Arkansas Sues Manufacturers and Pharmacy Benefit Managers Over Insulin Pricing Scheme

On Wednesday, the State of Arkansas filed suit against defendants including CVS Caremark, Express Scripts, OptumRx, and drug manufacturers in the Circuit Court of Pulaski Countym Arkansas. The complaint alleges that the defendants engaged in a collective “Insulin Pricing Scheme” which caused millions of Arkansas residents to pay inflated prices for insulin.

Some of the defendants manufacture diabetic medications, while some determine the pricing system for the medications (some of the largest pharmacies in the country, called pharmacy benefit managers, or PBM defendants).

The PBM defendants establish a list of drugs that are to be covered by health insurance. If a drug is not on the list, which is also called a formulary, health insurance will not cover the cost. The lawsuit notes that both the manufacturer defendants and the PBM defendants understand that the standard formulary offerings set by the PBM defendants drives drug utilization, and that the PBM defendants “wield enormous control over drug prices and drug purchasing behavior in Arkansas.” The three PBM defendants in this complaint control 80% of the pharmacy benefit market in Arizona.

The complaint alleges that the manufacturer defendants have raised the prices of their drugs in an “astounding manner” over the past fifteen years, despite the costs of producing the drugs decreasing and nothing about the medication changing. Rather than selling the drug for $20, as the manufacturer defendants did in the 1990’s, they now sell for between $300 and $700 when they are less than $2 to produce.

The plaintiff describes that after the PBM defendants gain formulary access for diabetic treatments, the manufacturer defendants raise their prices and pay a portion of the inflated price back to the PBM defendant. Later on, the PBM defendants will grant “preferred status” on their formularies to the manufacturers that pay them the most and have the most highly inflated price.

Each of the defendants directly benefit from the Insulin Pricing Scheme described in the complaint. The complaint maintains that “while the PBM defendants represent both publicly and to their clients that they use their market power to drive down prices for diabetes medications, these representations are patently false and intended to be deceptive and misleading.”

The alleged scheme is said to have directly harmed every diabetic and payor in Arkansas who purchases insulin, which is a life-sustaining drug. The complaint mentions that the physical, emotional, and financial tolls sustained by Arkansas residents “cannot be overstated.”

The action cites the Deceptive Trade Practices Act, unjust enrichment, and civil conspiracy. The complaint seeks injunctive relief, restitution, disgorgement, actual, treble, and punitive damages, civil penalties, and litigation fees.