The lawsuit alleges the companies engaged in an insulin pricing scheme leading to increased consumer prices of diabetes medication

PHILADELPHIA - The City of Philadelphia has filed a lawsuit today against several Pharmacy Benefit Managers (PBMs) and drug manufacturers, alleging that the companies have contributed to increased costs of insulin by intentionally engaging in a pricing scheme to drive up their profit margin, while misrepresenting to the public that they are working to decrease drug costs. Through this pricing scheme, the named PBMs have inflated diabetes drug costs and have caused the City, as the payor of benefits for its ~30,000 employees and their beneficiaries, to significantly overpay for diabetes medication.

Over the last twenty years, list prices of prescription drugs have sharply increased, despite the decrease in production costs. Insulin, which costs manufacturers as little as $2 to produce, has increased in price from around $20 per vial in the 1990s to between $300 to over $700 per vial today. In Philadelphia, where an estimated 14 percent of adults are living with diabetes, access to medications like insulin at affordable rates is crucial for public health.

The City alleges that the PBM defendants - CVS Caremark, Express Scripts, and OptumRx and manufacturer defendants Eli Lilly, Novo Nordisk, and Sanofi- have created and operated an Insulin Pricing Scheme by conspiring to raise list prices in exchange for favorable placement on formularies, also known as covered drug lists, to encourage the use of the manufacturers' drugs while giving lower-priced and generic medications less favorable placement. As a result, both the PBM and manufacturer defendants extracted a greater profit margin while significantly increasing market costs for insurance payors and consumers, hurting people by limiting availability of life-saving medications to diabetes patients.

The City of Philadelphia operates a self-funded healthcare insurance plan, is the payor for several Union-operated plans which bear the cost of insulin, and purchases insulin for its health centers. PBMs and their affiliated rebate aggregators play a significant role in establishing drug price for consumers, dictating the availability of the drug, and developing formularies to determine which medications are covered by payors, such as the City of Philadelphia, which are responsible for paying healthcare providers for covered services on behalf of their members.

The defendants' motive in creating and operating the Insulin Pricing Scheme was to leverage their control of the market for diabetes medications to exclude competition and maximize profits. As a result, PBM Defendants have gained control of more than 80% of drug benefits for more than 270 million Americans, while dramatically affecting patient affordability and access to insulins.

"No one should have to worry whether they will have to go without life-saving medication due to high costs," said Mayor Cherelle L. Parker. "As Mayor, I'm working to ensure that all residents of Philadelphia have access to what they need to live a healthy life, and we'll continue to hold the companies that are responsible for delivering health services to the highest standard."

"Instead of working to make essential drugs, like insulin, accessible to the people that need them, these companies operated a scheme to drive prices up at the expense of patients and insurers like the City of Philadelphia," said City Solicitor Renee Garcia. "These companies misled residents and siphoned from the pockets of the hardworking people of Philadelphia. Through this lawsuit, the City intends to hold the companies accountable for their fraudulent practices and recover damages for the falsely inflated costs it has paid through these companies."

"Philadelphia suffers from one of the highest rates of diabetes in the United States, especially in our Black and brown communities. Thanks to medications like insulin, Philadelphians suffering from diabetes can live a full, healthy life," said Department of Public Health Commissioner Palak Raval-Nelson. "Untreated, it can lead to disfigurement and death. When people cannot afford their insulin, they frequently go without or cut back, leading to disastrous consequences both for themselves and Philadelphia as a whole. Their lives are degraded, and we all pay the associated health costs."

Through this lawsuit, the City is seeking - among other relief - restitution, punitive and compensatory damages, and a declaratory order to prevent the Defendants from continuing to operate the Insulin Pricing Scheme at the cost of patients and insurance payors. The City is specifically asking the Court to determine that the Defendants have violated RICO and the Pennsylvania Deceptive and Unfair Trade Practices Act.

The City has filed its lawsuit as part of the Insulin Pricing Litigation, a national multidistrict litigation proceeding in the U.S. District Court for the District of New Jersey. More than 550 self-funded payers - including state and local governments, unions, and companies - have joined the litigation. The City is represented by Dilworth Paxson LLP; Baron & Budd; Levin, Papantonio, Rafferty, Proctor, Buchanan, O'Brien, Barr & Mougey; Kozyak Tropin & Throckmorton; and Seeger Weiss.

Read the full complaint here.