CA AG Sues Insulin Makers, PBMs for Price Gouging

Eli Lilly, Novo Nordisk, Sanofi, CVS Caremark, Express Scripts, and OptumRx are accused of overcharging patients.

California Attorney General Rob Bonta on Thursday filed a lawsuit against the nation's biggest insulin makers and pharmacy benefits managers, accusing them of using deceptive, illegal and unfair schemes to drive up the cost of the lifesaving drug.

The 47-page suit, filed in California Superior Court in Los Angeles, accuses drug makers Eli Lilly, Novo Nordisk, and Sanofi, and PBMs CVS Caremark, Express Scripts, and OptumRx, of leveraging their vast market power to overcharge patients, a violation of the state's Unfair Competition Law.

"Insulin is a necessary drug that millions of Americans rely upon for their health, not a luxury good," Bonta says. "With today's lawsuit, we're fighting back against drug companies and PBMs that unacceptably and artificially inflate the cost of life-saving medication at the expense of vulnerable patients."

Bonta is asking the court to order the defendants to stop their unfair business practices outlined in the suit and provide restitution for consumers who have been victimized by the scheme, and issue civil fines of $2,500 for each violation of state law.

More than 3 million Californians are diabetic, about 10% of the state's population, Bonta says, and their insulin is so pricey that many can't afford it, even the insured, and are forced to ration doses, sometimes with deadly consequences.

Those facts are in line with a 2021 report that found that insulin costs roughly 10 times more in the United States than in other countries. Other studies have shown that the high insulin prices disproportionately hurt poor people and communities of color. The California Department of Public Health reports that Hispanic and Black people are much more likely to be diagnosed with Type-2 diabetes than non-Hispanic white people, and much more likely to die as a result of complications from it. 

"No one should be forced to ration or go without basic medication that could mean the difference between life or death," Bonta says. "California will continue to be a leader in the fight to ensure everyone has equal access to affordable healthcare and prescription medications they need to stay healthy."

The lawsuit notes that the three drug makers named in the suit produce more than 90% of the global insulin supply, and that the three PBMs manage 80% of insulin prescription claims. Using their market stranglehold, Bonta alleges, the defendants "work in lockstep… to keep aggressively hiking the list price of insulin at the expense of many patients."

The lawsuit asserts that manufacturers and PBMs are complicit in the gouging, with drug makers setting insulin's list price and PBMs negotiating for rebates on behalf of health plans. The rebates are based on a percentage of list price, so manufacturers raise their list prices to get the biggest rebates they can offer PBMs

"PBMs are often paid for their services with a portion of the rebate they have negotiated," the suit says. "This creates an incentive to negotiate a drug with a higher rebate, not necessarily the lowest price for consumers. As a result, the drug becomes unaffordable for uninsured or underinsured patients, who have to pay the full price of insulin. High list prices also make insulin unaffordable for other patients as well, including those with high deductible health plans or coverage gaps."  

Defendents Respond

CVS Health issued a statement denying the allegations raised in the suit and saying it will "vigorously defend against this complaint."

"Pharmaceutical companies alone set the list price for their products," the company says. "Nothing in our agreements prevents drug manufacturers from lowering the prices of their insulin products and we would welcome such action. Allegations that we play any role in determining the prices charged by manufacturers are false."

A Novo Nordisk spokesperson says the drug maker does not comment on active litigation. However, the company issued a statement not specific to the suit which claims that Novo Nordisk's net prices for insulin have declined over the past five years "due in large part to the significant rebates and discounts manufacturers pay to ensure access for patients."

The company says that about 100,000 diabetics got free insulin from Novo Nordisk every year, and that more than 1 million get some form of financial assistance from the drug maker. The company has also extended its insulin program with Walmart that sells the drug for $25 per vial, and has seen "meaningful uptake" for its My$99Insulin program.

"However, we know there are people who continue to struggle to afford their insulin and that not one single solution will work for everyone," the statement reads.

Optum Rx issued a statement saying that PBMs negotiate for lower prices on behalf of consumers and "are the only participants in the prescription drug supply chain whose role is to reduce drug costs." The PBM says it has eliminated out-of-pocket costs on several prescription drugs, including insulin,

"Optum Rx welcomes the opportunity to show the California Office of the Attorney General, just as it has with other States Attorneys General, how we work every day to provide people with access to affordable drugs, including insulin," the statement reads.