California sues drug makers and PBM over insulin

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The state of California has filed a lawsuit against drug manufacturers and pharmacy operators for allegedly illegally raising the cost of insulin, accusing them of “illegal, unfair and deceptive business practices” in violation of the state’s unfair competition law.

According to California Attorney General Rob Bont, this causes insulin to become so expensive that people with diabetes can hardly afford it, even if they are covered by insurance plans, and are forced to limit their use – sometimes with deadly consequences.

Bonta’s office cited a 2021 Rand Corporation report saying that insulin costs about 10 times more in the United States than outside. Meanwhile, more than 3 million adults in California — more than 10% of the state’s adult population — have been diagnosed with diabetes.

The lawsuit alleges that manufacturers Eli Lilly, Novo Nordisk and Sanofi, as well as pharmacy benefits managers CVS Caremark, Express Scripts and OptumRx used their bargaining power to inflate prices for patients.

WHAT INFLUENCES

The three manufacturers named in the lawsuit make more than 90% of the world’s insulin supply, and three PBMs manage pharmacy benefits for about 80% of processed prescription claims, according to AG’s government office. The lawsuit alleges that because competition is severely limited in both markets, the six companies may continue to aggressively raise the list price of insulin at the expense of many patients.

People from low-income families and communities of color are disproportionately affected by the practices of insulin and PBM manufacturers, according to Bont. According to the California Department of Public Health, Hispanics and blacks are much more likely to be diagnosed with type 2 diabetes, the predominant form of diabetes, than non-Hispanic white people, and are much more likely to die as a result of complications from it.

The lawsuit alleges that manufacturers and PBM are complicit in inflating the price of insulin. Manufacturers set the list price for the drug, and PBMs then negotiate discounts on behalf of the health insurance plans. Since the discounts are based on a percentage of the list price, manufacturers raise their list prices to provide the biggest discounts they can offer PBM.

PBMs often pay for their services with a portion of the discount they have negotiated. This, AG says, creates an incentive to negotiate the drug at a higher discount, not necessarily the lowest price for consumers.

As a result, Bont says the drug is no longer available to uninsured or underinsured patients who have to pay the full cost of insulin. The high list prices also make insulin unaffordable for other patients, including those with high-deductible insurance plans or coverage gaps, AG said.

According to the AG, these out-of-pocket expenses had serious consequences for the lives of patients. The California Agency for Health and Human Services (CalHHS) reported this year national data showing that one in four diabetics cannot afford their insulin and thus limit or stop taking insulin. The report says that such rationing is extremely dangerous and can lead to serious health consequences, including death.

Through the lawsuit, Bonta stated that the state seeks to control the skyrocketing cost of insulin by encouraging price competition for insulin and eliminating illegal, unfair and misleading practices; and seek reimbursement on behalf of California residents for past drug overpayments.

BIG TREND

Last summer, in an effort to make diabetes care more affordable, California Gov. Gavin Newsom announced that the state would start making its own low-cost insulin, using a $100 million budget to kick-start development and production of the drug.

The budget signed by Newsom provides $100 million for the effort, he said, allowing the state to contract and produce its own insulin at a lower cost. About $50 million will go towards developing low-cost insulin products, with the remaining $50 million going to a California insulin manufacturing plant.

Meanwhile, a 2022 Podimetrics survey found that more than half (53%) of people living with type 2 diabetes fear complications from their condition that could eventually lead to their death. And about 25% reported that they needed emergency care for complications of type 2 diabetes, with a remarkable 62% of this group reporting that their emergency care was for a life-threatening problem.

It also found that 32% of people living with type 2 diabetes do not trust the US health care system to maintain their health. This raises the possibility that hospitals and health systems may need to do more to build a sense of trust.

Health and Human Services Secretary Xavier Becerra said last week that because of the Decrease Inflation Act passed in December, every Medicare American who needs insulin must pay $35 a month.

IN RECORDING

“Insulin is an essential drug that millions of Americans rely on for their health, not a luxury item,” Bonta said. “With today’s lawsuit, we are fighting back against pharmaceutical companies and PBMs that unacceptably and artificially inflate the cost of life-saving medicines at the expense of vulnerable patients. the difference between life and death. California will continue to be a leader in the fight to ensure that everyone has equal access to the affordable health care and prescription drugs they need to stay healthy.”

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