Corporate Law: FTC Lawsuit on Insulin Pricing

Written by Sophia Liu, Aqsa Babar, and Anna Ramesh

Edited by Anna Ramesh

What is the FTC

The Federal Trade Commision (FTC) is an independent agency of the United States that focuses on protecting consumers and the enforcement of antitrust law, meaning laws that are put in place to create a competitive, fair, open market and to protect consumers from exploitative and unfair business practices. The current chairman of the FTC is Andrew Ferguson, who took office in January 20, 2025, following Trump being instated as president. The FTC chair is appointed by the President from among the five FTC commissioners, who are nominated by the President and confirmed by the Senate, serving seven-year terms. This case started in September 2024, when Rahul Rao was serving as the Deputy Director of the FTC's Bureau of Commission.

What are PBMs

Starting with Rao's term, Pharmacy Benefit Managers have been under investigation by the FTC. Pharmacy Benefit Managers (PBMs) are third-party administrators of drug programs. They serve as the middlemen between drug manufacturers, pharmacies, and insurers, primarily making money through negotiating rebates from drug manufacturers, charging administrative fees to health plans, and utilizing "spread pricing" where they pay pharmacies a lower price for drugs and then bill the health plan at a higher price, keeping the difference as profit.

PBMs have been on thin ice with the FTC since 1999, when the FTC issued a report highlighting PBMs' potentially problematic rebate practices. Subsequent reports followed that made attempts to regulate what appeared to be a growing antitrust problem among PBMs. The July 2024 report preceded the lawsuit and highlighted the fact that the top six PBMs make up more than 90% of the market, while the top three process more than 80% of prescriptions. The FTC, in this report, was mainly worried about vertical consolidation among PBMs and other market participants (mainly pharmacies) that would allow PBMs to gain greater pricing power over the insulin market. The PBMs sued the FTC on September 17th and the FTC hit back with this September 20th suit.

The Lawsuit

Currently, the PBMs CVS Caremark, Cigna Express Group, and UnitedHealth Group OptumRX make up about 80% of the market share, almost $600 billion in 2024, covering around 270 million people. Over the past 20 years, the price of insulin has shot up 600%. The FTC alleges that this is because the revenue created for PBMs comes partly from rebates and fees, and when the price of insulin increases, so do rebates and fees. Therefore, the FTC is suing these three PBMs for inflated insulin prices.

The Discovery and Pricing of Insulin

Insulin, first discovered in 1921, was initially intended to be widely accessible, with its patent sold for $1 to ensure affordability. For much of the 20th century, insulin prices remained stable. However, beginning in the late 20th and early 21st centuries, pharmaceutical companies leveraged patent protections, product modifications, and market exclusivity to drive significant price increases.

Insulin pricing is monitored through a combination of federal oversight, market transparency efforts, advocacy initiatives, and legislative measures. The Centers for Medicare & Medicaid Services (CMS) enforces pricing caps, such as the $35 monthly cap under the Inflation Reduction Act for Medicare beneficiaries, while the Federal Trade Commission (FTC) investigates anti competitive practices. The Food and Drug Administration (FDA) also oversees insulin approvals, including efforts to increase competition in drug types to drive down costs. Congressional committees and state legislatures also monitor insulin pricing through hearings, reports, and state-level price caps (e.g., Colorado's $100 cap for insured patients).

Between 2002 and 2013 the cost of insulin tripled. By the late 2010s, the price of certain insulin products had increased by over 1,200% since 1999. These increases were attributed to various factors, including manufacturer pricing strategies, limited generic competition, and the role of PBMs in negotiating rebates that, in turn, incentivized higher list prices.

The global insulin market is now dominated by three companies: Eli Lilly, the French company Sanofi, and the Danish firm Novo Nordisk. All three have raised list prices to similar levels. According to IBM Watson Health data, Sanofi's popular insulin brand Lantus was $35 a vial when it was introduced in 2001; it's now $270. Novo Nordisk's Novolog was priced at $40 in 2001, and as of July 2018, it's $289.

Related Legislative Efforts

Some legislative and regulatory actions that were taken to mitigate insulin costs include the Inflation Reduction Act (2022). This Act Implemented a $35 cap on monthly insulin costs for Medicare beneficiaries. Then in 2023, big-players in the insulin production business such asEli Lilly, Novo Nordisk, and Sanofi, announced price cuts and out-of-pocket caps in response to public backlash from increasing insulin prices; this was known as the Voluntary Price Reductions. The FTC Lawsuit against PBMs marks the most recent series of regulatory measures to reduce insulin pricing.

The effects of this lawsuit

This lawsuit is a big step forward for both the FTC and the companies it regulates, and whichever side wins would gain a precedent for future litigation. If the Express Scripts suit succeeds, it sets a precedent of legal defense for other companies who find themselves targeted in a report. This is bad for the FTC because it "flips the playbook" by giving the target its choice of forum and, if the FTC files its own suit, forcing it to litigate in parallel venues. However, if the suit swings in favor of the FTC, it would be a massive strategic battering ram as this suit gets at the core of PBMs' business models and a central aspect of drug pricing. Because it is a high profile case "follow-on litigation can be expected" from both sides, but especially if FTC wins, potential plaintiffs will be able to see whether rulings on rebating practices for insulin may be repeated and extended to other drugs.

Currently, this case is still in the initial stages of the legal process. The FTC has filed a complaint against the PBMS, and is expected to file the lawsuit in court and therefore allege that the Pharmacy Benefit Managers have hamed consumers by inflating insulin prices. Once this complaint is filed, the defendants (in this case, the PBMs) would answer the complaint, and then both parties will enter the discovery period. Discovery includes the exchange of evidence, documents, and other information between parties to prepare for trial. If the case ends up proceeding to trial, a judge or jury will make a decision based on the evidence presented by the Plaintiffs (The FTC) and the Defendants (PBMs).