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CVS and UnitedHealth say the FTC should remove Lina Khan and two commissioners from the PBM case
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CVS and UnitedHealth say the FTC should remove Lina Khan and two commissioners from the PBM case

FTC Chairwoman Lina Khan makes statements during the House Appropriations Subcommittee on Financial Services and Government hearing entitled “Fiscal Year 2025 Application for the Federal Trade Commission” at the Rayburn Building on Wednesday, May 15, 2024 out of.

Tom Williams | Cq-roll Call, Inc. | Getty Images

CVS Health And UnitedHealth Group are demanding that Federal Trade Commission Chairwoman Lina Khan and two other commissioners recuse themselves from a lawsuit accusing the companies and other drug intermediaries of increasing their profits while driving up the cost of insulin for Americans.

In separate filings with the FTC on Tuesday evening, CVS and UnitedHealth argued that all three commissioners had an extensive track record of making public statements that suggested “serious bias” against the companies' so-called pharmacy benefit managers let.

The companies accused Khan, as well as commissioners Alvaro Bedoya and Rebecca Kelly Slaughter, of falsely claiming that PBMs were “price gougers” that had significant control over pricing and access to medications like insulin. CVS said those statements showed the commissioners had “pre-judged this matter” so their involvement in the case “violates due process.”

“If the opposite of 'complete fairness' were 'manifest bias,' the three commissioners themselves would easily meet that standard,” CVS wrote in a 23-page filing.

Meanwhile, UnitedHealth's 17-page motion said: “Any judge who made these comments about a litigant at the outset of litigation would be required to recuse themselves immediately on grounds of apparent bias.”

The FTC declined CNBC's request for comment on the filing on Wednesday.

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Other corporate giants, including Amazon And MetaThey have unsuccessfully pushed for Khan to be excluded from previous cases or investigations, citing concerns about her objectivity. Khan resisted these requests, saying she never anticipated any case or issue.

The FTC filed suit last month against the three largest PBMs, CVS Health's Caremark, UnitedHealth Group's Optum Rx and Cigna's Express Scripts. All are owned by or affiliated with health insurers and collectively manage about 80% of the nation's prescriptions, according to the FTC.

The FTC filed its complaint under its so-called administrative procedure, which initiates proceedings before an administrative law judge who hears the case.

PBMs are at the heart of the drug supply chain in the United States. They negotiate drug discounts with manufacturers on behalf of insurers, create lists of preferred medications covered by health insurance companies, and reimburse pharmacies for prescriptions. The FTC has been investigating PBMs and their role in insulin prices since 2022.

The agency's lawsuit argues that the three PBMs have created a “perverse” system that prioritizes deep discounts from manufacturers, resulting in “artificially inflated insulin list prices.” The lawsuit also alleges that PBMs favor insulins with high list prices even as insulins with lower list prices become available.

The lawsuit also affects the group purchasing organization (GPO) associated with the PBM, which brokers drug purchases for hospitals and other healthcare providers. Zinc Health Services serves as GPO for Caremark, while Emisar Pharma serves as GPO for OptumRx. Ascent Health Services is the GPO for Cigna.

The lawsuit is just one of several headwinds facing CVS. The company's shares have fallen more than 20% this year as it struggles with rising medical costs in its insurance segment and reimbursement pressures at pharmacies.

CVS has hired consultants to conduct a strategic review of its business that could potentially include separating the company's insurer from its retail pharmacies. It's unclear where Caremark would end up in the event of a split.

A general view shows a CVS Health Customer Support Center sign at CVS Health Corp's headquarters in Woonsocket, Rhode Island, the United States, October 30, 2023.

Faith Ninivaggi | Reuters

In Tuesday's filing, CVS alleged that Khan has disparaged PBMs throughout her career. For example, the company cited a 2022 statement in which Khan said that PBMs “virtually determine which medications are prescribed, which pharmacies patients can use, and how much patients pay at the pharmacy counter.”

CVS similarly referenced Slaughter's previous comments about PBMs' alleged “disturbing,” “unacceptable” and “lazy” rebate practices and how they say they are leading to “distortions of competition in pharmaceutical markets.” Meanwhile, the company cited Bedoya's claims that “a significant portion of the blame” for insulin price increases lies on rebates demanded by PBMs.

CVS called the three commissioners' previous statements “false allegations” about Caremark and other PBMs.

The healthcare giant also alleged that the three commissioners attended closed events to raise funds for anti-PBM lobbying groups during the FTC investigation. The organizers of these events denigrated PBMs as “bloodsuckers” and “vampires,” CVS argued in the motion.

The Biden administration and lawmakers on both sides have increased pressure on PBMs, seeking to increase transparency in their business practices as many patients struggle to afford prescription drugs. On average, Americans pay two to three times more for prescription drugs than patients in other developed nations, according to a White House fact sheet.

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