The Federal Trade Commission announced a settlement with Express Scripts, Inc., and its affiliated entities that could save American patients up to $7 billion in drug costs over the next decade. The agreement resolves an FTC lawsuit alleging that the pharmacy benefit manager artificially inflated insulin list prices through anticompetitive rebating practices.
The settlement requires Express Scripts to adopt fundamental changes to its business practices that increase transparency and are expected to significantly reduce patients' out-of-pocket costs for essential medications like insulin. The agreement also promises to bring millions of dollars in new revenue to community pharmacies each year.
"The FTC's settlement with Express Scripts is a clear testament to the Trump-Vance FTC's focus on lowering healthcare costs for American patients," said FTC Chairman Andrew N. Ferguson. "The FTC's settlement with ESI will end its business practices that have kept drug prices high, ultimately providing meaningful financial relief to American patients who depend on ESI to access life-sustaining prescription drugs as well as community pharmacies who will see new revenues each year and relief from being squeezed."
The FTC's enforcement action targets Express Scripts along with two other major pharmacy benefit managers, Caremark Rx and OptumRx. According to the Commission's complaint, these PBMs created a system that artificially drove up the list prices of drugs by preferencing rebates over actual net prices.
The complaint alleges that this rebate-focused system pushed insulin manufacturers and other drug companies to compete for preferred formulary coverage based on the size of rebates off the list price rather than the actual net price. This arrangement ultimately benefitted the PBMs, including Express Scripts, which keep a portion of the inflated rebates for themselves.
Under this system, patients bore the financial burden of inflated list prices. The FTC alleges that Express Scripts' practices particularly harmed patients whose out-of-pocket payments, such as copays and coinsurance, are tied directly to the list price of medications rather than the lower net price after rebates.
The settlement addresses these concerns by requiring Express Scripts to stop preferring medications on its standard formularies based primarily on rebate amounts. This change is designed to create more competition based on actual drug costs rather than rebate structures that can drive up list prices.
Chairman Ferguson emphasized that the settlement advances broader healthcare policy goals, including reshoring major portions of Express Scripts' business operations, ensuring regulatory compliance with price transparency laws, and requiring disclosure of payments to brokers. The agreement also supports the administration's TrumpRx initiative aimed at lowering prescription drug costs for Americans.
Pharmacy benefit managers serve as intermediaries between drug manufacturers, health insurers, and patients, managing prescription drug benefits for health plans. The three largest PBMs, including Express Scripts, control a significant portion of the prescription drug market in the United States, giving them substantial influence over drug pricing and access.
The FTC's action reflects growing scrutiny of PBM business practices and their role in rising drug costs. Critics argue that while PBMs were originally designed to help control drug costs through negotiations with manufacturers, their complex rebate structures have sometimes led to higher list prices that particularly burden uninsured patients and those with high-deductible health plans.
For patients, the settlement could mean lower out-of-pocket costs for essential medications, particularly insulin, which is used by millions of Americans with diabetes. The transparency requirements may also help patients and healthcare providers better understand the true cost of medications and make more informed decisions about treatment options.
Community pharmacies stand to benefit from the agreement through increased revenue streams and relief from what the FTC described as being "squeezed" by current PBM practices. These independent pharmacies have long complained that PBM reimbursement practices make it difficult to operate profitably while serving local communities.
The settlement with Express Scripts represents a significant enforcement action in the pharmaceutical pricing space. While the specific terms of the consent order were not fully detailed in the announcement, the agreement requires court approval before taking effect.
The case continues the FTC's broader examination of practices in the pharmaceutical supply chain that may contribute to high drug prices. The Commission has indicated that its investigation into PBM practices remains ongoing, suggesting that additional enforcement actions may follow.
For Express Scripts, the settlement allows the company to resolve the litigation while implementing new business practices that comply with FTC requirements. The company has not admitted wrongdoing as part of the settlement agreement.
The agreement comes as policymakers at both federal and state levels continue to examine ways to address high prescription drug costs. The FTC's action demonstrates the agency's commitment to using antitrust enforcement to tackle practices that may artificially inflate drug prices and harm consumers.