Express Scripts Sues Federal Trade Commission And Chair Over Interim Pharmacy Benefit Manager Report

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Duane Morris LLP

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On September 17, 2024, Express Scripts Inc.—the nation's third-largest pharmacy benefits manager (PBM) by patient population—filed suit against the Federal Trade Commission (FTC) and Chairperson Lina Kahn, challenging the accuracy and legal sufficiency of the FTC's July 9, 2024, interim report.
United States Food, Drugs, Healthcare, Life Sciences

On September 17, 2024, Express Scripts Inc.—the nation's third-largest pharmacy benefits manager (PBM) by patient population—filed suit against the Federal Trade Commission (FTC) and Chairperson Lina Kahn, challenging the accuracy and legal sufficiency of the FTC's July 9, 2024, interim report.

The interim report, the first fruits of the FTC's ongoing 6(b) investigation into the nation's largest PBMs, accuses major PBMs of various forms of anticompetitive conduct. Express Scripts' lawsuit calls the interim report "unfair, biased, erroneous, and defamatory" and asks for a rescission of the interim report and for judicial declarations that the interim report was issued in violation of various procedural requirements, as well as for an order recusing Kahn from any further involvement in any matters concerning Express Scripts. While the effects of this suit remain to be seen, it could prove to be consequential to other matters in the FTC's ongoing feud with PBMs, including its anticipated issuance of a final report. Providers are therefore encouraged to monitor the suit's development.

As we have covered in previous Alerts (see full timeline below), the FTC has been in tension with PBMs at least since June 7, 2022, when it announced its investigation. Though the investigation continues, amid calls from Congress and other actors for an update, the FTC issued the interim report. The interim report was immediately followed by reports of imminent antitrust lawsuits against these PBMs, reports that proved to be true on September 20, 2024, when the FTC filed such a lawsuit against Express Scripts, Caremark and OptumRx, the nation's three largest PBMs. The U.S. House Committee on Oversight and Accountability also cited the interim report in three August 28, 2024, letters that accuse executives at these PBMs of providing false testimony before Congress.

Express Scripts' 58-page complaint challenges the interim report, alleging, among other things, that the FTC ignored dispositive evidence in drawing its conclusions and exhibited unfair bias. According to the complaint, 75 percent of the interim report's citations were to public sources rather than to information collected from PBMs in the investigation. The complaint cites comments from FTC Commissioner Andrew Ferguson, who also expressed concern over "the Report's overreliance on a single 'case study' of two drugs, rather than thousands and thousands of drugs available in the United States today." The complaint expressly challenges Kahn's conduct as well, citing a well-known 2016 article she published while in law school and her involvement in a pharmacists' lobbying group to assert that she initiated the FTC's investigation due to an anti-PBM bias and had already drawn her own conclusions before the investigation began.

The complaint's legal counts include defamation, violation of the Fifth Amendment (by issuing a biased report based on an investigation that departed from standard procedural requirements), violation of the Administrative Procedure Act (APA) (by issuing a report that is not "in the public interest") and violation of Article II of the U.S. Constitution (on the grounds that the FTC's structure conflicts with that article)―but a key count to note is Express Scripts' claim of "arbitrary and capricious conduct." According to the complaint, when a federal agency changes position, it must show that it has good reasons for doing so, and failure to provide such reasons constitutes arbitrary and capricious conduct that violates the APA. The complaint cites a dissenting statement from FTC Commissioner Melissa Holyoak, who claims that the FTC previously took the position that PBMs were pro-competitive and that the interim report "contained no empirical work to rebut the Commission's past conclusions that PBMs are pro-competitive."

The complaint requests, among other things, declaratory judgments finding the interim report to be unlawful, an order vacating the interim report and an injunction recusing Kahn from all FTC action pertaining to Express Scripts.

While the effects of this lawsuit may be difficult to predict at this early stage, Express Scripts likely had several legal and practical motivations for filing it. On the legal side, as of September 30, 2024, there have been no further substantive actions in the case, so the case's legal merits have yet to be seen. But even if Express Scripts were to win, it is challenging only an interim report; a final report is likely forthcoming, the effects of which could be much greater on the perception of PBMs' operations than those of the interim report, and any victory in this lawsuit may or may not affect a final report. Further, given the FTC's ongoing investigation and its own lawsuit against Express Scripts, Caremark and OptumRx, Express Scripts' suit is only one of several current legal actions on this topic, and activity in any one of these actions may moot the others.

On the practical side, the suit may be an effort to combat the large amount of public criticism that Express Scripts and other PBMs have received over the past few months. Bringing a lawsuit against a major federal agency may be Express Scripts' way of saying that it genuinely believes it has done nothing wrong. Further, Express Scripts' arguments concerning the legal and factual sufficiency of the interim report may affect the FTC's completion of its investigation and issuance of a final report.

Whatever its effects prove to be, this lawsuit may be consequential in the FTC's ongoing feud with PBMs, so providers are encouraged to follow its development along with the rest of this matter.

Below is a timeline of key events in the FTC-PBM feud. We will continue to monitor the situation as it develops.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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