UnitedHealth Group, the American insurance giant recently in the spotlight due to the tragic death of UnitedHealthcare CEO Brian Thompson, has landed in yet another controversy—this time involving the Federal Trade Commission (FTC).
A newly released government report has uncovered that UnitedHealth Group, along with other major healthcare companies, has been charging exorbitant markups on prescription drugs, sometimes exceeding 1,000%, even for generic brands.
Profiting from Sky-High Markups
According to a recent report from the FTC, UnitedHealth Group's online pharmacy, OptumRx, together with CVS's Caremark Rx and Express Scripts, imposed markups of thousands of per cent on various specialty generic medications sold through their affiliated pharmacies. Many other drugs reportedly saw price increases of several hundred per cent, further inflating costs for consumers.
With that finding, FTC stated that the 'Big 3' pharmacy benefit management (PBM) organisations collectively generated over £5.94 billion ($7.3 billion) in revenue from 2017 to 2022, exceeding the estimated acquisition costs of the drugs.
Some of the drugs that were impacted by these excessive markups included drugs used to treat cancer, HIV, and other serious diseases and conditions. These include Imatinib, a generic medication used to treat leukaemia, and non-oncological Tadalafil, prescribed for pulmonary hypertension. Other drugs, such as Lamivudine, which is essential for HIV-positive patients, were priced at nearly four times their acquisition cost.
'Growing At An Alarming Rate'
The new report builds on findings from a July 2024 FTC report, which revealed that pharmacies affiliated with the Big 3 PBMs accounted for 68% of dispensing revenue from speciality drugs in 2023, an increase from 54% in 2016.
Expanding its analysis to include a broader range of speciality generic drugs compared to the two examined in the 2024 report, the new report uncovers substantial markups imposed by the Big 3 PBMs across a broad spectrum of these medications.
FTC Chair Lina M. Khan said, "The FTC staff's second interim report finds that the three major pharmacy benefit managers hiked costs for many lifesaving drugs, including heart disease and cancer medications. The FTC should keep using its tools to investigate practices that may inflate drug costs, squeeze independent pharmacies, and deprive Americans of affordable, accessible healthcare—and should act swiftly to stop any illegal conduct."
Meanwhile, Hannah Garden-Monheit, Director of the FTC's Office of Policy Planning, commented, "FTC staff have found that the Big 3 PBMs are charging enormous markups on dozens of lifesaving drugs. We also found that this problem is growing at an alarming rate, which means policymakers need to address it urgently."
'The Data Was Cherry Picked'
Following the release of the FTC report, two of the three PBMs refuted its details. While Cigna, the parent company of Express Scripts, did not comment on the matter, CVS and UnitedHealth Group did.
In a statement to Fortune, UnitedHealth Group said that it had assisted eligible patients in saving £1.058 billion ($1.3 billion) in costs, with an estimated median out-of-pocket payment of £4.07 ($5) on average.
"Optum is lowering the cost of speciality medications, which comprises half of all drug expenditures, and providing clinical expertise, programs and support for patients with complex and rare conditions," the company said.
Meanwhile, CVS fired back at the FTC, saying that the data was cherry-picked by only focusing on generic drugs, accounting for a tiny portion of customer spending on branded speciality medications. CVS also claimed to be saving customers money, claiming that since 2016, out-of-pocket expenses have decreased by 29% overall for seven consecutive years.
"If we're going to have an investigation like this, the American people deserve to see the complete story based on all the facts, not just those supporting a predetermined narrative. The 'anti-PBM' policies the FTC is currently pursuing would only increase U.S. drug costs for American patients, employers, unions, and taxpayers," the company said in the same Fortune report.
What's With UnitedHealth Group Nowadays?
As its provider services and health insurance portfolio overcame a record cyberattack and growing medical costs, UnitedHealth Group announced £11.7 billion ($14.4 billion) in 2024 profits, including £4.47 billion ($5.5 billion) in the fourth quarter.
Moreover, the company revised its 2025 business forecast, projecting net earnings of up to £22.54 ($28.65) per share and operational cash flows reaching £25.95 billion ($33 billion). The company also raised its revenue estimate to as much as £357.92 billion ($455 billion), surpassing the prior projection of £338.45 billion ($431 billion). As a leading player in the industry, UNH currently holds a market capitalisation of £442.88 billion ($563 billion).
However, market analysts have stated that pricing from states that hire health insurers to administer Medicaid benefits will 'continue to challenge U.S. health insurers.'
"Recent commentary from health insurers with exposure to the Medicaid market has highlighted concerns about inadequate rates paid to them per Medicaid beneficiary relative to the average costs of care, resulting in margin pressure on a product that already generates relatively thin margins," Fitch Ratings said recently.
The company came into the spotlight when, on December 4, 2024, Brian Thompson, the CEO of UnitedHealthcare, was tragically shot and killed outside the New York Hilton Midtown hotel in Manhattan. Thompson was in the city to attend UnitedHealth Group's annual investors' meeting, as UnitedHealthcare is its subsidiary.
The assailant, described as a masked white male, fled the scene on an e-bike. Authorities later arrested Luigi Mangione in Altoona, Pennsylvania, and charged him with the murder. Mangione's attorney has announced that he intends to plead not guilty and will challenge the charges.
