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american economic liberties project
FTC Sues Big Pharma Middlemen for Inflating Insulin Prices
"Caremark, ESI, and Optum—as medication gatekeepers—have extracted millions of dollars off the backs of patients who need lifesaving medications," said one agency leader.
Sep 20, 2024
The Federal Trade Commission on Friday initiated a legal process against middlemen that collectively administer about 80% of all prescriptions in the United States, accusing them of artificially inflating the list price of insulin drugs and blocking patients from accessing cheaper products.
The FTC action targets the "Big Three" pharmacy benefit managers (PBMs): CVS Health's Caremark Rx, Cigna's Express Scripts (ESI), and UnitedHealth Group's OptumRx. It also involves their affiliated group purchasing organizations (GPOs): Zinc Health Services, Ascent Health Services, and Emisar Pharma Services.
"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 powerful PBMs and their greed," said Rahul Rao, deputy director of the FTC's Bureau of Competition.
"Caremark, ESI, and Optum—as medication gatekeepers—have extracted millions of dollars off the backs of patients who need lifesaving medications," Rao continued. "The FTC's administrative action seeks to put an end to the Big Three PBMs' exploitative conduct and marks an important step in fixing a broken system—a fix that could ripple beyond the insulin market and restore healthy competition to drive down drug prices for consumers."
The FTC's vote to begin the legal process by filing a complaint was 3-0. Led by Chair Lina Khan, the Democrats supported the move while the two Republicans, Commissioners Melissa Holyoak and Andrew N. Ferguson, recused.
The American Prospect executive editor David Dayen noted that "the complaint, which was filed in an administrative court, has not yet been made public, as it is undergoing redactions. Agency officials expect it to be made public on Monday."
However, in a statement after the vote, the FTC shared some details about the complaint's arguments that "Caremark, ESI, and Optum and their respective GPOs engaged in unfair methods of competition and unfair acts or practices under Section 5 of the FTC Act by incentivizing manufacturers to inflate insulin list prices, restricting patients' access to more affordable insulins on drug formularies, and shifting the cost of high list price insulins to vulnerable patient populations."
Rao emphasized that while the commission on Friday "exercised its discretion to move forward with suing only the PBMs and GPOs now, FTC staff's investigation has also shed light on the concerning and active role that the insulin manufacturers—Eli Lilly, Sanofi, and Novo Nordisk—play in the challenged conduct."
"All drug manufacturers should be on notice that their participation in the type of conduct challenged here can raise serious concerns, with a potential for significant consumer harm, and that the Bureau of Competition reserves the right to recommend naming drug manufacturers as defendants in any future enforcement actions over similar conduct," he said.
Emma Freer, senior policy analyst for healthcare at the American Economic Liberties Project, pointed out that "the FTC's case adds to the mounting, bipartisan criticism of the 'Big Three' PBMs, which for far too long have exploited their monopoly power to inflate drug prices and enrich shareholders at the expense of patients' health and pocketbooks."
"The lawsuit also exposes their industrywide abuse, using insulin—the price of which has soared over 1,200% since 1999—as a flagship example of how PBMs' rebate schemes distort markets and drive up costs for lifesaving drugs," Freer said. "While PBMs bear much of the blame, the FTC is right to also put brand-name manufacturers like Eli Lilly, Novo Nordisk, and Sanofi on notice for their role in this crisis. We're thrilled to see the commission bring this long overdue challenge against healthcare's most notorious middlemen, and hope to see it result in concrete reform and accountability."
As The New York Timesreported:
Just weeks before the presidential election, the agency is tackling an issue that Vice President Kamala Harris has signaled an interest in. Campaigning at a community college in Raleigh, North Carolina, in August, Ms. Harris promised to "demand transparency from the middlemen who operate between Big Pharma and the insurance companies, who use opaque practices to raise your drug prices and profit off your need for medicine."
Former President Donald J. Trump has not campaigned on the issue, but in 2018, his administration proposed a sweeping change that would have threatened the benefit managers' business model. The proposal was never enacted. Mr. Trump's administration also created a model for capping Medicare patients' out-of-pocket costs for some insulin products that was later expanded under President [Joe] Biden.
The Times also noted that "some Republicans in Congress have proposed curbing some of the benefit managers' business practices. But other top Republicans have defended PBMs and said the FTC is overreaching."
Among the GOP's critics of PBMs is House Committee on Oversight and Accountability Chairman James Comer (R-Ky.), who highlighted his panel's investigations into the companies and praised the FTC move.
Another leading congressional critic of PBMs—and the country's failing for-profit healthcare system more broadly—is Senate Committee on Health, Education, Labor, and Pensions (HELP) Chair Bernie Sanders (I-Vt.), who caucuses with Democrats.
After a public pressure campaign led Eli Lilly, Novo Nordisk, and Sanofi to cut list prices of insulin products last year, Sanders held a hearing with their CEOs as well as PBM executives. At the time, he welcomed the voluntary reductions but also stressed that as "Americans pay outrageously high prices for prescription drugs, the pharmaceutical industry and the PBMs make enormous profits."
