By Sarah Jane
Tribble October 30, 2017
With the price of a
crucial diabetes drug skyrocketing, at least five states and a federal
prosecutor are demanding information from insulin manufacturers and the
pharmaceutical industry’s financial middlemen, seeking answers about their business
relationships and the soaring price of diabetes drugs.
Attorneys general in
Washington, Minnesota and New Mexico issued civil investigative demands this
year and are sharing information with Florida and California, according to
various corporate financial filings.
Insulin makers Eli
Lilly, Novo Nordisk, Sanofi and top pharmacy benefit manager CVS Health are
targets in the state investigations. Several of the financial filings note that
the state and federal prosecutors want information regarding specific insulins
for specific dates in relation to “trade practices.”
They appear to be
looking into potentially anti-competitive business dealings that critics have
leveled at this more than $20 billion niche
market of the pharmaceutical industry, according to analysts and court filings
reviewed by Kaiser Health News. These include whether drugmakers and middlemen
in the supply chain have allowed prices to escalate in order to increase their
profits.
At the same time,
prominent class-action lawyers are bringing suits on behalf of patients. Steve
Berman, an attorney best known for winning a multibillion-dollar settlement
from the tobacco industry, alleged collusion and said it was time to break up
the “insulin racket.”
The price of insulin —
a lifesaving drug — has reached record highs as Eli Lilly, Novo Nordisk and
Sanofi raised prices more than 240 percent over the past decade to often over
$300 a vial today, with price rises frequently in lockstep, according to
information technology firm Connecture.
Those prices take a
toll on patients like 21-year-old Hunter Sego, who needs about four vials a
month for his Type 1 diabetes. When he went to the pharmacy last year, the drug
was no longer on a preferred tier and the price had risen to $487 a vial,
compared with about $200 from a few years ago. Insurance companies often take
drugs off a preferred list in response to pharmaceutical price rises to
discourage overuse, a business strategy that leaves patients stuck in the
middle.
“I was absolutely
floored,” Sego said.
The DePauw University
junior began skipping doses, knowing that his parents were paying cash until
they met their health plan’s high deductible. Sego lost weight and felt
lethargic, and his grades suffered. Sego’s college football coach finally
called his mother to ask what was going on.
“I have to watch him
like a hawk because I know he is trying to save money,” said his mother, Kathy
Sego.
Last year, before the
states took action, the U.S. Attorney’s Office for the Southern District of New
York, one of the nation’s most powerful federal prosecutors, issued civil
investigative demands to Eli Lilly, Novo Nordisk, Sanofi and Express Scripts, according
to financial filings.
“There is enough
concern about competition in the drug industry to have galvanized forces at the
state and federal level to create specific pictures of abuse,” said Diana Moss,
president of the American Antitrust Institute after hearing of the
investigative demands.
Attorneys general use
the legally binding demands to collect evidence, such as documents and emails,
and testimony to help “piece together any number of stories about potential
competitive harm,” Moss said.
Insulin prices have
risen at regular intervals for years, Connecture’s research shows, but the
trend has become more pronounced in the past few years. For
example, in the final months of 2007, Sanofi’s Lantus cost $88.20 per vial and
Novo Nordisk’s Levemir $90.30 a vial. Today, after increasing in tandem over
the years, Lantus costs $307.20 per vial and Levemir runs $322.80 for the same
amount, based on average wholesale prices.
The increases “don’t
all happen on the same exact day, but they happen pretty close to each other on
the calendar,” said Jim Yocum, senior vice president of federal contracts with
Connecture. “I don’t know of any other industry where such regular price
increases have been the norm.”
The United States is
one of the few developed countries without regulations on prescription drug
pricing. So, one of the few tools available for the government to curb price
increases is to show fraudulent or anti-competitive practices.
Late last year, Sen.
Bernie Sanders (I-Vt.) and Rep. Elijah Cummings (D-Md.) asked the
Department of Justice and the Federal Trade Commission to investigate, noting
“the potential coordination by these drug makers may not simply be a case of
‘shadow pricing,’ but may indicate possible collusion.”
Spokespeople for Eli
Lilly, Novo Nordisk and Sanofi said in separate statements that each company
sets prices independently. Novo Nordisk’s Ken Inchausti added: “We monitor
market dynamics and our competitors’ pricing through public and subscription
databases that track list prices.”
Each of the pharmaceutical
companies said it is committed to ensuring patients have access to medicine.
Novo Nordisk, which makes Novolog and Levemir, also pledged to limit
price increases. Eli Lilly has announced a discounted insulin program.
State and federal
prosecutors often begin investigations because of consumer and whistleblower
complaints, several civil and antitrust attorneys said, and gripes about rising
insulin prices have been roiling the online diabetes community for the past few
years.
Indeed, James
Tierney, former attorney general of Maine and a
lecturer at Harvard Law School, said the civil investigative demands are not
uncommon and the companies “may be totally innocent.”
It’s difficult to know
exactly what the state and federal prosecutors are looking for, though, Tierney
said. The investigations are often sealed from the public, revealed primarily
when public companies acknowledge receiving them in their financial filings.
Nearly all of the
federal and state officials declined to confirm or deny the investigations,
except Washington and New Mexico officials, who confirmed the existence of the
civil investigative demands.
Still, clues about the
insulin investigations can be pieced together from corporate filings. They
focus on issues like pricing and business relationships. Several
ask for information about specific insulins regarding
certain years.
In January — at about the same time states began filing civil demands — the first of a handful of potential class-action lawsuits that were national in scope were filed.
A U.S. district judge
combined Berman’s suit and several other national cases last month, adding the
pharmacy benefit managers, or PBMs (Express Scripts, CVS and UnitedHealth Group
with its division OptumRx) as defendants.
Berman and the other
attorneys declined interview requests. But attorneys at Keller Rohrback, one of
the firms whose case was rolled into Berman’s, explained the reason for adding
the PBMs in a May letter to the
court: “The PBM defendants play a central role in the scheme — selling
formulary access in exchange for ‘rebates’ or other payments” from the
manufacturers.
Rebates, or negotiated
discounts, occur when a manufacturer sets a list price and then agrees to pass
money back to the PBMs in return for something, generally a spot on the
formulary that determines which drugs can be purchased.
The PBMs say their
negotiations ensure drugs are affordable, and two of them pointed fingers back
at the drugmakers.
Express Scripts
spokesman Brian Henry declined to comment on the investigations or lawsuit but
stated in an email that “if prices have gone up in lockstep, that is because
they have been priced by the drug makers in lockstep.” UnitedHealth did not
respond to questions. And CVS Health called the lawsuit without merit.
CVS spokesman Michael
DeAngelis said in an email: “Pharmaceutical companies alone are responsible for
the prices they set in the marketplace for the products they manufacture.
Nothing in our agreements prevents drug manufacturers from lowering the prices
of their insulin products and we would welcome such an action.”
Such lawsuits
generally take years to resolve. In the meantime, the suits and the
investigations may provide answers to the demands of lawmakers like Sen. Amy
Klobuchar (D-Minn.), who sent a letter to drugmakers in July asking for an
explanation for the “extreme price increases.”
KHN’s coverage of
prescription drug development, costs and pricing is supported in part by
the Laura and John Arnold Foundation.
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