By Amina Niasse
March 24 (Reuters) – CVS Health said on Tuesday it has reached a proposed settlement agreement with the Federal Trade Commission on insulin pricing.
Pharmacy benefit managers, which set how drugs are covered by health insurance, have faced a decade of scrutiny from regulators and lawmakers over pricing practices.
The company said on Tuesday its pharmacy benefit management unit, Caremark, has long focused on lowering prescription drug costs.
The Federal Trade Commision declined to comment.
Shares of CVS Health rose 1.05% in afternoon trading.
CVS expects the settlement process to conclude in the coming weeks, but said final terms were still pending and would be confirmed once the settlement was officially finalized.
A source familiar with the terms of the settlement said CVS’ deal was modeled on a deal the FTC struck with rival pharmacy benefit manager, Express Scripts, which is owned by Cigna.
That deal was finalized two weeks after being proposed, and CVS’ could be signed into effect sooner, they said.
Cigna’s settlement required the company to curb rebate pricing, where a drugmaker gives the pharmacy benefit manager a discount after a certain drug is dispensed. Regulators have said this model incentivizes companies to introduce higher list prices and steer customers to more expensive drugs, driving larger discounts.
Cigna’s deal also required the company to adopt more transparency and shift to a fee-based compensation structure. Violating terms of the deal could trigger further action from the regulator or lead to penalties.
Lisa Gill, an analyst at J.P. Morgan, said changes to the way CVS’ Caremark prices drugs will have a nominal impact on company earnings.
“We broadly view these as manageable and, importantly, not larger in scope than the changes CVS was already implementing to address regulatory concerns and de-risk its PBM business,” said Gill, adding the changes will remove regulatory risks for the company.
(Reporting by Amina Niasse in New York and Mrinalika Roy in Bengaluru; Editing by Caroline Humer, Shilpi Majumdar and Aurora Ellis)
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