Recently, the Commonwealth of Kentucky filed a lawsuit against pharmacy benefit managers (PBMs) and drug manufacturers over the rising insulin prices. In the lawsuit, Kentucky alleges that CVS Caremark, ExpressScripts, and Optum Rx, as well as Novo Nordisk, Eli Lilly, and Sanofi, use their collective market power to inflate insulin prices in a scheme to increase their profits.
PBMs are supposed to lower drug prices through negotiation, creating formularies, and reimbursing pharmacies, but the lawsuit alleges that the opposite is happening. The lawsuit alleges that the PBMs and the manufacturers are working together to raise insulin prices, creating “devastating” financial, physical, and emotional impacts for Kentuckians with diabetes.
The lawsuit notes that Eli Lilly, Novo Nordisk, and Sanofi manufacture the vast majority of insulin and other diabetic medications in Kentucky (and the United States as a whole) while CVS Caremark, Express Scripts, and OptumRx “collectively dominate the pricing system for the at-issue drugs.” It goes not to note that “because the three PBM defendants control 80% of the pharmacy benefit market, unless they include a drug on one of their standard formulary offerings, it is not available to 80% of Kentucky’s citizens.” The manufacturers also understand this, and therefore, the lawsuit notes that “if Manufacturers want their drugs to be prescribed and paid for they must obtain preferrable formulary position on the PBM Defendants’ formularies.”
The lawsuit alleges that the manufacturers artificially inflate their reported prices and then deceptively refund a significant portion of that price to PBMs via rebates, discounts, credits, and administration fees. According to a press release, between 75 and 84 cents of every dollar spent on insulin goes directly to affiliates of PBMs. The lawsuit alleges that PBMs “grant preferred status on their standard formularies based upon the largest Manufacturer Payment and the highest inflated list price (while at the same time excluding lower priced insulins) – which the PBMs know to be artificially inflated and which the PBMs insist that their payor clients use as the basis for the price they pay for the at-issue drugs.”
Therefore, patients who pay for their diabetes medication out of pocket pay “based on the inflated prices” generated by the aforementioned scheme. The lawsuit notes that “unable to afford the drugs their doctors prescribe, many diabetics ration or under-dose their insulin, inject expired insulin, reuse needles and starve themselves to control their blood sugar,” all “extremely dangerous” activities that have led to “serious complications or even death.”
“I understand the pain inflicted on Kentucky families by unfair and inflated insulin prices,” said Kentucky Attorney General Daniel Cameron. “The unlawful business practices that drove these increases have to end, and normal market forces must be allowed to lower the cost of insulin for all Kentuckians.”
This is not the first lawsuit against PBMs and/or drug manufacturers over rising insulin prices. In fact, just a week before the Kentucky lawsuit was filed, the city of Cleveland, Ohio, filed a lawsuit against the same defendants alleging that they made insulin prices “untethered” from fair market value. California filed a lawsuit against the same PBMs and manufacturers earlier this year as well.