Baltimore City school system sues drug companies over allegedly inflated price of insulin

The Baltimore City Board of School Commissioners is suing Eli Lilly and Co., UnitedHealth Group, CVS and several other drug manufacturers for allegedly colluding to inflate the cost of insulin.

Baltimore City Schools offers health insurance to more than 9,000 employees and their dependents, and one of the benefits is paying a "substantial share of the purchase price of their pharmaceutical drugs, including the diabetes medication," according to the complaint.

The city school system alleges that drug manufacturers raised the price of insulin to win the business of pharmacy benefits managers -- intermediary companies that negotiate prices between drugmakers and pharmacies.

"Like other government agencies, Baltimore City Public Schools is taking legal action against the Insulin industry to recover the excessive amounts paid by City Schools due to its overcharging for diabetes medications that its employees need to stay healthy," Baltimore City Schools said in a statement to The Baltimore Sun. "The Federal Trade Commission recently alleged that the insulin industry's overcharges are unlawful. City Schools' complaint is the first complaint filed on behalf of all school districts nationwide with self-funded health plans."

According to the lawsuit filed Friday, the manufacturers pay these middlemen "illegal kickbacks, falsely labeled as rebates, administrative fees and other payments." In return, the PBMs protect the drug manufacturers from competition and "abdicate [but still tout] their role to generate savings for health plan sponsors (and patients)," the suit says.

When choices were available between lower- and higher-priced drugs, the manufacturers and PBMs colluded to raise the price of prescriptions and exclude the cheaper options, according to the lawsuit. This practice resulted in Baltimore City Schools paying millions of dollars more than they otherwise would, lawyers for city schools allege.

"Diabetes medication is the poster child for the drug manufacturers and PBMs' drug pricing scheme," the complaint reads. "As a result of their collision in the prescription drug market, while the average cost of consumer goods and services has risen 1.75-fold over the past twenty years, the cost of some diabetes medications has risen more than tenfold. And the reason is the Defendants' Insulin Pricing Scheme."

The defendants are pushing back at the allegations.

CVS officials said the company "has led the way" in driving down the cost of insulin for all patients: insured, uninsured and underinsured. For example, members on average pay less than $25, below list prices and the Biden administration's $35 cap for seniors on Medicare, the company said. In addition, CVS said it provides access to $25 insulin to every American through its ReducedRx program at each of its more than 9,000 pharmacies and 67,000 network pharmacies, which are part of a group contracted with a health insurance company to provide medications at a specific price.

"Pharmaceutical companies alone are responsible for the prices they set in the marketplace for the products they manufacture," CVS spokesperson Shelly Bendit said in a statement. "Nothing in our agreements prevents drug manufacturers from lowering the prices of their insulin products and we would welcome such an action."

Officials with Eli Lilly said the company has been working for years to reduce insulin out-of-pocket costs for people with diabetes, against the headwinds of those who choose higher-list-price medicines over cheaper options. Lilly officials said it was the first and "still only company to cap" what people pay at $35 per month for all insulins. The company cut insulin prices by 70%, and the average monthly out-of-pocket cost for insulin is just $17.16, the company said.

"These copycat allegations are baseless," Eli Lilly spokesperson Jared Shapiro said in a statement. "In the only three cases where insulin pricing allegations have been put to their proof, the plaintiffs have either dropped their case, lost their motion to proceed as a class action, or settled for no money. The outcomes speak for themselves."

Drug manufacturer Novo Nordisk, another defendant, is also disputing the lawsuit.The company added in a statement: "While we will not comment further about pending litigation, we recognize that not all patient situations are the same and we have a number of different insulin affordability offerings available through NovoCare. Importantly, we continually review and revise our offerings as well as work with diverse stakeholders to create solutions for differing patient needs."

Optum Rx also called the lawsuit "baseless" and said it demonstrates "a profound misunderstanding of how drug pricing works."

"For many years, Optum Rx has aggressively and successfully negotiated with drug manufacturers and taken additional actions to lower prescription insulin costs for our health plan customers and their members, who now pay an average of less than $18 per month for insulin," Optum spokesperson Tamara Rocha said. "PBMs, like Optum Rx, are the key counterweight to pharmaceutical companies' otherwise unchecked monopoly power to set and raise drug prices."

UnitedHealth Group did not respond to a request for comment.

The price of insulin has surged by more than 1,000% since 2003, according to officials with Frantz Law Group, a firm representing the Oceanside Unified School District in San Diego in a similar case.

In the fall, dozens of school districts across multiple states, including Oceanside Unified, filed a lawsuit in U.S. District Court for the District of New Jersey against several pharmaceutical companies, PBMs and UnitedHealthcare, also accusing them of colluding to inflate insulin prices.

"Like many organizations with self-funded health plans, the Oceanside Unified School District should not be forced to pay inflated and unreasonable insulin prices created by a scheme between big pharma and benefits managers to engage in unfair and deceptive trade practices," James P. Frantz, CEO of Frantz Law Group, said in a statement.

And this isn't the first time these companies have faced legal challenges in Maryland.

In March, Baltimore Mayor Brandon Scott and the Baltimore City Council filed a lawsuit in the U.S. District Court of Maryland against Eli Lilly and 17 other companies, including CVS and Novo Nordisk. The lawsuit alleges that the drug companies and pharmacy benefit managers conspired to unjustly enrich themselves by purposefully driving up the price of life-sustaining medications and insulin.

That case became multidistrict litigation, meaning a group of civil cases were transferred to a single district court -- this one in New Jersey -- for pretrial proceedings, according to Sara Gross, chief of the Affirmative Litigation Division for the Baltimore City Department of Law. The case is ongoing.

The high cost of health care has been at the forefront of national headlines, underscored by the case of Luigi Mangione. The Towson native is accused of gunning down UnitedHealth Care CEO Brian Thompson last month over disillusionment with rising health costs.

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