Why Should Delaware Care?
Diabetes often requires patients to use daily medication to manage their symptoms. A recent lawsuit filed by the Delaware Department of Justice claimed the price of some insulin has increased by more than 1000% since 2003, and that manufacturers have profited from unlawfully inflated prices.
Delaware’s Department of Justice filed a lawsuit against multiple pharmaceutical juggernauts on Tuesday, accusing them of conspiring to artificially inflate insulin and GLP-1 drug prices at the expense of patients.
The lawsuit, filed by Attorney General Kathy Jennings’ office in the Delaware Court of Chancery, targets both pharmaceutical manufacturers like Novo Nordisk and Eli Lilly, as well as pharmaceutical middlemen – better known as pharmacy benefit managers (PBMs) – who negotiate drug prices between manufacturers and insurers, like CVS Caremark and Express Scripts.
Jennings’ lawsuit alleges that over the past 15 years both the PBMs and manufacturers have coordinated to “distort the market for diabetic treatments to their benefit at the expense of Delaware diabetics.”
“The level of greed that would drive someone to price-gouge consumers over life-saving diabetes medicine is almost unfathomable,” Jennings said in a statement.
In a statement from CVS, a spokesperson said PBMs have nothing to do with price-setting, instead deflecting onto drug manufacturers.
A spokesperson for Optum Rx, a PBM owned by UnitedHealth Group that is also named in the lawsuit, echoed those claims, saying PBMs act as a “key counterweight” to pharmaceutical companies that would otherwise have “monopoly power to set and raise drug prices.”
A spokesperson for Novo Nordisk, the drug manufacturer known for its blockbuster weight-loss and diabetes drug, Ozempic, called the claims against it “meritless” and said it will “vigorously” defend itself in court.
A spokesperson for Eli Lilly also decried the lawsuit, and said the organization has a “strong record of insulin affordability solutions.”
“It is unfortunate that the Delaware AG would decide to spend state resources on such a wasteful lawsuit and sue a company that has led the way in making insulin more affordable,” the spokesperson said. “Similar cases by other plaintiffs have either been dismissed, dropped or settled for no money after years of costly litigation.”
Sanofi, another drug manufacturer named in the lawsuit, denied the allegations against it, saying its pricing practices comply with the law.
“Under the current system, savings negotiated by health insurance companies and PBMs through rebates are not consistently passed through to patients in the form of lower co-pays or coinsurance,” the spokesperson for the company said. “As a result, patients’ out-of-pocket costs continue to rise while the average net price of our insulins declines.”
What’s in the lawsuit?
At the center of the 141-page complaint is an accusation that both drug manufacturers and PBMs have profited from artificially inflated drug prices and kickbacks secured through exclusionary practices.
According to the complaint, manufacturers have dramatically increased the price of insulin and other diabetes drugs in recent years, despite a decrease in the cost of production.
“Despite this decrease in production costs and no new research and development, the reported price of the at-issue drugs has risen astronomically over the last 15 years,” the complaint said.
The lawsuit also claims that PBMs work in tandem with manufacturers to exclude competitors by giving preferential treatment to those that pay the PBMs the largest share of profits generated by those artificially inflated prices.
Through this practice, the lawsuit says cheaper and more affordable formulas are often excluded from prescription coverage, leaving patients with fewer options.
PBMs hold immense power in the drug marketplace because of their positioning between manufacturers and insurance companies. The PBMs will negotiate with the two to determine prices, as well as prescription coverage and participating pharmacies, according to the Commonwealth Fund, a foundation that studies the health care industry.
“In order to maintain their profit margins, the Manufacturer Defendants further raised their list prices in order to make larger and larger Manufacturer Payments to the PBM Defendants,” the complaint said.
The lawsuit claims that through these practices, manufacturers and PBMs have defrauded Delaware patients, and the state, which pays for many of these drugs on its state employee health plan, millions of dollars each year.
Attorneys are claiming violations of the Delaware Consumer Fraud Act, as well as the Delaware Deceptive Trade Practices Act, asking a judge to permanently block the companies from what they’ve described as “unfair and deceptive” practices.
The attorneys also requested the pharmaceutical companies pay restitution to the state and consumers who may have been impacted by the alleged price gouging.
State diabetes spending woes
The lawsuit said diabetes costs Delaware $1.1 billion each year, and that many rely on daily insulin injections, as well as the use of GLP-1s.
However, Delaware also began to cover commercial weight-loss drugs like Ozempic and Wegovy for state employees in 2023 as part of its state health plan. As claims for the drug have skyrocketed, taxpayers are footing the bill.
The lawsuit names Ozempic as one of the medications included in the alleged price-gouging scheme.
In 2021, the U.S. Food & Drug Administration approved a formulation of Ozempic – a drug that has long treated type 2 diabetes – for use in weight loss. The drug mimics a hormone that targets the appetite-regulating area of the brain, reducing a patient’s perceived hunger.
The drug also carries a monthly cost of about $1,000 without insurance.
The state will likely spend more than $134 million on drugs Ozempic and Wegovy for state employees in 2026 — more than double the amount spent the previous year, according to projections made by the State Employees Benefits Committee, which manages benefits for state workers.
The increase in spending mirrors a recent boom nationally in the popularity of the injectable weight-loss drugs made by the Danish manufacturer Novo Nordisk.
In 2023, the Delaware state employee health care plan began to cover most of those costs for weight-loss patients. Officials initially budgeted about $2 million in the 2024 fiscal year, but the actual price tag reached more than $14 million that year and has continued to grow since.
In 2029, state projections show taxpayers could spend as much as $216 million, according to documents referenced during a meeting of the State Employees Benefits Committee on Tuesday.