Cigna's Express Scripts Reaches Settlement with FTC Over Insulin Pricing Allegations
Express Scripts, a unit of Cigna Group, has reached a settlement with federal antitrust enforcers to resolve allegations that the company artificially inflated the price of insulin for patients through illegal rebate tactics. The Federal Trade Commission, which filed the lawsuit in 2024, announced the agreement on Wednesday, stating that Express Scripts will change how it calculates prices for its list of approved drugs.
Background of the Case and Industry Impact
Cigna is one of three major pharmacy benefit managers that together control approximately 80% of prescriptions filled in the United States. The lawsuit against the other two companies, units of CVS Health Corp. and UnitedHealth Group Inc., remains ongoing. Last month, the FTC paused the case to allow for settlement talks with all three companies, leading to the cancellation of a hearing scheduled for Thursday.
This settlement removes a significant overhang for Cigna's Express Scripts, the country's largest pharmacy benefit manager. The company has recently signaled a series of changes to its drug benefit plans, which executives describe as a fundamental shift in its business model. These changes include phasing out many drug rebates, which were at the heart of the FTC's case, as part of efforts to get ahead of regulation and address investor concerns about risks from Washington.
Details of the Settlement Agreement
Under the settlement, which contains no monetary penalty and does not require Cigna to admit liability, Express Scripts will implement several key changes. According to the FTC, the company will standardize plan options to ensure that members' costs are based on the net prices of medications, rather than the higher list prices before discounts and rebates. It will also stop preferring higher list price drugs over identical ones with lower list prices and agree to pay retail pharmacies based on their actual costs to purchase medications.
Additionally, Cigna will move its group purchasing organization, Ascent Health Services, from Switzerland to the United States. Purchasing groups formed by Cigna and its rivals in recent years have added new layers to the drug supply chain and have faced regulatory scrutiny for taking payments from drug manufacturers, potentially driving up costs.
Market Reaction and Company Statements
Following the announcement, Cigna shares were up 1.2% at 12:37 p.m. in New York, while CVS stock dipped less than 1% and UnitedHealth shares fell 3%. In an emailed statement, Express Scripts said, "As enforced by the settlement, our new, transparent pharmacy benefits model ensures our members get their medicines at the lowest price."
The company will also offer coverage for drugs on TrumpRx, the Trump administration's website for direct-to-consumer drug sales, "upon relevant legal and regulatory changes," according to the FTC. This website was originally due to launch in January but has not yet gone live.
Broader Context and Regulatory Scrutiny
The FTC sued Cigna, CVS, and UnitedHealth in 2024 during the Biden administration, alleging that the companies made it harder for patients to access lower-cost versions of insulin. This case is part of a broader effort by Washington to scrutinize the role of pharmacy benefit managers, which influence which drugs patients can obtain at pharmacies.
FTC Chair Andrew Ferguson hailed the settlement as "historic," stating in a thread on X that, "today's settlement is a huge step toward lowering prescription drug costs." He was the sole FTC commissioner to vote in favor of the settlement, with his colleague, Mark Meador, recused due to previous work in private practice.
Financial Implications and Future Outlook
Cigna has already announced a series of changes to its traditional pharmacy benefit model, including ending rebates in many private drug plans late last year. Critics argue that these payments from drugmakers to middlemen drive up prices and increase costs for patients at the pharmacy counter.
The decision to phase out rebates initially spooked investors, leading to Cigna's worst selloff since 2008. The company recently stated that changes to the PBM model would lower earnings by up to $600 million next year. However, the FTC estimates that the settlement will reduce out-of-pocket costs for prescription drugs for American patients by $7 billion over the next decade, though it did not provide details on how this figure was calculated.
This settlement marks a significant development in the ongoing regulatory efforts to address high drug prices in the United States, particularly for essential medications like insulin.
