FAQ
Insulin Pricing Litigation
Over the last 20 years, the cost of insulin has skyrocketed—by several hundred percent. These price increases are not due to the rising cost of goods, increased production costs, or investment in research and development. To the contrary, these prices are the result of a concerted scheme by insulin manufacturers and the nation’s largest pharmacy benefit managers (PBMs) to artificially drive up the cost of this lifesaving drug.
Insulin medications, which today cost manufacturers as little as $2 to $4 per vial to produce, and which were priced at $20 per vial in the 1990s,[1] now range in price from $300 to $700 per vial, with insulin users typically requiring two to three vials per month. A recent analysis by GoodRx[2] of U.S. pharmacy and insurer data reported that the average insulin retail price rose 54 percent between 2014 and 2019 alone, while a RAND Corporation study in 2020[3] found that the average U.S. insulin list price was 10 times that of other nations.
State and independent local governments (including counties, municipalities, townships, school districts, and special districts), unions, and other purchasers of insulin have recently filed lawsuits against the insulin manufacturers and PBMs arising out of these defendants’ unlawful, deceptive, and unfair business practices in artificially inflating insulin prices.
What is the insulin pricing scheme?
Three insulin manufacturers—Eli Lilly, Novo Nordisk, and Sanofi—dominate the insulin supply chain, controlling 99% of the insulin market by value and 96% by volume.[4] The three largest PBMs—CVS Caremark, Express Scripts, and OptumRx—similarly dominate the prescription drug market, controlling over 75% of that market.
PBMs play a major role in the drug supply and payment chain. To manage their prescription drug plans, most health insurers contract with PBMs. PBMs control which medications are included on a given health plan’s formulary, or the list of drugs that plan agrees to cover. PBMs also negotiate rebates and discounts with drug manufacturers. These rebates are post-sale discounts that a drug manufacturer will provide to the PBM when a consumer fills a prescription for the manufacturer’s drug.
As part of the insulin pricing scheme, PBMs demand significant (yet undisclosed) rebates from insulin manufacturers in exchange for favorable placement on the PBMs’ standard formularies. These rebates are a percentage of the drug’s list price. The manufacturers then aggressively raise the list price of insulin—often in lockstep with each other—to artificially high levels. As PBMs demand larger and larger rebates or discounts, manufacturers offset these reductions by raising the “list” prices for their drugs.
Insulin manufacturers participate in this scheme because favorable formulary placement drives sales and revenue of their insulin medications. And PBMs encourage this practice because they pocket the higher rebates received from higher-priced insulin. PBMs profit from this scheme by passing inflated prices onto health plans, while retaining most of the rebates.
Rebates paid on analog insulin have climbed sharply over the past decade. According to a study in the Journal of the American Medical Association, insulin rebates for non-Medicaid consumers have grown from 13% of the list price in 2007 to 70% in 2018.[5] This insulin pricing scheme has resulted in record profits for manufacturers and PBMs at the expense of diabetics and self-funded payers, who have been egregiously overcharged for inflated diabetes medications.
Not only have insulin manufacturers and PBMs engaged in this scheme to artificially inflate insulin prices, but they have also made numerous misleading statements in furtherance of the scheme. PBMs have falsely stated (publicly and often in direct communications with their health plan clients) that they negotiate with the manufacturers and construct formularies for the benefit of payers and patients by decreasing the price of insulin and by promoting the health of diabetics. Manufacturers similarly misrepresent, among other things, that they are attempting to control insulin price increases.
Governmental investigations into the insulin pricing
Recent studies conducted by both chambers of Congress have revealed many features of the insulin pricing scheme.
