By Sarah Jane Tribble, Kaiser Health News
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 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 drug makers 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.APRIL 23, 201701:44
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.”
“I
don't know of any other industry where such regular price increases have been
the norm.”
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.
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 drug makers.
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 drug makers in July asking for an
explanation for the “extreme price increases.”
This
story was contributed by Kaiser Health News, an editorially independent
program of the Henry J. Kaiser Family Foundation and a nonprofit, nonpartisan
health policy research and communication organization not affiliated with
Kaiser Permanente.
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