- The city of Cleveland on Monday filed a lawsuit against major pharmacy benefit managers — the middlemen between drugmakers, pharmacies and health plans — and drug manufacturers, alleging that the defendants orchestrated a pricing scheme resulting in “skyrocketing” insulin prices.
- The suit alleges that PBMs, including CVS Caremark, Express Scripts and OptumRx, used their market power to drive up the cost of insulin for Cleveland residents — approximately 16.8% of whom are diabetic. Drug manufacturing defendants listed in the lawsuit include Eli Lilly, Novo Nordisk and Sanofi.
- The PBM defendants control roughly 80% of the market. The lawsuit alleges that PBMs incentivize drugmakers to inflate list prices for insulin, resulting in prices that are “untethered” from fair market value.
The lawsuit, filed in Northern Ohio District Court, comes as lawmakers scrutinize PBMs for their role in rising drug prices.
During two Congressional hearings in May, lawmakers on both sides of the aisle called for greater drug price transparency and accused PBMs of price gouging by utilizing rebates and their outsized market power to dodge oversight.
The middlemen sit between health insurers, pharmacies and drug manufacturers, and the three largest PBMs are owned by major health insurers; CVS Caremark is owned by Aetna, Express Scripts is owned by Cigna and OptumRx is owned by UnitedHealthcare.
Although PBMs’ job is to create formularies, negotiate rates, reimburse pharmacies and ostensibly lower drug prices, the Cleveland lawsuit alleges that PBMs and manufacturers work together to create a “best of both worlds” scenario when raising insulin prices to enrich themselves.
“ ... Although the PBM Defendants represent both publicly and to their client payors that they use their market power to drive down prices for diabetes medications, these representations are false and deceptive,” the lawsuit states. “Instead, the PBMs intentionally incentivize the Manufacturers to inflate their list prices.”
A recent legal case targeted PBMs over the discrepancy between insulin’s low manufacturing cost and high list price. In January, California filed a similar lawsuit alleging the same PBMs coordinate with manufacturers to drive up insulin prices.
Although manufacturers can produce insulin for as low as $2, according to the Cleveland lawsuit, individual vials can cost between $300 and $700.
The Cleveland lawsuit seeks damages and injunctive relief to “address and abate the harm” caused by rising insulin prices.
“Diabetics need insulin to stay alive,” the Cleveland Mayor’s Office said in a statement. “The defendants exploit this reality to guarantee their price-fixing scheme, making insulin unaffordable to individuals and resulting in exorbitant costs for prescription benefit sponsors like the City of Cleveland.”