Eli Lilly’s $35 insulin cap could unravel, as $13.5M class action settlement falls apart

Lawyers touting a $500 million settlement over insulin pricing are back at the drawing board after a judge refused to certify their class.

Insulin prices have drawn the interest of federal and state regulators, many of which, including California, have sued manufacturers Eli Lilly, Novo Nordisk and Sanofi-Aventis and, in some cases, numerous pharmacy benefit managers.

Meanwhile, a consumer class action humming along for six years in U.S. District Court in the District of New Jersey reached the first substantive settlement, in which Eli Lilly agreed to cap the price of insulin at $35 per month for four years and provide a $13.5 million cash fund for certain consumers.

Then, last week, lawyers told U.S. District Judge Brian Martinotti that the deal was off.

“We write on behalf of the class plaintiffs and Eli Lilly and Company to inform the court that they will not be moving forward with preliminary approval and are terminating the settlement agreement,” lead plaintiffs lawyers Steve Berman, of Seattle’s Hagens Berman Sobol Shapiro, and James Cecchi, of Carella, Byrne, Cecchi, Brody & Agnello in Roseland, New Jersey, wrote.

Their April 12 letter comes two months after Martinotti refused to certify a nationwide class of insulin consumers in the remaining litigation against the two other defendants, Novo Nordisk and Sanofi-Aventis. In a stipulation filed on Monday, both sides acknowledged the class certification order also pertained to Eli Lilly.

Plaintiffs lawyers are far from giving up, however. Hagens Berman partner Mark Vazquez, in Chicago, said plaintiffs plan to amend their complaint “in light of the changed circumstances following the court’s denial of class certification.”

“We are amending the complaint to address the court’s concerns,” he said.

“While Lilly will continue to defend itself from these allegations, Lilly’s commitment to patients remains the same,” Eli Lilly spokesperson Antoinette Forbes said in a statement. “Lilly was the first and still only company to cap what people pay at $35 per month for all of our insulins, and the average monthly out-of-pocket cost for Lilly insulin is even lower, $17.16. We also cut insulin prices by 70% and automatically capped monthly out-of-pocket costs at $35 or less wherever possible, which should drive that average even lower.”

Novo Nordisk, in its own statement, clarified that it also had a $35 insulin option and, as of Jan. 1, lowered its list prices on several products by up to 75%.

“Novo Nordisk believes that the allegations in the lawsuit are without merit, and we intend to vigorously defend against these claims,” spokesperson Jamie Bennett said.

A Sanofi-Aventis spokesperson did not respond to a request for comment.

Manufacturers “intentionally” allowed insulin prices to skyrocket

The lawsuits allege that drug manufacturers have intentionally allowed insulin prices to skyrocket. Initially, the consumer class action alleged federal racketeering claims, Vazquez said, plus state law consumer protection claims.

“The racketeering, the RICO claims, were knocked out on what was effectively a legal technicality called the ‘direct purchaser rule,’” he said. “That left us with the fraud and unfair practices claims.”

Vazquez said the complaint sought class certification based on the unfair practices claims.

Related: No more $35 insulin cap? Eli Lilly plaintiffs call off the $13.5M class action settlement

In a Feb. 5 redacted version of his order, Martinotti found that the class could not be certified because plaintiffs failed to establish an “ascertainable loss” without “delving into evidence individual to each putative class member and their respective factual circumstances,” such as whether each class member got a rebate and their various health plans and insurers.

Vazquez said plaintiffs plan to move ahead with an amended complaint alleging that the list price of insulin is deceptive to consumers. That’s because manufacturers are raising prices on consumers in order to compete through “kickbacks to middlemen,” he said.

‘Phantom consideration’

Last year, Arkansas, Illinois, Kansas, Mississippi and Montana sought to coordinate their attorneys general actions over insulin prices in Mississippi’s Southern District.

They asked to exclude the consumer class action, citing “material differences” in the claims, which don’t name pharmacy benefit managers. Lawyers in the consumer class action also referenced the pending Eli Lilly settlement. On Aug. 3, the U.S. Judicial Panel on Multidistrict Litigation sent the cases to Martinotti.

As the multidistrict litigation started up, about a dozen states, including Arkansas and Mississippi, intervened to object to the Eli Lilly settlement. They raised two concerns: the potential releases of the states’ claims, and the settlement’s “phantom consideration,” particularly given that Eli Lilly, on its own, had already agreed to cap insulin prices at $35 per month.

Plaintiffs lawyers, however, insisted that Eli Lilly’s $35 price for four years had an estimated $500 million value.

In support of the settlement, Eli Lilly noted in court papers that it had no legal obligation to keep offering the $35 price.

“But, through this settlement, plaintiffs have secured a guarantee that this offering will remain in place, regardless of changed market conditions, Lilly’s competitors’ actions, or any other business factors,” wrote Eli Lilly attorney Melissa Geist of Reed Smith in Princeton, New Jersey.

Geist added: “A legally binding obligation to continue an affordability solution that is currently saving patients $20 million per month is not ‘phantom’ consideration, especially considering that plaintiffs’ case rests on novel legal theories no court has ever endorsed and fully explored through six years of litigation and discovery.”