Attorney General Rob Bonta announced on Thursday that the California Department of Justice is suing the country’s largest insulin makers and pharmacy benefit managers (PBMs) over violations of the state’s Unfair Competition Law and driving up the cost insulin severely in recent years.
The suit, which was filed at the state Superior Court in Los Angeles, lists insulin makers Eli Lilly, Sanofi and Novo Nordisk as defendants, as well as PBMs CVS Caremark, Express Scripts and OptumRx. People of the State of California v. Eli Lilly and Company specifically notes that because competition is highly limited in both the insulin and PBM markets, the six companies have been able to keep aggressively hiking the list price of insulin, which regulates blood sugar levels in the body, at the expense of many patients.
The state is also charging that all six are also overcharging for insulin. According to a statement from Bonta’s office, “The lawsuit asserts that manufacturers and PBMs are complicit in overcharging for insulin. Manufacturers set the drug’s list price and PBMs then negotiate for rebates on behalf of health plans. Because rebates are based on a percentage of list price, manufacturers raise their list prices to provide the largest rebates they can offer PBMs. PBMs are often paid for their services with a portion of the rebate they have negotiated. 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.”
Bonta’s office pointed to studies backing up their points, including one that found that one in four diabetics cannot afford insulin, and that insulin costs ten times more in the United States than other countries. Through the lawsuit, Bonta seeks to control insulin costs by promoting price competition for insulin and eliminating deceptive practices, as well as get restitution for Californians who paid higher costs for the drug.
“Insulin is a necessary drug that millions of Americans rely upon for their health, not a luxury good,” noted Attorney General Bonta on Thursday. “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. “No one should be forced to ration or go without basic medication that could mean the difference between life or death. 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.”
Drug makers, PBMs accuse California of making false accusations
Drug manufacturers and PBMs responded within hours of the suit going up later on Thursday. While they accuse California of making false accusations, others expressed confusion at the lawsuit, as many have said that they are actively working to making insulin cheaper for patients. The study California used listed a standard unit of insulin in America for $98.70, comparing it to the UKs price of $7.52. But the companies said that actual costs in the US are far lower than the claimed price, with an average close to $20 a month, with prices freefalling by nearly 50% in the last 5 years. While still higher than many other countries, the actual costs bring them to being of a comparable price rather than the “ten times more” figure claimed by the state.
“The company is disappointed by the California Attorney General’s false accusations,” said Eli Lilly in a statement on Thursday. “Patients can purchase a monthly supply of insulin from Eli Lilly for $35 or less, even if they are uninsured. The average monthly out-of-pocket cost for Lilly insulin is $21.80, a 44 percent decrease over the last five years. Anyone paying more than $35 a month can call the company’s Diabetes Solution Center or go to insulinaffordability.com.”
PBM companies further added that the drug makers set the prices, with pharmacy benefit managers actually helping to lower costs even further.
“Pharmaceutical companies alone set the list price for their products,” stated CVS Caremark. “Allegations that we play any role in determining the prices charged by manufacturers are false. We plan to vigorously defend against this complaint.”
Others in the drug industry noted how far off base California was on Thursday.
“It’s good that the state wants to protect their citizens, but with this insulin case California got it plain wrong,” explained Alexandra Robinson, a former drug manufacturer executive, to the Globe. “California is going off of old information and didn’t even consult with the drug companies. What should have happened is that California collect the cases where they think the costs were deemed too high, then ask the companies or PBMs why they were charged so much. Find out directly. Then work together to help reduce costs or find workable solutions and getting insulin to those that need it, and to do so in an affordable way.
“Instead, California opted to go the legal route, and have ignored that prices are going down quickly. And as you pointed out, the insulin makers actually have websites where people can go to get affordable insulin if they’re paying too much. Yeah it’s still higher than Canada and Europe, but it’s also being worked on. The companies got a huge backlash against prices a few years ago, and have been working on lowering costs to avoid that negative PR again. They don’t want another company to come in and undercut prices, especially if the state follows through on the low-cost manufacturing plans. So they’re doing a lot to avoid that. California, with this lawsuit, seems keen on making their own. It is definitely a factor in this case.”
The suit is expected to be heard soon.
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