Howard County BOE sues drug manufacturers over surging insulin prices

The Howard County Board of Education is suing Eli Lilly and Co., Novo Nordisk, CVS, UnitedHealth Group and several other drug manufacturers accusing the companies of deliberately inflating insulin prices for profit.

The school board is responsible for purchasing insurance for all of its employees, retirees and dependents. The district has more than 7,800 educators, administrators and staff, according to the complaint.

Increases in spending have “detrimental effects” on the budget and consequently, the school board’s ability to provide services to the community, the lawsuit states.

During the past 20 years, the average cost of consumer goods and services has risen 1.75-fold while the cost of some diabetes medications has risen more than 10-fold, the complaint reads. The price increases are not caused by a rise in production costs or investments in development but by the defendants manipulating them to “exponentially increase their profits at the expense of payors.” This is all part of what the suit calls an “Insulin Pricing Scheme” by insulin manufacturers.

Health insurance plans are funded by payors such as Howard County Board of Education. They provide coverage and reimbursements for medical treatment and care.

Pharmacy benefits managers CVS Caremark, Express Scripts and OptumRx, named in the suit, are responsible for establishing national formularies — a list of approved drugs — and determining which diabetes medications are covered.

The defendants are the largest benefits managers in the country, owning more than 80% of the market, the lawsuit states. They are also the largest pharmacies in the U.S. and are owned and controlled by entities that own three of the largest insurance companies in the U.S.

The national formularies drive drug utilization, the suit states, and the exclusion of a drug from one or more of the benefit managers’ formularies can render the drug virtually inaccessible for millions.

The complaint argues manufacturers are artificially inflating their list prices and then paying a significant, yet undisclosed, portion of that inflated price back to the PBMs through rebate aggregators. The aggregators are PBM subsidiaries and “secure additional profits from each drug purchase.”

“The PBMs intentionally work to incentivize the Manufacturers to inflate their list prices,” the complaint said. “The PBMs’ ‘negotiations’ intentionally drive up the price of the at-issue drugs and are directly responsible for the skyrocketing prices of diabetes medications, conferring unearned benefits upon the PBMs and Manufacturers alike and overcharging payors like Howard County BOE. ”

Payors like the Howard County Board of Education have been overcharged millions because of this, the suit alleges. Earlier this year, Baltimore City Board of School Commissioners filed a similar suit.

Pharmaceutical companies alone are responsible for the prices they set in the marketplace for the products they manufacture, Monica Prinzing, a CVS spokesperson, 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,” Prinzing said. ” Allegations that we play any role in determining the prices charged by manufacturers for their products are false, and we intend to vigorously defend against this baseless suit.”

Optum Rx said the lawsuit is baseless, demonstrating 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,” Isaac Sorensen, an Optum spokesperson said in a statement. “PBMs, like Optum Rx, are the key counterweight to pharmaceutical companies’ otherwise unchecked monopoly power to set and raise drug prices. ”

Eli Lilly, Novo Nordisk, UnitedHealth Group, and Sanofi-Aventis did not immediately respond to requests for comment.

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