Insulin, PBM Lawsuits Seen as Alternative to Pricing Legislation

Litigation against insulin makers and companies managing prescription drug benefits is becoming an attractive tool for local governments aiming to alter the complex rebate system that attorneys and drug pricing analysts say fuels high patient costs.

State attorneys general in Arizona and Utah filed lawsuits last month against insulin manufacturers Eli Lilly & Co., Novo Nordisk A/S, and Sanofi SA, as well as pharmacy benefit managers CVS Caremark, Express Scripts, and OptumRX. The officials argue the companies have engaged in illegal pricing practices to artificially raise the price of insulin.

The states joined others like Kentucky and Ohio that have filed similar suits this year, as well as dozens of states and municipalities across the country whose complaints have been consolidated in multidistrict litigation in New Jersey.

Attorneys representing governments involved in the litigation are also working with cities and counties seeking damages from manufacturers and distributors of opioid products. These litigators say the PBM and insulin lawsuits have the same potential to capture the country’s attention and secure wins similar to the millions of dollars in settlements seen so far in the opioid litigation.

Because of their potential impact, attorneys and drug pricing analysts see the litigation as a more surefire way to compel change in how drug prices are formed compared with recent legislative attempts to address the issue.

“I’m not really optimistic that Washington will be able to fix this,” said D. Bruce Poole, a Maryland-based attorney representing multiple counties and municipalities in the New Jersey-centered MDL.

“You’re going to see that a solution has to come through litigation and through forced terms of settlement,” Poole said in an interview.

Litigation ‘Pile On’

In 2022 and 2023, state attorneys general in Arkansas, California, Kentucky, and elsewhere filed complaints against these companies. As of Dec. 15, more than 40 lawsuits filed by state and local governments have been consolidated in the US District Court for the District of New Jersey, where proceedings are being overseen by Judge Brian R. Martinotti.

The lawsuits have become a “pile on” against manufacturers and PBMs, said Antonio Ciaccia, CEO of Ohio-based drug pricing data firm 46brooklyn Research and president of 3 Axis Advisors.

“They’re a reflection of an established fact at this point, which in this case is that prices of insulin are highly bloated, have significant collateral damage in terms of its impact on patients and plan sponsors,” Ciaccia said.

State attorneys general and county officials argue insulin manufacturers and PBMs have engaged in unfair and deceptive business practices, overcharging state and city health insurance plans and hurting patients who rely on insulin to survive. They allege more expensive list prices for insulin have resulted in higher manufacturer rebates to PBMs in exchange for better placement on an employer or health plan’s list of covered drugs, or a formulary.

Eli Lilly, Novo Nordisk, and Sanofi together produce roughly 90% of the global insulin supply, while CVS Caremark, Express Scripts, and OptumRx control about 80% of the PBM market.

The lawsuits, including one filed in October by the Hawaii attorney general’s office, argue PBMs charge other administrative fees, data fees, and price-protection fees that don’t ultimately result in discounts to patients at the pharmacy counter.

“The anticompetitive scheme allegedly perpetuated by the PBM defendants takes money out of consumers’ pockets and jeopardizes the well-being of the most vulnerable citizens of our state,” Deputy Attorney General Ciara Kahahane said in a statement at the time.

‘Blow Wide Open’

Attorneys working on these cases expect the lawsuits to gain more traction in the coming year, especially because of the tangible impact on patients and current high rates of distrust in the pharmaceutical industry.

“This is really going to blow wide open as people pay more attention,” Poole said.

US spending on insulin tripled in the past decade, from $8 billion in 2012 to $22.3 billion in 2022, according to a November report from the American Diabetes Association.

This comes as “the pharmaceutical industry is on the back foot,” said Daniel G. Aaron, associate law professor at the University of Utah. In an interview, he cited a September Gallup poll that found just 18% of Americans surveyed had a positive view of the pharmaceutical industry—a decrease of 7 percentage points from 2022.

There’s a possibility these cases “will lead to a settlement that doesn’t actually move the needle as far as changing the incentives for companies to engage in misconduct,” Aaron said.

However, Poole says he and his team will be able to secure internal business documents and other insights through the discovery process that will force the companies to make changes—not only for insulin, but for any prescription drug.

The companies say the allegations in the lawsuits are without merit. An Eli Lilly spokesperson said in an email that the company has been working for years to reduce insulin out-of-pocket costs.

Novo Nordisk and Sanofi each declined to comment on the specific allegations made in the lawsuits, but said they plan to defend themselves against the claims. Each of the insulin manufacturers announced $35 out-of-pocket caps on their insulin products this year.

CVS Caremark, Express Scripts, and OptumRX also each pushed back on the allegations and committed to challenging the claims. CVS also specifically pointed to manufacturers as the main culprit behind high insulin costs.

“Nothing in our agreements prevents drug manufacturers from lowering the prices of their insulin products and we would welcome such an action,” CVS spokesperson Phillip Blando said in an email.

Going Where Legislators Haven’t

Despite attempts by federal and state governments to rein in the cost of insulin, many municipalities don’t want to “sit around and wait for regulatory action,” said Mark Pifko, a shareholder at Baron & Budd PC who is working with Poole in representing several counties and cities in Florida, Maryland, Virginia, and elsewhere in the New Jersey-based MDL.

“Health-care payers are fed up with what they see as unnecessary, unlawful increases in their health-care costs,” Pifko said in an interview.

The House on Dec. 11 passed a package of health-care legislation that would, in part, prohibit PBMs from charging a health plan more for a drug than the amount reimbursed to pharmacies under Medicaid. All 50 states have enacted legislation related to PBMs, but they vary in their level of regulation.

States have also aimed to limit what patients with state-regulated health insurance pay for insulin, but they don’t account for rebates and fees drugmakers pay to PBMs. Most of the copay caps also don’t apply to people with other types of insurance or those without insurance.

Other legislation has been introduced on Capitol Hill to boost transparency over PBMs and manufacturer list prices, though “Congress has thus far been unwilling to address” modifying the rebate system to prevent “the harvesting of rebate dollars off the backs of sick patients who are overpaying for medicines,” Ciaccia said.

“It does create an interesting opportunity for litigation,” Ciaccia said.