Insulin Overpricing Lawsuit Alleges Drug Makers and PBMs Engaged in Deceptive and Unfair Conspiracy

Rebates disguised as “administrative fees” and other costs lead to an illegal insulin pricing scheme which costs consumers and the healthcare system billions of dollars, the lawsuit claims

An Illinois community has filed a lawsuit against several insulin manufacturers and pharmacy benefit managers (PBMs), accusing them of engaging in a scheme designed to artificially inflate prices for the vital diabetes drug, which they say only costs about $2 to produce, yet consumers and state medical plans are forced to pay $300 to $700 to purchase insulin.

The complaint (PDF) was filed by Lake County, Illinois in the U.S. District Court for the Northern District of Illinois on April 18, naming several insulin manufacturers as defendants; including Eli Lilly and Company, Novo Nordisk and Sanofi Aventis, as well as several pharmacy benefit managers (PBMS), including Express Scripts, Inc, Medco Health Solutions, CVS and its Caremark subsidiaries, UnitedHealth Group and Optum, Inc.

The hormone insulin is created in the pancreas, and it is a key treatment for diabetes, as it helps the body properly process, store and use glucose. Patients with Type 1 diabetes use insulin on a daily basis, and many with Type 2 diabetes also use insulin regularly to maintain proper blood glucose levels.

Inflated Insulin Price Scheme

According to allegations raised in the insulin pricing lawsuit, manufacturers have worked with PBMs to artificially inflate insulin prices to extreme levels in order to maximize profits, costing state medical plans and consumers millions, or even billions, in unnecessary costs.

PBMs regularly release formulary lists of drugs insurers should be willing to pay for, which usually determines which drugs are sold on the U.S. market. However, the lawsuit indicates manufacturers and PBMs have created a scheme where manufacturers pay high “administrative fees” to ensure their drugs get on those lists, which the lawsuit claims is a form of illegal rebate.

These fees, and other inflated prices, drive up the cost of insulin significantly, resulting in a drug that is only $2 to produce costing consumers hundreds of dollars. The same insulin only cost $20 per vial as recently as the 1990s, and the cost to manufacture insulin has decreased since then, the lawsuit indicates.

This is exacerbated by the fact that the three largest manufacturers, Eli Lilly, Novo Nordisk and Sanofi controlled 92% of insulin manufactured in the U.S. and receive 96% of the revenue of the global diabetes drug market. In turn, the three largest PBMs in the U.S., CVS Caremark, Express Scripts and OptumRX control more than 80% of the PBM market and the largest pharmacy chains in the U.S., Lake County’s lawsuit claims.

“Given the PBMs’ market power and the crucial role their standard formularies play in the pharmaceutical pricing chain, both Defendant groups understand that the PBM Defendants wield enormous influence over drug prices and purchasing behavior,” the lawsuit states. “The unfair and deceptive conspiracy at the root of this Complaint—the ‘Insulin Pricing Scheme’—was born from this mutual understanding.”

The lawsuit notes that the manufacturers have, in coordinated fashion, increased the prices of their insulin products by 1,000%, often raising the prices within a few days of one another, and in some cases, within a few hours of each other.

The Impact of Inflated Insulin Prices

According to the American Diabetes Association, the cost of diabetes treatment in the U.S. cost about $327 billion in 2017, representing one out of every four dollars spent on healthcare in the U.S. that year. Much of that is due to the cost of diabetes drugs in general, and insulin specifically, the lawsuit claims.

The costs have led to some patients foregoing needed insulin treatments, resulting in worsening health conditions, and have impacted Lake County and other communities nationwide, according to the complaint.

Lake County provides services to more than 700,000 residents, and the high costs of insulin have negatively impacted its ability to provide health services to its community, the lawsuit claims. The allegedly inflated prices have also been a millstone on the county’s budget when it comes to providing health insurance to its own government employees, the lawsuit indicates.

The lawsuit presents claims of violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, civil conspiracy and unjust enrichment, and seeks compensation from the manufacturers and PBMs.