Insulin pricing claims: deep dive for self-funded payers and advisors

Insulin is an essential medication for the more than seven million Americans with type 1 diabetes. Over the last two decades, its price has increase exponentially. Despite minimal advancements in formulation or efficacy since the 1990s, the cost for insulin has surged by as much as 1,000%. These steep price hikes, which are occurring even as the actual production costs remain relatively stable, have placed increasingly large financial burdens on self-funded payers who are forced to outlay millions of dollars annually to cover the costs of overpriced insulin and other diabetes medications for health care plan members.

In the last 10 years, spending on insulin in America has tripled, increasing from $8 billion in 2012 to $22.3 billion in 2022, prompting medical providers and patient support organizations, including the American Diabetes Association, to push for solutions to the insulin affordability crisis. Likewise, newer diabetes medications such as Ozempic and other Glucagon-like Peptide-1 Receptor Agonists (GLP-1 RAs) are stunningly expensive to the point that the Senate HELP Committee recently launched an investigation into these “outrageously high prices.” 

The insulin market is highly concentrated, with three manufacturers — Eli Lilly, Novo Nordisk, and Sanofi — dominating nearly 96% of the global market. Additionally, three major pharmacy benefit managers (PBMs) — CVS Caremark, Express Scripts, and OptumRx — control more than 80% of all prescription drug sales in the U.S. This concentration of market power has raised serious questions about anti-competitive practices and lack of pricing transparency.

The rising cost of diabetes medications has not only become a critical public health issue, but also a significant legal and financial concern for self-funded payers and the benefits professionals who support them. To remedy the financial burden on self-funded payers, many have taken to civil litigation with intention to recoup undue losses, particularly through the national Insulin Pricing Litigation.

This litigation, which was consolidated in August 2023 in the District of New Jersey under Judge Brian R. Martinotti, involves self-funded payers, including private companies, state and local governments, unions, and nonprofits, who allege that major insulin manufacturers and PBMs engaged in a scheme to artificially inflate insulin prices. Plaintiffs contend that there is collusion between manufacturers and PBMs to manipulate insulin prices. Two main allegations are at the forefront:

• Rebates and formulary placements: PBMs are accused of demanding substantial rebates from manufacturers in exchange for favorable placement on drug formularies. These secretive rebate agreements are alleged to drive up list prices, as manufacturers pass on the costs to payers and consumers.
• Price fixing: The lawsuits also claim that insulin manufacturers engage in price fixing by raising their prices in lockstep. This alleged collusion not only limits competition but also ensures that rising costs don’t lead to a loss of market share.

Considering the widespread nature of this activity, the litigation is expected to grow as more organizations with self-funded health care programs file suit and attempt to recoup the massive losses they have suffered due to overpriced insulin.

For self-funded payers, the financial implications of these alleged practices are substantial. Rising drug costs directly affect the sustainability of their health plans and the affordability of care for their members. The litigation offers a pathway for self-funded payers to potentially recover overpayments resulting from unjustly inflated insulin prices, seeking to not only get compensation for the money wrongfully paid for artificially inflated insulin prices, but also to obtain injunctive relief to stop the insulin pricing scheme, and punitive damages designed to deter future misconduct.

The Insulin Pricing Litigation gets at the core of pivotal issues for anyone involved in managing or advising self-funded health plans. By staying informed and proactive, benefits professionals can not only protect the interests of their clients, but also contribute to broader efforts to ensure fair and reasonable drug pricing. As this litigation progresses, it will be important to monitor outcomes and adapt strategies to navigate this challenging landscape effectively.

While self-funded payers and others consider joining this litigation, leaders must act swiftly to ensure their legal claims are preserved. In addressing these issues, benefits advisors play a crucial role in safeguarding the health and financial wellbeing of millions of Americans, making their role more vital than ever in the face of such significant legal and economic challenges.

Mark Pifko of Baron & Budd, David Buchanan of Seeger Weiss, Brandon Bogle of Levin Papantonio Rafferty, and Ben Widlanski of Kozyak Tropin & Throckmorton serve as co-lead plaintiffs’ counsel for the self-funded payer track of the Insulin Pricing Litigation.