FTC Chairwoman Lina Khan Testifies Amid Controversy Over Pharmacy Benefit Managers
On May 15, 2024, Federal Trade Commission (FTC) Chairwoman Lina Khan took center stage during a House Appropriations Subcommittee hearing focused on the agency’s fiscal year 2025 budget request. The hearing, held in the Rayburn Building, was not only a platform for discussing the FTC’s financial needs but also a backdrop for a brewing controversy involving major healthcare companies and their allegations against the commission’s leadership.
The Context of the Hearing
The hearing came at a pivotal moment for the FTC, as it faces increasing scrutiny over its regulatory actions, particularly concerning the pharmaceutical industry. Khan, known for her aggressive stance on antitrust issues and her commitment to consumer protection, has been a polarizing figure since her appointment. Her testimony was expected to address various topics, including the agency’s ongoing investigations and enforcement actions against companies accused of anti-competitive practices.
The Controversy: PBMs Under Fire
At the heart of the controversy are three major pharmacy benefit managers (PBMs): CVS Health, UnitedHealth Group, and Cigna. These companies have recently filed motions demanding that Khan and two other commissioners—Alvaro Bedoya and Rebecca Kelly Slaughter—recuse themselves from a lawsuit accusing them of inflating insulin prices through their business practices. The lawsuit claims that these PBMs, which collectively manage about 80% of the nation’s prescriptions, have created a system that prioritizes profit over patient access to affordable medications.
The companies argue that Khan and her fellow commissioners have demonstrated a clear bias against PBMs, labeling them as "price gougers" and asserting that they exert undue control over drug pricing and access. CVS’s motion, a detailed 23-page document, contends that the commissioners have "prejudged this matter," violating due process principles. UnitedHealth’s motion echoed this sentiment, stating that any judge making similar remarks would be compelled to recuse themselves for bias.
The FTC’s Position
In response to the motions, the FTC has remained tight-lipped, declining to comment on the allegations. However, the agency’s lawsuit against the PBMs, filed through its administrative process, aims to address the systemic issues surrounding insulin pricing. The FTC argues that the PBMs have fostered a "perverse" system that leads to artificially inflated drug prices, particularly for insulin, which has become a critical issue for many Americans struggling to afford their medications.
The lawsuit also implicates the affiliated group purchasing organizations (GPOs) of the PBMs, which are responsible for negotiating drug purchases for healthcare providers. This broad approach underscores the FTC’s commitment to tackling the complexities of the pharmaceutical supply chain and its impact on drug pricing.
The Broader Implications
The allegations against Khan and her fellow commissioners are not isolated incidents. Other corporate giants, including Amazon and Meta, have previously sought Khan’s disqualification from various cases, citing concerns over her objectivity. Khan has consistently defended her position, asserting that she has never prejudged any case or set of facts.
The scrutiny of PBMs comes at a time when the Biden administration and lawmakers from both parties are pushing for greater transparency in drug pricing. With Americans paying significantly more for prescription drugs than patients in other developed nations, the pressure is mounting on PBMs to reform their practices and provide clearer insights into their pricing mechanisms.
CVS’s Challenges
For CVS Health, the stakes are particularly high. The company has seen its shares plummet over 20% this year, grappling with rising medical costs and pressures on pharmacy reimbursements. As CVS engages in a strategic review of its business, potentially considering a split between its insurance and retail pharmacy segments, the outcome of the FTC’s lawsuit could have far-reaching implications for its future.
CVS has accused Khan of vilifying PBMs throughout her career, citing past statements where she criticized their influence over drug pricing and patient access. The company also highlighted the commissioners’ participation in fundraising events for anti-PBM lobbying groups, further fueling claims of bias.
Conclusion
As Chairwoman Lina Khan continues to navigate the complexities of her role at the FTC, the ongoing legal battles with major PBMs underscore the challenges facing the agency in its mission to protect consumers and promote fair competition. The outcome of these proceedings will not only shape the future of the pharmaceutical industry but also impact millions of Americans who rely on affordable access to essential medications. With the spotlight firmly on the FTC, the coming months will be critical in determining how these issues unfold and what reforms may be enacted to address the pressing concerns surrounding drug pricing in the United States.
