FTC Deal Forces Express Scripts to Delink Fees From Drug List Prices in Insulin Pricing Crackdown

On Feb. 4, federal regulators did something they had long resisted in the fight over drug prices: they moved to rewrite the business model of one of the most powerful middlemen in American health care.

The Federal Trade Commission said it had secured a 10-year consent order with Express Scripts, one of the three dominant pharmacy benefit managers, over allegations that its rebate and formulary practices helped drive insulin list prices sharply higher while limiting access to cheaper alternatives. The order is the first major outcome from the FTC’s sweeping investigation of pharmacy benefit managers, or PBMs, and could become a template for how prescription drugs are priced and paid for across the country.

The settlement, finalized Feb. 17 after a public comment period, requires Express Scripts to “delink” its compensation from drug list prices, offer health plans a new benefit design that bases patients’ out-of-pocket costs on net prices instead of inflated sticker prices, and overhaul how it pays community pharmacies. The FTC estimates the changes could reduce patients’ out-of-pocket costs for drugs, including insulin, by up to $7 billion over the next decade.

“Today’s action is a major step toward ending the perverse incentives that have made life-saving drugs like insulin unaffordable for too many Americans,” FTC Chair Andrew N. Ferguson said in announcing the deal.

Express Scripts, now part of Cigna’s Evernorth Health Services, did not admit wrongdoing and will pay no civil penalty. The company has long argued that drug manufacturers, not PBMs, set list prices and that its negotiations save money for health plans and employers.

The FTC’s case against PBMs

The settlement stems from a September 2024 administrative complaint in which the FTC accused Express Scripts and rivals CVS Caremark and OptumRx of operating a “perverse drug rebate system” that rewarded higher list prices. According to the complaint, PBMs demanded large rebates tied to list prices in exchange for favorable placement on drug formularies, then kept a portion of those rebates—giving them a financial stake in rising prices.

Regulators said that system was especially harmful for insulin, a century-old drug that millions of Americans with diabetes rely on. The list price of Eli Lilly’s Humalog, one of the most commonly used insulins, rose more than 1,200% between 1999 and 2017, far outpacing inflation and wage growth.

For many patients, the FTC noted, out-of-pocket costs are calculated as a percentage of a drug’s list price or are paid in full until a deductible is met. Rebates negotiated behind the scenes rarely reduce what they pay at the pharmacy counter, particularly for those in high-deductible plans or without insurance.

In internal communications cited by the agency, a PBM executive described the system as allowing the industry’s “Big Three” firms to continue to “drink down the tasty … rebates” on high-priced insulins, even as cheaper versions were available.

What the consent order requires

Under the new consent order, Express Scripts must create and actively market a “Standard Offering” to employers, insurers, and other plan sponsors that changes those incentives.

Delinking PBM compensation from list prices

In that offering, the company’s compensation “must not be based, directly or indirectly, on the list price of any drug,” according to the order. Instead, Express Scripts is required to move toward flat or fixed-fee arrangements that are not tied to how high a manufacturer sets a price.

Net-price cost sharing at the pharmacy counter

The Standard Offering also must base patients’ copays and coinsurance on the net cost of a drug—the price after rebates and discounts—not on list price or any higher benchmark. Patient out-of-pocket costs “must be no higher than the net unit cost” of the medicine.

Express Scripts will have to ensure that manufacturer rebates and other price concessions are applied at the point of sale so that patients see the benefit immediately.

Formulary restrictions for “high-list/low-list” versions

The settlement takes direct aim at formulary practices that, according to the FTC, sidelined lower-cost insulins. When a manufacturer sells both a high-list and a low-list-price version of the same drug, Express Scripts’ standard formularies may no longer cover only the high-price product while excluding or placing the cheaper version on a worse tier—or subjecting it to extra hurdles such as prior authorization.

“This order is designed to ensure that lower-priced insulins and other drugs are not locked out of formularies merely because they generate smaller rebates,” Ferguson said.

