Henrico files federal lawsuit against insulin manufacturers, distributors

Henrico County has filed a federal lawsuit against three manufacturers of insulin, three pharmacy benefit managers, and 12 subsidiaries of the companies, alleging that they conspired to artificially inflate the price of the medicine, which is used to treat diabetes.

In the suit, filed Nov. 20 in the U.S. District Court for the Eastern District of Virginia, Henrico alleges that insulin manufacturers Eli Lilly and Company, Novo Nordisk Inc. and Sanofi-Aventis, U.S., LLC and pharmacy benefit managers CVS Caremark, Express Scripts and OptumRx, and their subsidiaries, “have in tandem increased the prices of their insulins up to 1000%,” during the past two decades.

The result, according to the lawsuit, is that Henrico has been overcharged “substantial amounts of money” for insulin during that time, thereby harming its financial ability to provide necessary services to the community. The county is self-insured, meaning that it pays to provide private health coverage to its 11,000-plus employees and therefore incurs many of the costs associated with insulin supplies, both for those employees who need the medicine and also for the county agencies that use it.

The lawsuit alleges that since 2003, the defendants have violated the Racketeer Influenced and Corrupt Organizations Act and Virginia law and seeks “injunctive relief, restitution, disgorgement, damages, civil penalties, attorneys’ fees and costs, and all other available relief to address and abate the harm caused by the Insulin Pricing Scheme.” It does not provide a specific dollar amount of restitution that Henrico is seeking but says that the county intends to prove at trial the amount it believes it is owed – a figure the suit suggests should at least include the difference between the amount Henrico paid for insulin between 2003 and 2023 and the actual value of the medicine during that period.

Henrico County Attorney Andrew Newby told the Citizen he could not comment on the pending litigation. The case was assigned to District Judge Roderick C. Young.

Although insulin costs manufacturers as little as $2 per vial to make, according to the lawsuit, those vials often range in price between $300 and $700 apiece to purchasers like Henrico County.

“Little about these medications has changed over the past 100 years; today’s $350 insulin is essentially the same product the Manufacturers sold for $20 in the 1990s,” the suit reads.

The suit alleges that the defendants have engaged in an illegal scheme to artificially elevate the price of insulin so that they each benefit financially. It suggests that the PBMs – whose purchasing power it claims “should theoretically drive down list prices” – instead benefit financially from secret kick-backs that the manufacturers provide after artificially inflating their list prices for the medicine. Those manufacturer payments “bear a variety of dubious labels, including rebates, discounts, credits, inflation/price protection fees, and administrative fees,” according to the lawsuit. “By whatever name, the inflated list prices and resulting Manufacturer Payments are a quid pro quo for inclusion and favorable placement on the PBMs’ formularies.”

As part of the scheme, the suit alleges, manufacturers set list prices for insulin that “are so exorbitant in comparison to the net prices they ultimately realize that the Manufacturers know their initial list prices constitute a false price. These list prices reflect neither the Manufacturers’ actual costs to produce the at-issue drugs nor the fair market value of those drugs. Rather, they are artificially inflated solely to facilitate the Insulin Pricing Scheme.”

The suit alleges that the PBMs know that the inflated prices are false, even as they are representing publicly and to their clients that they are using their market power to drive down costs.

“Instead,” it suggests, “the PBMs intentionally incentivize the Manufacturers to inflate their list prices. 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.”

The lawsuit alleges that because the defendants “actively concealed” their agreements and payment plans, the county could not have known or reasonably discovered the full extent of those agreements in the past, and therefore any defense involving a statute of limitations claim should be irrelevant.

The suit claims that in 2015, about 8.5% of all Henrico citizens were living with diabetes and that overall in the U.S., one in four healthcare dollars is spent caring for people with diabetes.

The federal Inflation Reduction Act capped (on Jan. 1) at $35 per month the out-of-pocket costs for insulin for people on Medicare Part D and (on July 1) for those on Medicare Part B. A bipartisan bill introduced earlier this year by U.S. Senators John Kennedy (R-Louisiana) and Raphael Warnock (D-Georgia) would extend that monthly cap to all insulin patients, including those with private insurance and those who are uninsured. Another bill, from Senators Susan Collins (R-Maine) and Jeanne Shaheen (D-Connecticut), would cap the cost for most insulin patients at $35 per month or 25% of the list price.

The firm representing Henrico County in its lawsuit, Dallas-based Baron & Budd, P.C., recently has filed nearly identical lawsuits on behalf of two other Virginia localities (Arlington County and the city of Alexandria) in federal court and previously filed at least one other (on behalf of Pasco County, Florida). Earlier this year, the firm won a $500-million settlement for the state of New Mexico from Walgreens, related to that company’s role in the opioid epidemic. It also was instrumental in the landmark $26-billion 2021 settlement in which four major drug distributors (Johnson & Johnson, AmerisourceBergen, Cardinal Health and McKesson) agreed to pay states and localities for their role in fueling the opioid crisis nationally.