Why a lawsuit may be state and local governments’ best chance to cut insulin prices

Insulin prices have risen so much over the years that state and local governments are going to court to help knock them down. 

Indeed, insulin spending has nearly tripled from $8 billion in 2012 to $22.3 billion in 2022, according to the American Diabetes Association. One reason for the stark increase in costs is the “pay-to-play” relationship between drug manufacturers and pharmacy benefit managers, one legal expert says. 

To sell their products, pharmaceutical manufacturers must have their medications on formularies, or the list of covered drugs under an insurance plan. PBMs are responsible for determining which drugs qualify for health insurance plans, so that means PBMs can charge manufacturers exorbitant fees, often called rebates or service fees, to be included on formularies, said Brandon Bogle, an attorney at the Florida-based Levin Papantonio Rafferty law firm. To recover the fees paid to PBMs, he said, drug companies increase their prices. 

Bogle is one of the lead attorneys in a multidistrict insulin pricing litigation, and he’s representing more than 30 local governments with self-funded health care plans from Anne Arundel, Maryland, to Spokane County, Washington. The litigation also includes cases brought by state attorneys general in Arkansas, Illinois, Kansas and others. The separate cases were consolidated late last year into a multidistrict litigation at the United States District Court of New Jersey.

The governments allege that drug companies, including Eli Lilly, Novo Nordisk and Sanofi, and PBMs, such as CVS Caremark, Express Scripts and OptumRx, colluded to inflate insulin prices, which have soared to life-threatening levels over the last 20 years. In 1996, for instance, a vial of insulin went for $33, but by 2017, it cost around $300. 

“The reason we’re targeting insulin is twofold,” Bogle said. “One: It’s a life-saving drug, it’s a necessary drug for millions of people in this country, so it’s vitally important to be as cheap as possible.” 

Plus, insulin has remained largely unchanged since its development more than a century ago. So drug companies’ arguments that the expense of getting a new drug on the market and that covering research and development costs necessitates higher drug prices makes little sense, Bogle said.

Governments, particularly at the local level, are spending too much on insulin, Bogle said. It’s not just employee health plans that account for increased costs. In many counties, for example, the government picks up the tab for public hospitals and correctional facilities that need to have insulin available. Spending so much on insulin takes away governments’ ability to finance other projects, such as infrastructure improvements, he said.

For state and local governments, litigation is one way to address legislation’s shortcomings. Policy “has to operate prospectively, so it can only make rules that have to be followed going forward,” said Elizabeth McCuskey, a professor of health law policy at Boston University’s School of Public Health and School of Law. Even if a state government approves insulin price caps, for instance, it won’t replace the money spent before the price caps were in place. 

That’s where litigation comes in, she said. It’s useful if governments have suffered a financial injury in the past and want to be compensated. The court route isn’t necessarily faster or less expensive than changing legislation, particularly considering legal and administrative costs, she said, “but it gets you money as opposed to just behavior change. The payoff for that longer wait is usually much greater.” 

McCuskey compared the insulin litigation to states’ efforts to address high generic drug prices through antitrust cases. In 2019, more than 40 attorneys general filed a lawsuit against major manufacturers of generic drugs for conspiring to increase the prices of common medications like antibiotics, antidepressants and contraceptives. A number of pharmaceutical companies have since admitted to their role in the price-fixing conspiracy and agreed to pay penalties. 

Governments can also seek injunctive relief through litigation, or a court order that requires entities to change their behavior going forward, McCuskey said. But it’s only relevant to identified parties, unlike legislation that can be written to apply to whomever policymakers decide. 

“With PBMs, there’s been so much consolidation that if you name … the big three in your lawsuit, that pretty much [covers] most of the PBM market,” McCuskey said. But the resulting injunctive relief would not apply to new PBMs or those not named in the lawsuit. 

Using injunctive relief to lower insulin prices moving forward is one of the goals of the multidistrict litigation, Bogle said. “As far as resolution goes, it’s a little speculative at this point,” he said, but the idea is for governments to be reimbursed for past insulin overpayments and to leverage injunctive relief to ensure insulin costs are set at a reasonable rate going forward to stop insulin companies and pharmacy benefit managers from unfairly raising prices again. 

A trial date is yet to be set for the multidistrict litigation over insulin pricing, but Bogle hopes it will be scheduled by early 2026.

“The [high] cost of insulin … is a significant public health problem, if not an outright crisis,” Bogle said. It’s not just cities, counties and states that are feeling the effects of steep costs, “but individuals ultimately are having to ration insulin and [are] suffering adverse health consequences because of it.”