Insulin drugmakers sued for inflating prices
- A lawsuit filed Monday in Massachusetts district court accused drugmakers Eli Lilly, Novo Nordisk and Sanofi of illegally inflating the list prices for insulin products in a scheme designed to ensure coverage and protect profits.
- According to the lawsuit, the three drugmakers — which together control most of the insulin market — have worked in lockstep to push prices up for their insulin products by more than 150% over the last five years.
- Lawsuit aside, the insulin makers have been under fire for the rising cost of drugs like Humalog (insulin lispro), Novolog (aspart) and Lantus (glargine). At the same time, competition in the U.S. and increasing pressure from payers have crimped the market's growth prospects.
The lawsuit, filed on behalf of 11 plaintiffs in U.S. District Court for the District of Massachusetts, alleges the drugmakers violated the Racketeer Influenced and Corrupt Organizations (RICO) Act, along with dozens of other state consumer protection laws.
In particular, the suit attacks the relationships between the three drugmakers, insurers and pharmacy benefit managers. Rather than competing for insurance coverage by lowering drug prices, the companies have simultaneously raised list prices as well as the rebates (or discounts) paid to pharmacy benefit managers (PBMs) to lock in coverage.
PBMs earn a percentage of this "spread" between list price and net price. The lawsuit claims Eli Lilly, Novo and Sanofi marketed a wider spread to PBMs rather than lower prices — a "quid pro quo" that gives PBMs higher profits from a wider spread while preserving a stable net price for the drugmakers.
"Insidiously, an arms race in the escalation of reported benchmark prices—and consequently spreads—has ensued between defendants: each defendant raises its benchmark price just a bit more than its competitors, encouraging the large PBMs to keep its drug on formulary," the lawsuit states.
As patient out-of-pocket costs are typically calculated based on list prices, patients can end up paying more in this scenario — a result highlighted by the experience of the plaintiffs named in the suit.
Many of the plaintiffs paid hundreds of dollars a month for their insulin prescriptions, costs which led some to take potentially dangerous steps like underdosing themselves or taking expired product.
The lawsuit is seeking class action status for consumers who purchased insulin analog products from the three drugmakers.
Outside of the potential legal headaches, the insulin market in the U.S. has tightened considerably. Sanofi expects revenues from its diabetes division to decline between 4% and 8% in the near term and Novo has cut jobs while forecasting lower prices for this year. As this lawsuit illustrates, insulin drugmakers will face pressure both from investors looking for sources of growth and a public increasingly sensitive to drug price increases.
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