Class-Action Lawsuit Against Insulin Companies Clears Legal Hurdle

-Craig Idlebrook

A class-action lawsuit against the three major pharmaceutical companies that manufacture insulin has survived a recent legal challenge and can proceed.

On February 15th, 2019, New Jersey District Court judge Brian Martinotti handed down an opinion that only partly found in favor of a motion filed by attorneys for Eli Lilly, Novo Nordisk, and Sanofi to dismiss the lawsuit. This means the three companies still must defend themselves in court on at least some of the counts of the original lawsuit.

The suit was originally filed in 2017 by 12 people with diabetes who use insulin and are uninsured or have high-deductible plans. It has since expanded to include over 100 plaintiffs in several dozen states. The plaintiffs accuse insulin manufacturers of working in lockstep to raise the list price of insulin in an effort to gain favor with Pharmacy Benefit Managers (PBMs), which in turn benefit from the alleged scheme by pocketing a percentage of the difference between the list price of a drug and a lower, negotiated rate.

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In the original lawsuit, the plaintiffs accused the drug manufacturers of colluding amongst themselves and with PBMs to violate the Racketeer Influenced and Corrupt Organizations (RICO) Act. Judge Martinotti dismissed these claims largely on the grounds that the plaintiffs didn’t prove that the three drug companies were directly responsible for the harm the plaintiffs said they suffered from the high list prices for insulin. In his opinion, the judge said that the drugmakers were not the final seller of the product to the consumer in a system that includes pharmacies, insurers, and PBMs.

However, Judge Martinotti did allow many of the plaintiffs’ claims to stand that the insulin makers had violated consumer protection laws in several dozen states. Both the plaintiffs and defendants put out statements claiming victory after the judge’s decision.    

Judge Martinotti also allowed the plaintiffs to refile claims in the lawsuit that the drugmakers had violated RICO statutes, and a modified complaint was filed on March 18th, 2019. In the new complaint, the plaintiffs attempted to modify the RICO argument, moving further from language that accused the three companies of having formed a formal association to conspire to keep insulin list prices high. The plaintiffs argue in the new filing that the companies were “culpable persons” for their role in a system that resulted in an allegedly artificially high list price for insulin.

This is not the only lawsuit that has been filed in recent years accusing insulin makers and PBMs of price manipulation. Here are others:

-In October 2018, Minnesota Attorney General Lori Swanson filed a lawsuit against Lily, Novo Nordisk, and Sanofi, accusing the companies of fraudulently setting high list prices for insulin.  

-Judge Martinotti is overseeing a different insulin pricing lawsuit filed in 2017 against Novo Nordisk. This one was filed by some of the company’s investors who say they were misled about earnings forecasts by allegedly deceptive maneuvers to keep insulin list prices high.

-Another 2017 lawsuit that was filed by the non-profit Type 1 Diabetes Defense Foundation against CVS Health, a PBM, was voluntarily dismissed in January 2019. The foundation says the dismissal was partly a result of the legal wake being created by the current class-action lawsuit against the insulin makers.

In addition, insulin manufacturers and PBMs are facing heightened scrutiny from lawmakers over their pricing practices, with hearings held on the issue in both the House and the Senate.

 

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