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The city of Meriden, Connecticut, filed a lawsuit in federal court on Monday, accusing 20 companies, including major drug manufacturers such as CVS Health Corp., Eli Lilly and Co., and Novo Nordisk Inc., as well as pharmacy benefit managers (PBMs), of conspiring to maintain high insulin prices. The city alleges that these companies have engaged in an illegal insulin pricing scheme that violates the Racketeer Influenced and Corrupt Organizations Act (RICO) and the Connecticut Unfair Trade Practices Act.

According to the complaint, the scheme works as follows: manufacturers set “exorbitant” list prices for insulin and then, after PBMs agree to purchase the drugs, the manufacturers pay a portion of the inflated price back to the PBMs in the form of kickbacks. These kickbacks can come in the form of rebates collected by the PBMs’ rebate aggregators, which serve as an additional source of profit for PBMs, the suit claims.

Meriden argues that the list prices presented by the manufacturers to the PBMs are not a result of normal market competition, but are inflated specifically to facilitate the pricing scheme. This, according to the city, creates “perverse PBM incentives” that allow PBMs and manufacturers to profit handsomely from the continuously rising price of insulin, which increases well beyond the rate of inflation. As a result, the city claims that purchasers, including Meriden, are forced to overpay for the drugs they need to provide to local government health plan participants.

The city states that every entity purchasing insulin has been directly harmed by this scheme, as the purchase price for every diabetes medication is derived from a false list price. Meriden is seeking both injunctive relief to stop the alleged scheme and damages for the harm caused. They are also seeking attorney fees in connection with the lawsuit.

A spokesperson for Novo Nordisk told Law360 on Tuesday that the company believes the allegations against it are meritless. A representative from CVS Health also denied the allegations, calling the city’s lawsuit “baseless” and stating that “pharmaceutical companies alone are responsible for the prices they set in the marketplace for the products they manufacture.” The representative went on to say that nothing in CVS’s agreements prevents drug manufacturers from lowering insulin prices and expressed support for such actions.

Eli Lilly responded by emphasizing its ongoing efforts to lower insulin prices and dismissed the lawsuit as baseless. The company pointed out that in previous cases regarding insulin pricing, plaintiffs had either dropped their claims, lost motions to proceed as a class action, or settled without receiving money. According to Eli Lilly, the outcomes of these cases speak for themselves.