FTC Alleges PBMs Inflated Insulin Prices, Citing 1200% List Price Increase for Humalog

A recent social media post by "Clark H" has ignited discussion around the pharmaceutical industry's profitability and the role of Pharmacy Benefit Managers (PBMs) in drug pricing. The tweet asserted that "stupendous misguided attention" is paid to pharma profits, claiming they are "within normal ranges," and instead highlighted PBMs for "jacking up or distorting prices for little benefit." This perspective contrasts with ongoing scrutiny from regulators and consumer advocates regarding drug costs.

The profitability of pharmaceutical companies remains a contentious issue. A 2020 study published in JAMA Network found that from 2000 to 2018, large pharmaceutical companies exhibited significantly higher median net income margins, averaging 13.8%, compared to 7.7% for other S&P 500 companies. However, a more recent analysis by the Campaign for Sustainable Rx Pricing (CSRxP) in November 2024 claimed that pharmaceutical manufacturers' average annual net income margins were nearly 23%, ten times greater than the 2.3% seen in other drug supply chain sectors.

Much of the current debate centers on the practices of Pharmacy Benefit Managers, which act as intermediaries between drug manufacturers, insurers, and pharmacies. Critics argue that PBMs, particularly the three largest entities controlling approximately 80% of the market, contribute to high drug costs through opaque practices. These include "spread pricing," where PBMs charge health plans more for a drug than they reimburse pharmacies, and retaining a portion of manufacturer rebates.

The Federal Trade Commission (FTC) has launched investigations into PBM practices, with a significant development occurring in September 2024. The FTC filed a lawsuit alleging that the three largest PBMs—Caremark Rx, Express Scripts, and OptumRx—artificially inflated insulin drug prices. The complaint specifically cited a staggering 1200% increase in the list price of Humalog from $21 in 1999 to over $274 by 2017, attributing this to PBMs prioritizing high rebates from manufacturers over lower-list-price products.

"As PBMs increasingly act in their own self-interest without transparency or accountability, drug prices rise and patients face health risks from cost-prohibitive drug treatments," stated AMA President Bobby Mukkamala, MD, underscoring concerns about the PBM market's impact on patients.

Lawmakers at both federal and state levels are pursuing reforms aimed at increasing transparency, banning spread pricing, and mandating the full pass-through of rebates to health plans. While PBMs argue they secure savings for payers, these legislative efforts reflect growing concerns that their business models may inadvertently drive up list prices and patient out-of-pocket costs, diverting attention from other systemic issues in drug pricing.