In January 2021, the United States Senate Finance Committee released a report on the insulin pricing scheme, with Committee Chairman Grassley noting that the Committee had “found that the business practices of and the competitive relationships between manufacturers and middlemen have created a vicious cycle of price increases that have sent costs for patients and taxpayers through the roof” and that the insulin market “is anything but a free market when PBMs spur drug makers to hike list prices in order to secure prime formulary placement and greater rebates and fees.”[6]
Later in 2021, the United States House Committee on Oversight and Reform released a report of its findings from its three-year investigation into pharmaceutical pricing and business practices. Representative Carolyn B. Maloney, Chairwoman of the Committee, noted, that drug companies “have raised prices relentlessly for decades while manipulating the patent system and other laws to delay competition from lower-priced generics. These companies have specifically targeted the U.S. market for higher prices, even while cutting prices in other countries, because weaknesses in our health care system have allowed them to get away with outrageous prices and anticompetitive conduct.”[7]
In June 2022, the Federal Trade Commission announced that it was launching an inquiry into PBM business practices. The inquiry “will scrutinize the impact of vertically integrated pharmacy benefit managers on the access and affordability of prescription drugs.”[8] In May 2023, the FTC announced that it had “deepened” its investigation into, among other things, “the use of complicated and opaque pharmacy reimbursement methods; and negotiating rebates and fees with drug manufacturers that may skew the formulary incentives and impact the costs of prescription drugs to payers and patients.”[9]
On March 1, 2023, the United States House Oversight and Accountability Committee also launched an investigation into PBMs’ tactics that are harming patient care and increasing costs for consumers.[10]
Who can file a lawsuit based on the insulin pricing scheme?
Seeger Weiss is currently investigating and filing claims relating to the insulin pricing scheme on behalf of entities that maintain self-funded healthcare plans. These self-funded entities include state and independent local governments (including counties, municipalities, townships, school districts, and special districts), unions, and other self-funded organizations that paid or reimbursed for insulin medication—whether as part of their self-funded prescription drug plan or for their own use—e.g., for use in local government facilities.
What claims are being asserted against insulin manufacturers and PBMs?
Potential causes of action against the insulin manufacturers and PBMs include, but are not limited to, the following:
- Violation of state consumer protection laws or unfair/deceptive trade practice laws stemming from the manufacturers and PBMs misleading payers regarding the fair market price for diabetes medications and concealing their agreements regarding rebates and other payments from manufacturers to PBMs.
- Violation of the federal civil RICO statute, based on the collusion of manufacturers and PBMs to artificially inflate insulin prices through a pattern of fraudulent misrepresentations and omissions.
- Unjust enrichment, seeking reimbursement of monies paid to PBMs and manufacturers that should have remained in payors’ pockets but for the insulin pricing scheme.
What compensation is recoverable for self-funded payers?
Self-funded payers are seeking substantial monetary relief in their lawsuits against the insulin manufacturers and PBMs, including:
- Financial compensation for the difference between amounts actually paid or reimbursed for insulin and the amounts that should have been paid but for the insulin pricing scheme. In some cases, under certain state consumer protection statutes, these damages may be multiplied.
- Disgorgement of revenues by PBMs and manufacturers received as part of the insulin pricing scheme.
- Punitive damages to punish past misconduct and deter future misconduct.
In addition, these lawsuits seek injunctive relief to stop the insulin pricing scheme from causing future harm.
Are these lawsuits impacted by future insulin price cuts or legislation?
In March 2023, insulin manufacturers announced that they would be cutting insulin prices and/or capping monthly out-of-pocket payments for insulin. These measures take effect beginning in 2023 or 2024. In addition to these announcements, a number of states have passed laws that cap insulin co-payments at or under $100 per month.
While these are positive steps that may help diabetics with high-deductible insurance or plans that come with a high cost-share instead of set co-pay, these manufacturer price-cuts and state legislation do not impact lawsuits brought by self-funded payers against insulin manufacturers and PBMs arising out of the insulin pricing scheme. These lawsuits, which allege claims against both insulin manufacturers and PBMs, seek (among other things) damages for all amounts that payers have been overcharged as a result of the insulin pricing scheme.
Holding insulin manufacterers and PBMs accountable
Insulin manufacters Eli Lilly, Novo Nordisk, Sanofi, and PBMs CVS Caremark, Express Scripts, and OptumRx have allegedly conspired to artificially inflate the price of insulin, a vital, life-sustaining medication, forcing communities across the United States grapple with the challenge of securing affordable access to insulin. With an impressive history of representing state and local governments in complex litigation, Seeger Weiss is the perfect partner to provide comprehensive support and guidance for communities looking to hold these corporations accountable.