A federal judge has rejected attempts by major pharmacy benefit managers (PBMs) to dismiss a Federal Trade Commission lawsuit, allowing the case to proceed. The ruling, issued Tuesday by Judge Matthew Schelp of the U.S. District Court for the Eastern District of Missouri, denied the request from Caremark, Express Scripts, and Optum Rx to halt proceedings against them.
The FTC initiated legal action in September against these three dominant PBMs, which collectively control a significant portion of the U.S. pharmacy benefit management market. The lawsuit centers on allegations that these companies, owned respectively by CVS, Cigna, and UnitedHealth, employ business practices that artificially inflate insulin prices.
According to the FTC’s allegations, these PBMs deliberately favor higher-priced insulin products to secure larger rebates during negotiations with pharmaceutical manufacturers. This practice, regulators argue, creates an environment where drug companies are incentivized to raise list prices, ultimately resulting in increased costs for both insurance providers and patients.
The PBMs had challenged the FTC’s approach, arguing that the agency’s decision to pursue the case through an internal administrative court rather than a federal court violated constitutional principles. They contended this arrangement inappropriately allowed the FTC to serve as both prosecutor and judge.
However, Judge Schelp found these arguments insufficient to warrant case dismissal. In his ruling, he emphasized that the PBMs failed to demonstrate they would suffer irreparable harm if the case continued. The judge also noted that established legal precedent supports the FTC’s authority to conduct such administrative proceedings without violating due process rights.
The court’s decision represents a significant setback for these pharmaceutical intermediaries and their parent companies, which generate substantial annual profits from their operations. Judge Schelp specifically stated that halting the proceedings would work “against the public’s interest,” noting that Congress had explicitly authorized the FTC to pursue such cases through internal proceedings.
The landscape of PBM regulation could shift under the Trump
administration, though the direction of any changes remains uncertain. While the current Biden administration has taken an aggressive stance toward what it perceives as anticompetitive practices in the industry, Trump’s approach to industry oversight might differ, given his administration’s generally more business-friendly orientation.
However, Trump’s recent public statements suggest continued scrutiny of PBMs might persist. During a December news conference, the president expressed his intention to “knock out the middleman,” indicating potential ongoing pressure on the industry regardless of administrative changes.
The ruling allows the FTC to continue its investigation into practices that regulators believe contribute to escalating healthcare costs. The three PBMs have consistently denied allegations that their business methods lead to higher drug prices, characterizing the FTC’s lawsuit as part of a broader campaign against their industry.
This development comes at a time of increasing national focus on healthcare costs, particularly regarding insulin pricing. The case highlights ongoing tensions between regulatory efforts to control pharmaceutical expenses and the complex business relationships among healthcare industry intermediaries.
The judge’s decision underscores the FTC’s authority to investigate and challenge business practices it considers potentially harmful to market competition and consumer interests, particularly in the healthcare sector where pricing transparency and cost control remain significant public policy concerns.