FTC Action Against Caremark & Zinc Health Services Sparks Proposed Regulatory Overhaul of Insulin Pricing Practices

The Federal Trade Commission’s enforcement action against Caremark Rx, LLC, Zinc Health Services, LLC, and related entities—which centers on how pharmacy benefit managers (PBMs) and their affiliated group purchasing organizations (GPOs) allegedly structured insulin rebate practices in ways that inflated list prices and impaired affordability—has prompted the drafting of the Insulin Rebate & Formulary Integrity Act (IRFIA).

IRFIA is designed to directly address the conduct highlighted in the FTC matter, including rebate-driven formulary placement, lack of pricing transparency, and incentives that favor high list-price drugs over more affordable alternatives.

Purpose of the Act

IRFIA is intended to correct the pricing distortions identified by the FTC, which alleged that PBM/GPO practices contributed to artificially elevated insulin list prices and formulary structures shaped by rebate volume rather than net cost or patient affordability.

The Act aims to:

• Eliminate rebate structures that reward higher list prices. Increase transparency in formulary and pricing practices.
• Ensure insulin affordability for patients and payors.
• Realign PBM incentives toward fair, competitive pricing frameworks.

Key Provisions of the IRFIA

Section 1 — Legislative Findings

• PBMs and their affiliated GPOs allegedly used rebate arrangements that encouraged higher insulin list prices, as described by the FTC.
• These practices may have harmed patients, employers, and health plans by inflating out-of-pocket costs and reducing access.
• Oversight and transparency reforms are necessary to prevent rebate-driven formulary decisions.

Section 2 — Prohibited Practices

The Act prohibits PBMs and GPOs from:

• Using formulary exclusion or disfavoring insulin to secure higher rebates.
• Preferring higher list-price insulin products when lower-priced alternatives exist at equal or lower net cost.
• Accepting rebate or price-concession structures that incentivize drugs with elevated list prices. These prohibited practices mirror the behaviors alleged in the FTC’s action.

Section 3 — Transparency Requirements

PBMs must provide the regulatory authority with quarterly reporting including:

• Formulary positioning for insulin products (preferred, co-preferred, excluded).
• List prices and net prices (or permissible net-price ranges) for insulin products.
• Total rebates or price concessions received for insulin and how they are utilized.

Section 4 — Rebate Pass-Through Standards

To counter the rebate-driven pricing distortion described by the FTC:

• PBMs must pass through 100% of insulin rebates or manufacturer concessions to payors or patients unless they provide a regulator-approved justification.
• Out-of-pocket costs for insulin must reflect net price—not inflated list prices.

Section 5 — Enforcement Authority

• The designated oversight body may audit PBMs and GPOs for compliance with IRFIA.
• Violations based on the practices highlighted in the FTC matter may result in civil penalties, disgorgement of gains, and mandated corrective action.

Section 6 — Oversight and Annual Reporting

PBMs and GPOs must submit annual insulin-pricing and formulary-structure reports documenting:

• Rebate flows
• Net pricing outcomes
• Patient-level cost implications

This reporting requirement is designed to ensure ongoing visibility into practices similar to those scrutinized by the FTC.

Section 8 — Regulatory Updates

The oversight agency may update reporting rules, enforcement mechanisms, and transparency requirements as necessary to address the specific conduct identified in the FTC’s insulin-rebate case.

Impact & Intent of IRFIA

IRFIA directly responds to the FTC’s findings by building a regulatory framework that:

• Removes financial incentives that elevate list prices,
• Ensures formulary decisions reflect net value rather than rebate magnitude,
• Protects patients from inflated insulin costs, and
• Introduces structural transparency into rebate systems highlighted by the FTC.

The Act’s primary goal is to prevent insulin pricing practices of the type described in the FTC enforcement action from recurring and to restore fairness and clarity to PBM-managed drug markets.

Reference

Caremark Rx, Zinc Health Services, et al. In the Matter of Insulin. Federal Trade Comission. Do 9437. https://www.ftc.gov/legal-library/browse/cases-proceedings/221-0114-caremark-rx-zinc-health-services-et-al-matter-insulin