The Federal Trade Commission filed suit Friday against the nation's three largest pharmacy benefit managers, including a division of Minnetonka-based UnitedHealth Group, alleging the companies have engaged in anticompetitive and unfair rebating practices that artificially inflate the list price of insulin.

The administrative complaint alleges that Caremark Rx, Express Scripts and Optum Rx — dubbed the "Big Three" of pharmacy benefit managers — worked with their respective group purchasing organizations to rig the pharmaceutical supply chain in favor of the companies, thereby driving up costs for certain patients.

Pharmacy benefit managers (PBMs) negotiate drug prices with manufacturers and structure the formularies that dictate what level of coverage patients within health plans have for different medications.

The FTC took aim at what it called "a perverse drug rebate system" that pushes up list prices in order to maximize rebates from manufacturers, a dynamic that the commission says forces some patients to pay much more out-of-pocket.

"Millions of Americans with diabetes need insulin to survive. Yet for many of these vulnerable patients, their insulin drug costs have skyrocketed over the past decade thanks in part to the powerful PBMs and their greed," wrote Rahul Rao, deputy director of the FTC's Bureau of Competition, in a statement.

Optum Rx issued a response that stressed PBMs are the counterweight to what the company described as the monopoly power of pharmaceutical companies to set and raise drug prices.

Optum also highlighted steps it has taken over the past decade to lower patients' out-of-pocket insulin costs.

"This baseless action demonstrates a profound misunderstanding of how drug pricing works," the company said in a statement. "For many years, Optum Rx has aggressively and successfully negotiated with drug manufacturers and taken additional actions to lower prescription insulin costs for our health plan customers and their members, who now pay an average of less than $18 per month for insulin."

The Pharmaceutical Care Management Association, the trade group for PBMs, said the FTC's action was "driven by the self-serving agendas of special interests and designed to misrepresent the role and value of pharmacy benefit managers."

Scrutiny of PBMs has grown in recent years, including an ongoing FTC study released in July suggesting the companies may have generally inflated costs while squeezing independent pharmacies.

State attorneys general have asked the U.S. Supreme Court to review a case that otherwise threatens relatively new state regulation of pharmacy benefit managers. Optum headquarters in Eden Prairie was the scene earlier this month of a protest against the influence of PBMs, which critics describe as middlemen.

PBMs have strenuously objected, insisting that their work provides significant savings for patients. Earlier this week, Express Scripts, a division of Connecticut-based Cigna, sued the FTC in federal court, demanding that the commission retract the July report on costs and pharmacies.

Administrative complaints by the FTC are filed internally, not in federal court, and heard by an administrative law judge.

The complaint filed Friday alleges PBMs systematically excluded lower price insulins, which could have been more affordable for patients, in favor of products with high list prices that delivered higher rebates as well.

According to the complaint, PBMs have created and managed a system in which drug manufacturers compete for spots on health plan formularies by raising, rather than lowering, drug list prices. This allows for bigger rebates that are collected by the managers and their health plan clients.

The FTC alleges that PBMs keep hundreds of millions of dollars in rebates and fees each year. The companies use these sums, the commission alleges, to attract clients ranging from health insurers and employers to labor unions.

"The PBMs, however, are not the only actors who have contributed to this broken system that has driven up the price of insulin and other drugs," Rao said in a statement issued by FTC. "While the commission has exercised its discretion to move forward with suing only the PBMs and [group purchasing organizations] now, FTC staff's investigation has also shed light on the concerning and active role that the insulin manufacturers ... play in the challenged conduct."

Certain patients with deductibles and coinsurance requirements often must pay the higher "unrebated list price," FTC says. The out-of-pocket cost to a patient, in fact, could exceed the cost of the drug to the commercial insurers, according to the commission.

Insulin medications used to be affordable, the commission says, pointing to one widely used drug that cost $21 in 1999. By 2017, the list price for this insulin — Humalog from Indiana-based Eli Lilly — grew by more than 1,200% to more than $274, according to FTC.

In another example, an insulin from Danish drug manufacturer Novo Nordisk more than doubled from $122.59 in 2012 to $289.36 in 2018.

"Competition usually leads to lower prices as sellers try to win business," the FTC said in a news release. "But in the upside-down insulin market, manufacturers — driven by the Big Three PBMs' hunger for rebates — increased list prices to provide the larger rebates and fees necessary to compete for formulary access."

The Pharmaceutical Care Management Association said the FTC's rhetoric obscures how the insulin market is working.

The trade group cited industry figures showing the average out-of-pocket cost for a month's supply of insulin has declined across all payer types from $25.79 in 2019 to $18.64 in 2023.

"If the FTC had considered the role of the entire supply chain, the commission may have accurately diagnosed the lack of insulin competition in the period analyzed as a result of Big Pharma's anti-competitive tactics and found that prices on brand name insulin products increased at manufacturer discretion, since rebates are uncorrelated to higher list prices," the trade group said.

The group added: "Decisions from Big Pharma companies to lower the price of some insulin products last year, following increased congressional scrutiny and public outcry, underscore that drug companies can decide to lower prices at any time."

Three of the FTC commissioners voted to file the administrative complaint; two recused themselves. Complaints are filed when the FTC has reason to believe the law has been or is being violated, and it appears that a proceeding is in the public interest. The allegations will be tried in a formal hearing.

On Friday, Express Scripts issued a statement saying the commission was "choosing to ignore the facts and score political points, rather than focus on its duty to protect consumers."

Caremark Rx, a division of Rhode Island-based CVS Health, said in a statement: "Three brand drugmakers control nearly the entire insulin market, and without competitive lower-cost generic alternatives, they raised their list prices by as much as 500% in lockstep with one another prior to 2012. That's when CVS Caremark fueled increased competition by creating new formulary options to fight back against these manufacturer price hikes."