How UnitedHealth and Rivals Made $7.3 Billion Marking Up Drugs: FTC

UnitedHealth, the largest health care company in the U.S., made profits of up to 7,700 percent on lifesaving drugs, the Federal Trade Commission has reported.

The Context

The high cost of medical care in the United States received renewed attention following the assassination of Brian Thompson, the CEO of UnitedHealth Group's insurance wing, UnitedHealthcare, on December 4.

Police said the suspect in the fatal shooting, Luigi Mangione, was found in possession of a manifesto against UnitedHealthcare. He has pleaded not guilty to both federal and state murder charges.

What To Know

On Tuesday, the FTC released a report that said the three largest pharmacy benefit managers (PBMs) had made massive profits on monthly supplies of lifesaving drugs.

The FTC report showed that from 2017 to 2022, the three PBMs—UnitedHealth Group's Optum, CVS Health's CVS Caremark and Cigna's Express Scripts—marked up prices at their pharmacies by hundreds or thousands of percent.

With markups of more than 1,000 percent on drugs for cancer, HIV, multiple sclerosis, pulmonary hypertension and other life-threatening conditions, the PBMs collectively added $7.3 billion in revenue, the report said.

PBMs are third-party companies connected to pharmacies that serve as intermediaries between insurance providers and pharmaceutical manufacturers. The companies say they reduce consumer costs.

According to the FTC report: "For the pulmonary hypertension drug tadalafil (generic Adcirca), for example, pharmacies purchased the drug at an average of $27 in 2022, yet the Big 3 PBMs marked up the drug by $2,079 and paid their affiliated pharmacies $2,106, on average, for a 30-day supply of the medication on commercial claims—an average markup of over 7,700 percent.

"Similarly, the average markup on the drug dimethyl fumarate (generic Tecfidera) for patients with multiple sclerosis was more than 2,100 percent on commercial claims in 2022; the average acquisition cost of the drug was $177, while PBMs marked up the drug by $3,753, on average, and paid their affiliated pharmacies $3,930 for a 30-day supply."

The FTC also alleged that the PBMs paid their affiliated pharmacies more for drugs than independent pharmacies.

What People Are Saying

A CVS Caremark spokesperson told Newsweek: "At CVS Caremark, our top priority is to make healthcare more affordable and accessible, by working to lower the costs of prescriptions for the patients we serve, as well as the employers and unions that hire us. Our role in the US health system is to fight back against pharma price gouging, and CVS Caremark has a long track record of making specialty drugs more affordable.

"For the 2023 calendar year, which is the latest full year we reported drug trends, our clients' specialty drug spend increased only 3.7 percent over the previous year (roughly consistent with the overall rate of inflation in 2023, despite the introduction of several new, high-priced specialty drugs.

"During this period, we achieved a client satisfaction rate of 95 percent and a member satisfaction rate of 96 percent. For the 7th consecutive year, our average member's out-of-pocket cost declined, for a total reduction of 29.3 percent since 2016, to a current average monthly copay of $7.26. We drove more than $1 billion in cost savings on specialty medications alone.

"It is inappropriate and misleading to draw broad conclusions from cherry-picked 'specialty generic' outliers, as the FTC did in its interim report."

FTC Chair Lina M. Khan said in a news release: "The FTC should keep using its tools to investigate practices that may inflate drug costs, squeeze independent pharmacies, and deprive Americans of affordable, accessible healthcare—and should act swiftly to stop any illegal conduct."

What Happens Next

The FTC is considering its position and may take legal action. However, the report said the issues highlighted did not necessarily indicate that any illegal conduct had occurred.