CVS says FTC should take Lina Khan and two commissioners off drug middlemen case

CVS Health is demanding Federal Trade Commission Chairwoman Lina Khan and two other commissioners recuse themselves from a lawsuit accusing the company and other drug middlemen of boosting their profits while inflating insulin costs for Americans. 

In a 23-page motion filed Tuesday night with the FTC, CVS argued that all three commissioners have “a lengthy track record of making public statements that indicate serious bias” against the company and other drug middlemen. 

The company accused Khan, as well as commissioners Alvaro Bedoya and Rebecca Kelly Slaughter, of incorrectly asserting that so-called pharmacy benefit managers are “price gougers” that hold significant control over the pricing and access to drugs like insulin. CVS said those statements demonstrate that the commissioners have “prejudged this matter,” so their participation in the case “violates due process.” 

“If the opposite of ‘complete fairness’ is ‘blatant bias,’ the Three Commissioners would easily satisfy even that standard,” CVS wrote.

The FTC on Wednesday did not immediately respond to CNBC’s request for comment on the motion. 

Other corporate giants, including Amazon and Meta, have unsuccessfully pushed for Khan to be disqualified from previous cases or investigations, citing concerns about her objectivity. Khan has resisted those calls, saying she has never prejudged any case or set of facts. 

The FTC filed the 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 connected to health insurers and collectively administer about 80% of the nation’s prescriptions, according to the FTC. 

PBMs sit at the center of the drug supply chain in the U.S., negotiating medication rebates with manufacturers on behalf of insurers, creating lists of preferred medications covered by health plans and reimbursing 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 high rebates from manufacturers, which leads to “artificially inflated insulin list prices.” The suit also alleges that PBMs favor high-list-price insulins even when insulins with lower list prices become available. 

The lawsuit also includes each PBM’s affiliated group purchasing organization, or GPO, which brokers drug purchases for hospitals and other health-care providers. Zinc Health Services operates as the GPO for Caremark. 

The lawsuit is just one of several headwinds CVS is facing. Shares of the company are down more than 20% this year as it grapples with runaway medical costs in its insurance segment and pharmacy reimbursement pressure. 

CVS has engaged advisors in a strategic review of its business, which could potentially involve splitting the company’s insurer from its retail pharmacies. It’s unclear where Caremark would fall in the case of a breakup. 

In the motion Tuesday, CVS alleged that Khan has vilified PBMs during her entire professional career. For example, the company cited a 2022 statement in which Khan said PBMs “practically determine which medicines are prescribed, which pharmacies patients can use, and the amount patients will pay at the pharmacy counter.”

CVS similarly pointed to Slaughter’s previous comments about the allegedly “disturbing,” “unacceptable” and “rotten” rebating practices of PBMs and how she believes they create “competitive distortions in pharmaceutical markets.” Meanwhile, the company cited Bedoya’s suggestions that “a significant part of the blame” for insulin price increases rests on rebates demanded by PBMs. 

CVS called the prior statements of the three commissioners “incorrect assertions” about Caremark and other PBMs. 

The healthcare giant also alleged that during the FTC probe, the three commissioners attended closed events to help fundraise for anti-PBM lobbying groups. Organizers of those events vilified PBMs as “bloodsuckers” and “vampires,” CVS argued in the motion.

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