Three Insulin Makers Face Class-Action Lawsuit on Price Fixing

February 2, 2017
Jackie Syrop

On January 30, 2017, a lawsuit was filed in federal court in Massachusetts against 3 insulin makers—Eli Lilly, Novo Nordisk, and Sanofi—alleging that the companies exponentially raised consumer insulin prices in an organized scheme to drive up prices at the expense of patients who need insulin to live.

The lawsuit, brought by the firm Hagens Berman Sobol Shapiro LLP on behalf of 11 diabetes patients, claims that in the last 5 years alone, Lilly, Novo Nordisk, and Sanofi raised the sticker, or “benchmark,” prices on their insulins by more than 150%. The list prices of insulin have steadily risen, often in concert, despite competition between the 3 companies. Humalog, launched 2 decades ago at a price of $21 per vial, has increased to $255 per vial.

The suit charges that the 3 drug companies are in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO) and consumer protection laws in many states because they exploited the drug-pricing system to ensure higher profits for themselves and other players while those living with diabetes are crippled by high insulin costs, sometimes as much as $900 per month. According to Hagens Berman, insulin, a once-affordable drug, is now out of reach for many patients because of “a behind- the-scenes quid pro quo arrangement.” The complaint states that increased list prices of insulin are the result of a “scheme and enterprise” among each defendant and several pharmacy benefit managers (PBMs) in which the drug companies set two different prices for their insulin treatments: a publicly reported list price and a lower, real price, they offer to certain PBMs.

Lilly, Sanofi, and Novo Nordisk have denied wrongdoing and take issue with the charges. Lilly stated that it conducts business in compliance with all laws and adheres to the highest ethical standards. Sanofi said the allegations have no merit, and the company will defend against the claims. Novo Nordisk said the company has a longstanding commitment to patients’ access to their medicines and is prepared to vigorously defend itself.

In December 2016 Lilly said it would offer a 40% discount on the list price of Humalog for patients forced to pay full price, and Novo Nordisk pledged to limit price increases in the American market to less than 10%.

Hagens Berman’s statement provides detail of how the firm says the pricing scheme has worked: the PBMs serve as middlemen between health insurers and drug makers, negotiating medicine prices with drug companies on behalf of health insurers. PBMs also design drug formularies for their health insurer clients, ranking drugs based on efficacy and cost, the suit states, which “allows health insurers to funnel patients towards one brand of drug over others.” The complaint alleges that because the insulin prices of the 3 insulin manufacturers are largely interchangeable, the drug companies compete for preferential treatment on the PBM’s formularies, offering the PBMs rebates off their list prices. The PBMs keep a percentage of the difference between the reported list prices and the undisclosed actual price they are able to secure, a difference known as the “spread,” the firm alleges. The larger the spread, the higher the PBM’s profits; the drug maker with the largest spread between list and real price is more likely to secure a PBM’s preferred formulary position, and the business of the PBM’s clients, the suit states.

The suit details the harm this alleged scheme has caused, with patients resorting to underdosing insulin, using expired insulin, starving themselves to lower blood sugar, and even slipping into life-threatening diabetic ketoacidosis to get insulin from emergency rooms. The law firm’s own investigation shows the 3 companies increased the publicly reported, list prices of Lantus, Levemir, Novolog, and Humalog by more than 150% in the last 5 years while keeping the prices they offer to PBMs constant or even lowering them. The lawsuit charges that rather than competing with each other to offer the lower real price to insurers, the drug companies aim to offer the best price to the PBMs and retaining high list prices. The high list prices result in patients, even those who are insured, facing skyrocketing out-of-pocket (OOP) costs, because of increasingly high deductibles and coinsurance.

The lawsuit says uninsured patients and patients enrolled in high-deductible health plans, plans with high coinsurance rates, and Medicare Part D plans have been seriously injured by Sanofi, Novo Nordisk, and Lilly’s benchmark price hikes.

The suit also seeks certification as a class action lawsuit for all patients with type 1 or type 2 diabetes who had to pay high OOP costs for Lantus, Levemir, Novolog, or Humalog in the past 4 years because they are uninsured, have a high-deductible plan, or have a plan with high coinsurance rates, to reclaim economic losses in an amount to be determined at trial, and to put into place an injunction halting this behavior.