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Out-of-Pocket Costs for Insulin Are a Problem. Litigants in Case Disagree on Who Is at Fault

Mary Caffrey
A case filed more than a year ago has taken many turns, landing in a federal court in Trenton, where it has been shaped by a difference of opinion over how to address the role of pharmacy benefit managers (PBMs).
After a year in court, the leading insulin manufacturers and the attorneys suing them agree: Some people with diabetes pay a lot of money out of pocket for the hormone that keeps them alive.  

They disagree, however, on whether laws have been broken and who should be blamed. The insulin manufacturers argue the problem of rising prices is beyond the court’s ability to solve.

Soon judges overseeing the 14-month-old suit will decide whether they agree. With a stay lifted in the case, the insulin companies have filed a scathing motion to dismiss the racketeering claims lodged against them.

But in doing so, the drugmakers admit that consumers’ sticker shock is real. It’s just not the manufacturers’ fault, they argue. And it’s definitely not a crime.
“Defendants acknowledge that pharmaceutical pricing is an important issue, especially given how recent trends in the design of insurance benefits have affected certain patients’ out of pocket costs,” states the joint motion filed on March 9, 2018, by attorneys for Novo Nordisk, Sanofi, and Eli Lilly.

If allowed to proceed, the case could finally shed light on the role of pharmacy benefit managers (PBMs), who may be the plaintiffs’ ultimate target. The lead attorneys have followed a strategy that will allow them to gather evidence while fighting the pharmaceutical firms and use it later in a suit against the PBMs. Not everyone agrees with this approach, however.

Attorneys representing 71 patients—who have not been certified as a class—argue that rebates are paid to the nation’s 3 largest PBMs to keep brands on formulary, inflating insulin prices and harming consumers when their health plans do not uniformly pass discounts through at the pharmacy counter. Multiple suits were merged into a case called Insulin Pricing, which claims the transactions between pharmaceutical companies and PBMs amount to a series of illegal schemes. Although PBMs were not sued, their role in the pharmacy chain is discussed at length by both sides. They are drawing scrutiny from well beyond the obscure federal courthouse in Trenton, New Jersey, where the case ended up after it was filed in Massachusetts.

The drug manufacturers say the plaintiffs fail to show how insulin prices reflect rebates, and they portray the current system as something beyond their ability to change. “As plaintiffs recognize, manufacturer rebate payments are not unique to the sales of insulin. It is how the entire branded pharmaceutical industry functions. As a result, the relief plaintiffs seek would not only require this Court to regulate the sales of insulin, but also would have an impact on the entire pharmaceutical industry at large,” the joint motion states.

Against this backdrop, regulators are taking notice. Two days before the manufacturers filed their motion, FDA Commissioner Scott Gottlieb, MD, took aim at rebates and the effect on consumers during an address to America’s Health Insurance Plans (AHIP). Amid proposed mergers between CVS and Aetna and Cigna and Express Scripts, Gottlieb said, “The very complexity and opacity of these schemes help to conceal their corrosion on our system—and their impact on patients. In the long run, the interests of patients, providers, and manufacturers are not well served by these arrangements, precisely because these practices encourage large list price increases to fuel the pricing schemes.”

“And so,” Gottlieb said, “we continue to see a backlash against these Kabuki drug-pricing constructs—constructs that obscure profit taking across the supply chain that drives up costs; that expose consumers to high out-of-pocket spending; and that actively discourage competition.”

The Plaintiffs Line Up
Attorney Steve Berman made headlines in sources from the New York Times to business outlets to medical publications when he filed the putative class action in the US District Court for the District of Massachusetts on January 30, 2017, citing a federal racketeering statute created to go after figures in organized crime. The filing alleged the 3 companies increased “benchmark” insulin prices 150% over 5 years, acting in “lock step” to pay rebates to PBMs.
“People living with diabetes are practically imprisoned under the price hikes and sadly are resorting to extreme measures to afford the medication they need to live,” said Berman, the managing partner of Hagens Berman, best known for his prosecutions that contributed to the $206 billion master settlement agreement with the tobacco companies.

Berman was racing the clock to beat other plaintiffs to court. Another firm based in Seattle, Washington, Keller Rohrback, was preparing an insulin pricing case led by plaintiff Julia Boss, the mother of a child with type 1 diabetes and head of the Type 1 Diabetes Defense Foundation (T1DF). After considering a filing with Hagens Berman, Keller Rohrback filed Boss v. CVS Health in Trenton on March 17, 2017.

Insulin Pricing was delayed for months while various plaintiffs’ attorneys fought for control of the case. Boss’ determination to sue PBMs from the start, not later—and her disagreement with Hagens Berman on this point—was among the reasons she and Charles Fournier, vice president of T1DF, cut ties with Keller Rohrback, causing a stay in late January. Filing pro se, Boss still seeks to add PBMs to the case; on March 16, 2018, she asked to court to reconsider its consolidation order, so that PBMs could be sued on a separate track.

“Our goal is to realign the interests of payers and consumers. That means passing through rebates and basing cost-sharing on actual net cost to plan for specialty/brand drugs and supplies. A payer who has no perverse incentive to inflate list prices can instead use its negotiating power to exert downward pressure on both list and net prices for analog insulin, glucagon and test strips, returning these to competitive levels,” Boss said in an email to The American Journal of Managed Care® (AJMC®).

In February, a group representing Medicare Advantage and other health plans joined the fray, saying it will use big data tools to prove its case. An attorney involved in the entity, MSP Recovery, told AJMC® in an interview that the entity will be aided by an ability to draw insights from data drawn from up to 100 health plans.

Enrique G. Serna, of Serna & Associates of San Antonio, Texas, said the pooled health plan data will allow MSP Recovery to show connections between rising insulin prices and outcomes like incidence of diabetic ketoacidosis, hospital admissions, and prescriptions being abandoned at pharmacy counters. He said the data are especially compelling in regions of the country with high rates of diabetes. Referring to defendants, Serna said, “We have access to information that they don’t.”

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