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.
