Three leading pharmaceutical companies and the country’s top three pharmacy benefit managers (PBMs) are accused of participating in an insulin price-fixing scheme in a 69-count class action lawsuit, Bloomberg BNA reported.
Sanofi-Aventis, Novo Nordisk and Eli Lilly are the drug companies named as defendants, along with PBMs CVS Health Corp., Express Scripts and OptumRx, a UnitedHealth Group business. Together, the three PBMs control an estimated 80 percent of the market and manage benefits for approximately 180 million people.
The suit, filed in federal court by four individuals, alleges that the defendants violated the Employee Retirement Income Security Act, as well as federal antitrust and racketeering laws and regulations in all 50 states. The PBMs are accused of steering health plans toward specific insulin treatments, and the drugmakers are accused of conspiring to drive up their prices and then sharing the additional profits with the PBMs through rebates. The suit claims that these actions led to price increases of more than 150 percent for insulin products sold by Sanofi, Novo Nordisk and Lilly.
“The skyrocketing cost of insulin cannot be explained away with typical drug company rationalizations for high costs,” the lawsuit states. “Instead, the increased list prices are the result of a scheme and enterprise among the three dominant drug manufacturers of insulin … and the three largest [PBMs].”
The same three drugmakers face similar allegations in a separate lawsuit filed in January; PBMs are mentioned as beneficiaries of higher drug prices but are not named among the defendants in that case. Novo Nordisk is the sole defendant in another class action lawsuit filed by a retirement fund in January; in that suit, the company is accused of using the alleged price-fixing scheme to camouflage poor financial performance.
The Type 1 Diabetes Defense Foundation is also a plaintiff in the latest lawsuit.
Our Take: The implications of this suit cannot be understated.
What story has pharma been telling the world about its pricing over the last year, in part to help consumers understand the complicated maze of real-world pricing? That its actual (net of rebate) price increases have been much lower than retail (practically fictional) price increases. So what we know is this: much of the benefit of an increasing spread goes to the PBMs. That spread is largely responsible for, say, Express Scripts’ earnings of $3.4 billion in 2016, a 37 percent increase over the previous year. Rebates go straight to the bottom line.
If there is evidence of collusion—and we haven’t seen any—this strikes at the heart of a system that, at least for pharma and PBMs, works. We will be tracking this story closely.