics, a start-up that lacks an FDA-approved product but is developing a promising drug to treat Pompe disease, a rare genetic disorder.6 Sanofi terminated the proposed exclusive license for the development drug following the FTC’s challenge to the transaction.7
- a joint request for information from the U.S. Department of Justice, the FTC, and the Department of Health and Human Services to solicit public comments about the impact of consolidation in the healthcare industry.8
- the White House affirming its commitment to promote competition in healthcare markets.9
The focus on life sciences is likely to continue under the next presidential administration as well. For example, Kamala Harris’s campaign website states that “she’ll keep fighting to bring down prescription drug costs by taking on pharmacy middlemen.”10 While Donald Trump has not provided specifics for lowering drug costs, his administration implemented a program that temporarily lowered the copay for certain Medicare beneficiaries to $35 a month.11
For more information or advice, please contact Michelle Yost Hale, Brendan Coffman, Seth Silber, Jamillia Ferris, or any member from the antitrust and competition practice.
[1] Complaint, Caremark Rx, Zinc Health Services, et al., In the Matter of (Insulin), available here.
[2] Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act, Commission File No. P221202 (Nov. 10, 2022), available here.
[3] Statement of FTC Bureau of Competition Deputy Director Rahul Rao on Lawsuit Against PBMs and the Role of Drug Manufacturers in Distorting Competition in the U.S. Drug Distribution System (Sept. 20, 2024), available here.
[4] Press Release, FTC Releases Interim Staff Report on Prescription Drug Middlemen (July 9, 2024), available here.
[5] Press Release, Federal Trade Commission, FTC Challenges Private Equity Firm’s Scheme to Suppress Competition in Anesthesiology Practices Across Texas (Sept. 21, 2023), Federal Trade Commission, available here.
[6] Federal Trade Commission, Sanofi/Maze Therapeutics, Inc., In the Matter of, available here.
[7] Press Release, Sanofi, Statement on FTC challenge to proposed license agreement with Maze Therapeutics (Dec. 11, 2023), available here.
[8] Request for Information, Department of Justice, Department of Health and Human Services, Federal Trade Commission, available here.
[9] Press Release, White House, FACT SHEET: President Biden Announces New Actions to Lower Costs for Americans by Fighting Corporate Rip-Offs (Mar. 5, 2024), available here.
[10] Kamala Harris, Build an Opportunity Economy and Lower Costs for Families, available here.
[11] Press Release, Centers for Medicare and Medicaid Services, President Trump Announces Lower Out of Pocket Insulin Costs for Medicare’s Seniors (May 26, 2020), available here.