Pharmacy reimbursement changes and a ban on spread pricing

Changes extend to how Express Scripts deals with pharmacies. The order bans “spread pricing” in the Standard Offering, a practice in which PBMs charge health plans more for a prescription than they reimburse the pharmacy and keep the difference.

Instead, Express Scripts must pay retail community pharmacies based on their actual acquisition cost for a drug, plus a dispensing fee and additional compensation for non-dispensing services.

The FTC said that move will “bring millions of dollars in new revenue to community pharmacies each year,” a significant shift for independent pharmacies that have long complained of opaque and below-cost reimbursement levels.

Moving a Swiss-based rebate hub to the U.S.

One of the most unusual provisions requires Express Scripts to relocate its Swiss-based rebate hub, Ascent Health Services, to the United States. Ascent, based in Schaffhausen, Switzerland, is a group purchasing organization that negotiates rebates with drug manufacturers on behalf of Express Scripts and other participants.

By ordering Express Scripts to move Ascent’s activities, staff, and assets to the U.S., the FTC said it expects “more than $750 billion in purchasing activity” to be repatriated over the life of the order. While the agency framed the move as improving oversight of rebate flows, it also aligns with broader efforts by the Trump administration and Congress to encourage reshoring of key health care and pharmaceutical operations.

Ties to TrumpRx and broader policy efforts

The settlement explicitly connects to TrumpRx, a new federal platform that lists cash prices for dozens of brand-name drugs, including diabetes medicines. Under the Standard Offering, Express Scripts must allow plan members access to its insulin cost-sharing programs and, once regulatory issues are resolved, facilitate use of TrumpRx discounts unless a plan sponsor opts out in writing.

The FTC has cast the case as part of the Trump-Vance administration’s push to lower health care costs without directly capping manufacturer prices. Targeting PBMs—the intermediaries that sit between drugmakers, insurers, employers, and pharmacies—has drawn bipartisan interest in Congress as well.

Key elements of the Express Scripts deal mirror provisions under discussion on Capitol Hill, including proposals to require PBMs to delink their fees from list prices, pass through rebates to plan sponsors, and disclose more information about their contracts.

What happens next—and what could limit the impact

Still, the impact of the settlement is far from guaranteed.

The Standard Offering will be mandatory for Express Scripts to offer and promote, but optional for employers and insurers to adopt. Plan sponsors may choose custom benefit designs that continue to rely on traditional rebate guarantees and spread pricing, so long as they receive detailed disclosures about the Standard Offering first and sign acknowledgments.

Benefits consultants say some large employers may be reluctant to abandon arrangements that produce sizable rebate checks and help keep premiums down, even if those designs leave certain patients paying more at the pharmacy.

The order also leaves untouched some of the most lucrative parts of the PBM business, including steering patients to PBM-owned mail-order and specialty pharmacies. The new cost-plus reimbursement rules apply only to retail community pharmacies, not to Express Scripts’ own pharmacy operations.

Meanwhile, the FTC’s broader case against CVS Caremark and OptumRx is continuing. Those companies have asked an administrative law judge to dismiss the case, arguing in part that the FTC’s in-house adjudication system violates constitutional separation-of-powers principles. A ruling in their favor could complicate the agency’s effort to impose similar remedies on the rest of the industry.

For patients who depend on insulin, the stakes are immediate. An estimated 37 million Americans have diabetes, and research published in recent years suggests roughly 1 in 6 insulin users have rationed the drug at some point because of cost.

Whether the new order will change that reality will depend less on the legal language in Washington than on decisions made in boardrooms and benefits committees over the next few years. If employers and insurers embrace net-price-based designs—and if other PBMs are forced, by regulation or competition, to follow Express Scripts’ lead—the way Americans pay for medicines could look very different.

If they do not, the first big test of attacking high drug prices by targeting the middlemen may amount to an ambitious experiment that never fully reaches the pharmacy counter.