While the FTC's Friday action was widely praised—other than by the PBMs, who denied the allegations—some advocates hope the commission and other decision-makers will go even further in the future.
Stacy Mitchell, co-executive director of the Institute for Local Self-Reliance, called PBMs "some of the most predatory corporations in healthcare" and highlighted that "these companies have incredibly long rap sheets and convictions at the state level."
"I'm thrilled the FTC is going after these criminal enterprises," she said. "I hope this lawsuit, with its focus on kickbacks, is just the beginning. We also need action on how PBMs harm local pharmacies. Ultimately, these corporations need to be broken up."
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'Corporate Greed at Its Absolute Worst': FTC Challenges Kroger Merger
"As grocery store 'price gouging' reaches the top of the political ticket, the FTC is intervening to protect consumers and workers from further harm."
Aug 26, 2024
As grocery giants Kroger and Albertsons faced the U.S. Federal Trade Commission in a federal court Monday, economic justice advocates said Americans should be wary of the corporate media's reporting on the FTC's lawsuit, which aims to block the companies' proposed $24.6 billion merger.
"Get ready for more takes like these from corporate media," said the American Economic Liberties Project (AELP), posting on social media a clip from CNBC in which anchor Joe Kernen echoed Kroger and Albertsons' claims that the merger would help them compete with big box stores like Walmart, lower prices for consumers, and benefit workers.
"With a merger this blatantly harmful to consumers, workers, and countless local communities, Wall Street cheerleaders can't help but rely on misleading arguments," said AELP.
The trial, kicking off in a U.S. District Court in Portland, Oregon, centers on a claim by the FTC along with eight states and the District of Colombia that the merger would reduce industry competition—creating "a straight-up monopoly" in small communities like Gunnison, Colorado where 6,000 residents "would have to drive 65 miles to reach a non-Kroger supermarket," according to AELP.
FTC Chair Lina Khan is also opposing the merger because it would weaken unionized workers' bargaining power, particularly in parts of the country where dozens of Kroger and Albertsons stores are located near each other.
With 115 of 159 Albertsons stores located within two miles of a Kroger in Los Angeles County and Orange County, California, the United Food and Commercial Workers International Union (UFCW) has warned that hundreds of unionized workers could see their stores close if the merger is finalized.
As the trial began Monday, The New York Times published an interview with an employee of an Albertsons subsidiary in Woodland Hills, California. Leonard De Monte was represented by the UFCW in 2015 when the grocery store he was working at was sold as part of Albertsons' merger with the store's parent company—a deal that was called "an unmitigated disaster" for workers by AELP senior legal counsel Lee Hepner.
De Monte found another job at the Albertsons subsidiary, but was demoted to minimum wage. Now nine years later, after working his way up to a $27-per-hour union wage, the store De Monte works at is once again at risk of being sold if the merger goes through, and he fears being demoted to minimum wage again and losing his benefits.
"I have great health benefits because I've been with the company so long," he told the Times. "If I lose my health benefits, I would have to pay out of pocket."
Despite the stores' claim that they need to compete with Walmart and Amazon, AELP pointed out in March that Kroger and Albertsons acknowledge one another as their top competition. Without the two stores competing, said the group, "grocery workers will lose bargaining power, both because individually they won't have a competing employer to go work for, and because unions will lose leverage during contract negotiations. As a result, workers will potentially face lower wages, worse working conditions, and layoffs."
According to an analysis by the Economic Policy Institute, the merger would reduce the total annual earnings of grocery store workers in affected metropolitan areas by $334 million.
In court on Monday, the FTC displayed text messages showing that Kroger executives have complained that Albertsons has forced it "to accept more worker compensation."
The progressive think tank Roosevelt Institute said the trial, which is expected to go on for three weeks, shows that Khan and the FTC are "taking the harms of corporate consolidation on workers seriously."
Kroger's arguments and business practices—including using "dynamic pricing" to price gouge and its exorbitant CEO pay—represent "corporate greed at its absolute worst," said former U.S. Labor Secretary Robert Reich.
"The Kroger-Albertsons merger would eliminate head-to-head competition between grocery stores across the country," said Hepner. "As grocery store 'price gouging' reaches the top of the political ticket, the FTC is intervening to protect consumers and workers from further harm."
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California-Google Deal Called 'Disaster for Journalism and Good Government'
One critic said the agreement "was hammered out behind closed doors between media giants and tech platforms," and "fails to meet the needs of California's journalists and communities."
Aug 22, 2024
Anti-monopoly and media groups this week are sounding the alarm over a new agreement between California and Google that kills two state bills focused on funding journalism.
Both supporters and critics of the bills—state Sen. Steve Glazer's (D-7) S.B. 1327 and Assemblymember Buffy Wicks' (D-14) A.B. 886, also known as the California Journalism Preservation Act (CJPA)—have expressed concerns about the deal that Wicks announced and Democratic Gov. Gavin Newsom cheered as "a major breakthrough" on Wednesday.
