Diabetes Patients Suing Insulin Manufacturers for Alleged Pricing Fraud

The companies are accused of raising the list prices of insulin in a fraudulent-pricing scheme

Diabetes Patients Suing Insulin Manufacturers for Alleged Pricing Fraud
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February 1, 2017

A group of diabetes patients is suing three drug companies that they claim fraudulently raised the list prices of insulin for years in a scheme that, according to the filing, left the patients with "crushing out-of-pocket expenses."

As reported by The Washington Post (WP), an oligopoly of companies that sell billions of dollars of insulin every year dominate the insulin market, and they have been regularly increasing the list prices of their drugs. One version called Humalog coast $21 per vial when it launched two decades ago. Now, it costs $255 per vial.

In the meantime, competition seems to have worked perversely as the list prices of competing drugs often rose too. Two lawmakers, Senator Bernie Sanders and Representative Elijah Cummings, requested a federal investigation last year into "possible collusion" on insulin prices.

Eleven patients have filed the lawsuit in the U.S. District Court in Massachusetts. It focuses on the common pharmaceutical industry practice of drug manufacturers competing for insurance companies' business by offering them secret drug rebates. Pharmacy benefit managers, companies that negotiate drug prices for insurers, can categorize drugs in tiers that determine how much patients pay for them—decisions that might be affected by the size of the drug companies' rebates.

According to the patients, the drug manufacturers have been raising insulin list prices in order to expand their discounts without decreasing the overall price. The patients are the ones stuck with the bill, especially the patients who either do not have insurance or who have a high-deductible plan. The lawsuit claims that these practices violate state consumer protection laws as well as the Racketeer Influenced and Corrupt Organizations Act.

"I think that publishing a price that you know is artificially inflated and is not a real price — other than to one group of people — is a fraud," said Steve Berman, who is a partner in the Hagens Berman law firm representing the plaintiffs.

A patient is described in the lawsuit who might have to have her foot amputated because she can't afford her insulin. Others, it claims, have intentionally let themselves develop a syndrome that can be life threatening in order to be admitted to a hospital and get free samples of insulin.

"This scheme directly and foreseeably causes consumers to overpay for these life-saving medications," the lawsuit states.

Insurers acknowledge that the list prices have gone up, but they argue that the net prices—the amounts that drug companies are paid after rebates—have not changed.

According to Eli Lilly spokesman Greg Kueterman, his company "conducts business in a manner that ensures compliance with all applicable laws, and we adhere to the highest ethical standards."

Sanofi, said a company spokeswoman, believes that the allegations are meritless and will defend itself against them.

Ken Inchausti, spokesman for Novo Nordisk, stated, "We are aware of the complaint and its characterization of the pharmaceutical supply chain. We disagree with the allegations made against the company and are prepared to vigorously defend the company in this matter."

A trade group called the Pharmaceutical Care Management Association, which represents pharmacy benefit managers, said that it is reviewing the suit and noted that the companies it represents are not defendants. It stated that the suit "inexplicably attacks prescription drug rebates, long used to reduce costs in public programs like Medicaid and in the commercial market."

Climbing drug list prices have become a big problem for the biopharmaceutical industry as various controversies over pricing that were triggered by hikes in the list price have erupted into congressional hearings and prompted additional scrutiny during the past year and a half. Though drug manufacturers provide pharmacy benefit companies with list price discounts, these may not always pass through straight to the consumer.

One example of this is in the fact that patients with a high-deductible plan or co-insurance that requires them to pay a percentage of the cost of the drug can be impacted by the increasing list prices. As more patients use high-deductible health insurance plans, more are being exposed to drugs' list prices. In addition, people take insulin for a lifetime, so any gaps in insurance coverage or problems like losing or breaking a vial of insulin may expose them to their medicine's list price.

According to the lawsuits, pharmacy benefit managers that negotiate drug prices for insurers participate in the alleged scheme by claiming to the public that the rebates were saving money for patients and insurers, even when they know that the actual price of the insulin is not being lowered by such rebates.

Brian Henry, a spokesman for Express Scripts, one of the biggest pharmacy benefit managers, would not comment on the suit but stated in an email that "Rebates don't raise drug prices. Drugmakers raise drug prices."

CVS Health spokeswoman Erin Britt said that her company passes more than 90 percent of its rebates back through to customers.