Dive Brief:

• An affiliate of healthcare giant Cigna is suing the Federal Trade Commission for making defamatory statements against it in a report on how pharmacy benefit managers are inflating the price and limiting the availability of drugs. The company is asking a federal judge to have the report vacated and set aside.
• “The Commission’s Report followed prejudice and politics, not evidence or sound economics, and wrongly concluded that PBMs inflate drug costs and harm independent pharmacies,” lawyers for Express Scripts, a PBM owned by Cigna, said in the complaint filed Sept. 17 in federal court in Missouri. “Express Scripts’ business and reputation have been harmed by the Commission’s unlawful, unconstitutional, and arbitrary and capricious conduct and defamatory statements.”
• The FTC issued “Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies” as an interim report in July.

Dive Insight:

Express Scripts is one of half a dozen large PBMs that the FTC says plays an intermediary role in 80% of the prescription drugs dispensed in the U.S. today. When smaller PBMs are included, the industry controls 90% of the market, the agency says in its report. 

The companies work with drug manufacturers on one side and health insurance plan sponsors on the other to negotiate how much members of a plan pay for prescription drugs and what drugs are considered standard under their insurance programs. 

Express Scripts accuses the FTC of conducting shoddy research to conclude PBMs skew the cost and availability of drugs by favoring manufacturers and pharmacies that are part of the same integrated vertical conglomerate of companies that they are. Instead of building the report around the full sweep of data the PBMs provided, the company alleges, the agency relied heavily on publicly available information and public comments, including anonymous comments, in a way that doesn’t meet the high standard of rigor that is expected of an agency like the FTC, the company says. 

“Over seventy-five percent of the citations in the Report are to public sources, including cherry-picked third-party publications and anonymous public comments, not the voluminous data and information produced in response to the Commission’s wide-ranging and burdensome requests for information to inform this supposed study,” the complaint says. 

As a result of the report, the company says, it’s been named a defendant in multiple lawsuits and expects to be named in more. 

The company says FTC Chair Lina Khan was biased against PBMs when she was a law student and she brought that bias with her to the agency when she initiated the research in 2022. 

“Chair Khan came into office having already decided, as a law student, that PBMs are the bad actors,” the company says. “Chair Khan’s mind is irrevocably closed to contrary views on PBMs and the overwhelming evidence that supports those contrary views.”

An earlier FTC study on PBMs, from 2005, concluded the intermediaries were actually good for consumers. Other papers and letters the agency produced in prior years largely came to the same conclusion but they and the report were disregarded in the latest research, the company claims. 

“The decision to disavow these letters and reports was made only by Chair Khan and the two other Democratic Commissioners,” the company says. 

In a dissent over releasing the report, FTC Commissioner Melissa Holyoak said she was hoping this new report would pick up where the 2005 report left off by examining how the market has changed since then to see if the earlier conclusion still holds. But the new report doesn’t factor in the earlier findings. 

“The Report does not present any empirical evidence to rebut the 2005 Report’s findings,” said Holyoak, the Utah solicitor general before she was appointed to the FTC earlier this year. In her previous role, she says, she supported efforts to hold PBMs accountable when appropriate but she can’t support the way the FTC has gone about conducting its research in this case. 

“Rather than generate public engagement and fruitful policy discussion, the Report will only exacerbate ideological schisms and further degrade the legitimacy of the Commission,” she says.  

In addition to asking the court to have the report vacated and set aside, Express Scripts wants the court to find the agency has defamed it when it stated without evidence that, as a PBM, the company has inflated drug costs.

The company also accuses the agency of violating its due process rights by prejudging its role in the market, and of violating the federal Administrative Procedures Act by ignoring its earlier findings about the positive role PBMs play and also by issuing a report that, because of its defects, isn’t in the public interest. It also challenges the agency on the broader constitutional grounds that the U.S. Supreme Court used in a landmark case this year, SEC v. Jarkesy, that calls into question the amount of executive authority agencies have.   

“Because FTC Commissioners exercise executive authority but are not freely removable by the President, the Commissioners’ insulation under Section 41 of the FTC Act violates Article II, Sections 1 and 3 of the U.S. Constitution,” the complaint says. 

The FTC didn’t immediately respond to a request for comment but in a comment to Bloomberg News, the agency said it rejects the company’s claims. 

“This is a complicated and opaque market, and the FTC is committed to using its clear authority to help the public and policymakers understand it,” FTC spokesperson Douglas Farrar told Bloomberg in an email.