Judge Dismisses RICO Claims, But 3 Insulin Makers Must Still Face Drug Pricing Lawsuit

February 19, 2019
Kelly Davio

A United States District Judge in New Jersey has allowed a proposed class-action lawsuit against 3 major insulin makers to proceed.

A United States District Judge in New Jersey has allowed a proposed class-action lawsuit against 3 major insulin makers to proceed.

The suit, Chaires v Novo Nordisk Inc., was originally brought by a group of individuals who filed a 2017 complaint against Novo Nordisk, Eli Lilly, and Sanofi. The suit was filed on behalf of the individuals themselves and a proposed class of insulin users who had paid for any part of the purchase price of several brand-name insulins.

The complaint alleged that rising insulin prices are unrelated to rises in production costs, and that “Sanofi, Novo Nordisk, and Eli Lilly have not only dramatically increased their insulins benchmark prices in the last 10 years, they have done so in perfect lock-step.”

According to the plaintiffs, in order to secure positions on pharmacy benefit managers’ (PBMs’) formularies, the drug companies artificially inflated list prices in order to provide higher rebates to PBMs while forcing patients (especially those who are uninsured, have high deductibles, have high coinsurance rates or are in the Medicare Part D coverage gap) to pay more out-of-pocket.

“In an industry where artificial benchmark price inflation has become common, Sanofi, Novo Nordisk, and Eli Lilly are [3] of the worst offenders,” read the complaint.

The plaintiffs also alleged that the drug makers had violated the Racketeer Influenced and Corrupt Organizations Act (RICO). Novo Nordisk and Sanofi asked the court to dismiss the RICO claims, saying that the plaintiffs’ claims were barred by the “indirect purchaser rule,” a doctrine that states that a party cannot show that it was harmed by providing evidence only of purchases made indirectly.

The drug makers argued that the plaintiffs could not claim to have purchased their insulin directly from the companies because the products were sold to the patients by retailers (who in turn obtained the insulin from other members of the supply chain), and that the companies’ actions did not amount to a conspiracy under RICO.

In an opinion filed on February 15, Judge Brian R. Martinotti agreed with the insulin makers’ argument, and dismissed the RICO claims.

However, Martinotti denied the defendants’ request to dismiss the suit for not having demonstrated a measurable loss to the plaintiffs, allowing the case to proceed.

The judge wrote in his opinion that the plaintiffs adequately pled a measurable loss in their contention that they were unfairly made to pay more than their share of the net prices of insulin. The court also held that the plaintiffs adequately alleged “fraudulent, unfair, or unconscionable conduct” on the part of the drug makers.

Attorney Steve Berman, JD, of Hagens Berman Sobol Shapiro LLP, co-lead counsel for the plaintiffs, said in a statement that Judge Martinotti’s decision “clears the way for us to begin obtaining discovery from the manufacturers and PBMs so we can shine the light on exactly what has driven insulin prices sky-high.”