FTC Chair Lina Khan testifies during the House Financial Services and General Government Appropriations Subcommittee hearing titled “Fiscal Year 2025 Request for the Federal Trade Commission,” in the Rayburn Building on Wednesday, the 15th. May 2024.
Tom Williams | Cq-roll Call, Inc. | fake images
CVS Health, UnitedHealth Group and Cigna are demanding that Federal Trade Commission Chairwoman Lina Khan and two other commissioners recuse themselves from a lawsuit that accuses companies and other pharmaceutical middlemen of padding their profits while inflating insulin costs for Americans.
In separate motions filed Tuesday night with the FTC, the companies argued that the three commissioners have a long history of making public statements indicating allegedly serious bias against the companies' so-called pharmacy benefit managers.
The companies accused Khan, as well as commissioners Alvaro Bedoya and Rebecca Kelly Slaughter, of incorrectly claiming that PBMs are “price gougers” who maintain significant control over prices and access to drugs like insulin. CVS said those statements show that the commissioners have “prejudged this matter,” so their involvement in the case “violates due process.”
“If the opposite of 'complete fairness' is 'egregious bias,' the Three Commissioners would easily meet even that standard,” CVS wrote in a 23-page motion.
Meanwhile, UnitedHealth's 17-page motion said: “Any judge who made these comments about a litigant at the outset of a lawsuit would have to immediately recuse himself for blatant bias.”
Cigna, in one of three motions filed, said Khan “prejudged the facts and law surrounding this action.”
“She has repeatedly and wrongly claimed that PBMs 'control' drug pricing and patient access to medications,” Cigna said.
The FTC filed its complaint through its so-called administrative process, which initiates a proceeding before an agency administrative judge who would hear the case and issue an opinion. FTC commissioners then vote on that opinion.
The FTC on Wednesday denied CNBC's request to comment on the motion.
Other corporate giants, including Amazon and GoalThey have unsuccessfully pushed for Khan to be disqualified from previous cases or investigations, citing concerns about her objectivity. Khan has resisted those calls, saying he has never prejudged any case or set of facts.
The FTC filed the lawsuit last month against the three largest PBMs: CVS Health's Caremark, UnitedHealth Group's Optum Rx and Cigna's Express Scripts. All are owned or connected to health insurers and collectively administer about 80% of the country's prescriptions, according to the FTC.
PBMs are at the center of the drug supply chain in the U.S., negotiating drug rebates with manufacturers on behalf of insurers, creating lists of preferred medications covered by health plans, and reimbursing pharmacies for recipes. The FTC has been investigating PBMs and their role in insulin prices since 2022.
The agency's lawsuit contends that the three PBMs have created a “perverse” system that prioritizes high rebates from manufacturers, leading to “artificially inflated insulin list prices.” The lawsuit also alleges that PBMs favor insulins with high list prices even when insulins with lower list prices are available.
The lawsuit also includes each PBM's affiliated group purchasing organization, or GPO, that negotiates the purchase of drugs for hospitals and other health care providers. Zinc Health Services operates as the GPO of Caremark, while Emisar Pharma acts as the GPO of OptumRx. Ascent Health Services is Cigna's GPO.
The lawsuit is just one of several obstacles CVS faces. The company's shares have fallen more than 20% this year as it grapples with runaway medical costs in its insurance segment and pharmacy reimbursement pressure.
CVS has hired advisers for a strategic review of its business, which could potentially involve separating the company's insurer from its retail pharmacies. It's unclear where Caremark would fall in the event of a breakup.
A general view shows a CVS Health Customer Care Center sign at the CVS Health Corp headquarters in Woonsocket, Rhode Island, U.S., Oct. 30, 2023.
Faith Ninivaggi | Reuters
In Tuesday's motion, CVS alleged that Khan has vilified PBMs throughout his professional career. For example, the company cited a 2022 statement in which Khan said that PBMs “virtually determine what medications are prescribed, which pharmacies patients can use, and the amount patients will pay at the pharmacy counter.”
CVS also noted Slaughter's previous comments about PBMs' supposedly “disruptive,” “unacceptable” and “rotten” reimbursement practices, and how she believes they create “competitive distortions in pharmaceutical markets.” Meanwhile, the company cited Bedoya's suggestions that “a significant part of the blame” for rising insulin prices lies with rebates demanded by PBMs.
CVS called the three commissioners' previous statements “incorrect statements” about Caremark and other PBMs.
The healthcare giant also alleged that during the FTC investigation, the three commissioners attended indoor events to help raise funds for anti-PBM lobby groups. Organizers of those events vilified PBMs as “bloodsuckers” and “vampires,” CVS argued in the motion.
The Biden administration and lawmakers on both sides of the aisle have increased pressure on PBMs, seeking to increase transparency in their business practices as many patients struggle to pay for prescription drugs. Americans pay on average two to three times more than patients in other developed countries for prescription drugs, according to a White House fact sheet.