Glazer's bill would have imposed a 7.25% tax on online advertising revenue to create a tax credit for California newsrooms while the CJPA would have made platforms pay part of their ad revenue to media outlets for using their content. Big Tech was fiercely against both proposals.
Negotiators settled on providing nearly $250 million in private and public funding over the next five years to launch a National AI Accelerator and a News Transformation Fund, to be administered by the University of California, Berkeley Graduate School of Journalism, according to Wicks, who claimed that "this is just the beginning."
As CalMattersreported:
Instead of Google and Meta being forced to negotiate usage fees with news outlets directly, Google would deposit $55 million over five years into a new fund administered by UC Berkeley to be distributed to local newsrooms—and the state would provide $70 million over five years. Google would also continue paying $10 million each year in existing grants to newsrooms.
The Legislature and the governor would still need to approve the state money each year; the source isn't specified yet. Google would also contribute $12.5 million each year toward an artificial intelligence "accelerator" program, raising labor advocates' anxieties about the threat of job losses.
The deal came after more than a year of debate over the bills, during which Google came under fire for testing that involved "removing links to California news websites, potentially covered by CJPA, to measure the impact of the legislation on our product experience," as Jaffer Zaidi, the tech giant's VP for global news partnerships, explained in April.
While the new plan was praised by leaders at CalMatters, Local Independent Online News Publishers, OpenAI—which is also part of the agreement—and Google's parent company, Alphabet, Glazer and various groups put out statements that range from skeptical to scathing.
"Despite the good intentions of the parties involved, this proposal does not provide sufficient resources to bring independent news gathering in California out of its death spiral," Glazer said a lengthy statement. "This agreement, unfortunately, seriously undercuts our work toward a long-term solution to rescue independent journalism."
"There is a stark absence in this announcement of any support for journalism from Meta and Amazon," he added. "These platforms have captured the intimate data from Californians without paying for it. Their use of that data in advertising is the harm to news outlets that this agreement should mitigate."
Charles F. Champion II, president and CEO of the California News Publishers Association, which represents over 700 newspapers and online publications in the state, was less critical, but still not fully pleased with the outcome.
"We appreciate the effort to bring together resources from both the public and private sectors to support local journalism," he said. "However, we believe that the financial commitments from Google and other tech companies should have been more robust, given the substantial revenues they generate from the distribution of journalistic content."
Seven labor union leaders—including Media Guild of the West president Matt Pearce—jointly declared that "California's journalists do not consent to this shakedown," and sent the state Legislature a letter of opposition over what they described as an "undemocratic and secretive deal with one of the businesses destroying our industry."
Noting the union opposition, Society of Professional Journalists national president Ashanti Blaize-Hopkins said that "it is concerning that journalists appeared to lose their seat at the table as this initiative was negotiated."
"At the very least journalists should be deeply involved in how this plan will be rolled out, as it could potentially impact their livelihoods," Blaize-Hopkins added. "As other states study this effort for lessons on how to bolster local journalism, I hope California leaders will set an example that both centers and honors the input of working professionals who fight tirelessly to keep the public informed."
Lee Hepner, senior legal counsel at the American Economic Liberties Project, which backed the CJPA, said Tuesday—before the agreement was officially announced—that "this backroom deal is bad for journalists, publishers, and all Californians, which is why state lawmakers including Gov. Newsom should reject it and proceed through a transparent legislative process."
"The fact that a journalism preservation bill may be replaced with a Google-funded AI Accelerator is not just absurd policy, it's horrendous politics," Hepner continued. "That this AI deal is reportedly close to being finalized and we still don't know the details speaks volumes about who is driving the decision-making process in Sacramento—and it's not the journalists, publishers, or newsrooms who have had their industry hollowed out by Google's monopoly."
After the deal was set, Free Press Action co-CEO Jessica J. González, whose group opposed the CJPA, said that "we are disappointed in this outcome and this process. Good policy is made out in the open, where people can see and participate in the democratic process."
"This deal, meanwhile, was hammered out behind closed doors between media giants and tech platforms," she stressed. "While we're awaiting final details, it seems clear that the result is an agreement that fails to meet the needs of California's journalists and communities."
González continued:
While some newsrooms will benefit from this deal in the short term, the funding is far too meager, the time span far too short, the commitment to localism and diversity far too inadequate. Lawmakers must view this outcome as the first step in a much broader process to revive and transform local news, not as a viable long-term solution.
Local journalism that helps people understand what's happening in their communities and holds the powerful accountable is a public good. Local journalists, community publishers, public interest groups, labor unions, and grassroots advocates worked tirelessly to make this a priority issue for lawmakers.
"Going forward, we encourage lawmakers to continue working with these groups, look beyond short-term measures, and begin envisioning the kind of structural policy change that's needed to truly stabilize and transform our media system," she added. "That means putting community publishers, ethnic media outlets, and nonprofit newsrooms at the center of any legislative intervention. These entities are closest to their communities and are doing incredible work to plug critical information gaps."
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