California sues drugmakers and PBMs over insulin
The lawsuit alleges that manufacturers and pharmacy benefit managers have leveraged their market power to overcharge patients.
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The State of California has filed a lawsuit against drugmakers and pharmacy benefit managers for allegedly increasing the cost of insulin illegally, accusing them of "unlawful, unfair, and deceptive business practices" in violation of the state's Unfair Competition Law.
What this does, said California Attorney General Rob Bonta, is make insulin so expensive that those suffering from diabetes struggle to afford it even when covered by health plans, and are forced to ration their use – sometimes with deadly consequences.
Bonta's office cited a 2021 report from the Rand Corporation which found that insulin costs roughly 10 times more within the United States than outside it. Meanwhile, more than 3 million adults in California – over 10% of the state's adult population – have been diagnosed with diabetes.
The lawsuit alleges that manufacturers Eli Lilly, Novo Nordisk and Sanofi, and pharmacy benefit managers CVS Caremark, Express Scripts and OptumRx, have leveraged their market power to overcharge patients.
WHAT'S THE IMPACT
According to the state AG's office, the three manufacturers named in the lawsuit produce more than 90% of the global insulin supply, and the three PBMs administer pharmacy benefits for roughly 80% of prescription claims managed. The lawsuit argues that because competition is highly limited in both their markets, these six companies are able to keep aggressively hiking the list price of insulin at the expense of many patients.
People from low-income households and communities of color are disproportionately impacted by the practices of insulin manufacturers and PBMs, said Bonta. According to the California Department of Public Health, Hispanic and Black people are much more likely to be diagnosed with Type 2 diabetes, the predominant form of diabetes, than non-Hispanic white people, and much more likely to die as a result of complications from it.
The lawsuit claims 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, said the AG, creates an incentive to negotiate a drug with a higher rebate, not necessarily the lowest price for consumers.
As a result,said Bonta, 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, the AG said.
These out-of-pocket costs have had severe consequences on the lives of patients, according to the AG. The California Health and Human Services Agency (CalHHS) reported this year on national data showing that as many as one in four diabetics can't afford their insulin, and thus ration or stop taking insulin altogether. This rationing is extremely dangerous and can lead to serious health consequences, including death, the report found.
Through the lawsuit, Bonta said the state seeks to control the skyrocketing cost of insulin by promoting price competition for insulin and eliminating unlawful, unfair, and deceptive practices; and recover restitution on behalf of California residents for past overpayments for the drug.
THE LARGER TREND
Last summer, in a bid to make diabetes treatment more affordable, California Governor Gavin Newsom said the state will begin making its own low-cost insulin, using a $100 million budget to kick-start development and manufacturing of the drug.
A budget Newsom signed sets aside $100 million for the effort, and will allow the state to contract and make its own insulin at a lower price, he said. About $50 million will go toward the development of low-cost insulin products, while the other $50 million has been earmarked for a California-based insulin manufacturing facility.
Meanwhile, a 2022 Podimetrics survey found that more than half (53%) of people living with Type 2 diabetes fear complications from their condition may ultimately result in their death. And about 25% reported requiring emergency care for a Type 2 diabetes complication, with a notable 62% of that group revealing that their emergency care was for a life-threatening issue.
It was also revealed that 32% of people living with Type 2 diabetes don't trust the U.S. healthcare system to keep them healthy. That raises the possibility that hospitals and health systems may need to do more to foster a sense of trust.
Health and Human Services Secretary Xavier Becerra said last week that because of the Inflation Reduction Act that passed in December, every American in Medicare who needs insulin should be paying $35 a month.
ON THE RECORD
"Insulin is a necessary drug that millions of Americans rely upon for their health, not a luxury good," said Bonta. "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."
Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com
