Unions file suit against drug middlemen, insulin makers on behalf of thousands, Ohio, elsewhere

Unions that provide health benefits to nearly a half-million workers — including many in Ohio — have filed nearly identical lawsuits against the biggest insulin makers and against the pharmacy middlemen that decide whether to cover the drugmakers’ products.

The suits accuse the huge companies of conspiring to raise the cost of the lifesaving medicines in order to boost their profits. 

A spokesman for PhRMA, an industry group representing the drugmakers, said his organization didn’t comment on lawsuits against individual companies. The Pharmaceutical Care Management Association, which represents the middlemen, didn’t immediately respond to requests for comment.

The Service Employees International Union on Jan. 10 sued in U.S. District Court in New Jersey on behalf of more than 400,000 members. Then last week, the Ohio Laborers District Council and the Ohio Contractors Insurance fund representing 81,000 workers filed a nearly identical suit in the same court. 

Both take the health companies to task, accusing them of using their dominance to unlawfully jack up prices on a product that many diabetics can’t survive without. The Federal Trade Commission in September filed a suit making similar allegations. 

Each of the middlemen being sued — CVS Caremark, OptumRx and Express Scripts — is part of a conglomerate that also owns a major health insurer — Aetna, UnitedHealth and Cigna, respectively. The pharmacy benefit managers, or PBMs, work on behalf of those and other insurers to facilitate drug claims and together, they control access to nearly 80% of the insured people in the United States.

The PBMs create pharmacy networks and determine reimbursements that many pharmacies say are so low they’re driving them out of business. But crucially for the labor suits against the companies, the PBMs also determine which drugs are covered and which get the most favorable treatment.

Meanwhile, the drugmakers being sued — Eli Lilly, Novo Nordisk and Sanofi — make more than 90% of the world’s insulin.

In order to get PBMs to cover their products, the insulin makers pay them rebates and fees. The FTC lawsuit said that starting around 2012, the PBMs started excluding some products from their lists of covered drugs altogether, instead of just favoring some over others by offering them to patients at lower copayments. That, the FTC suit said, touched off a race for rebates in which both middlemen and manufacturers saw benefit in favoring more expensive drugs over cheaper ones.

The SEIU suit said the results have been clear.

“Insulins, which today cost Manufacturers as little as $2 per vial to produce, and which were priced at $20 per vial in the 1990s, now range in price from $300 to over $700,” it said.

The suit added the system of legalized kickbacks from insulin makers is largely to blame.

“For insulin… to gain access to the PBMs’ (lists of covered drugs), the Manufacturers gain the PBMs’ approval by artificially inflating their list prices and then paying a significant, yet undisclosed, portion of that inflated price back to the PBMs…” it said. “The Manufacturer Payments bear a variety of dubious labels, including rebates, discounts, credits, inflation/price protection fees, and administrative fees. 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.”

All three corporations that own the big PBMs are “vertically integrated,” meaning they’re big players in various parts of the health sector. UnitedHealth Group, for example, owns the largest health insurer, the second-largest PBM, 10% of doctors practices and mail-order pharmacies.

But when it comes to drug transactions, CVS Health stands alone. CVS Caremark is the largest PBM, Aetna is the second-largest insurer, and it owns mail-order pharmacies as well. In addition, CVS Pharmacy is the largest brick-and-mortar chain in the country.

The SEIU lawsuit said the company is using its dominance in so many areas to profit off of the rising price of insulin.

“For transactions in which the PBM Defendants control the insurer, the PBM, and the pharmacy (e.g., CVS Caremark–Aetna–CVS Pharmacy) — these middlemen capture as much as half of the money spent on each insulin prescription (up from 25% in 2014), even though they contribute nothing to the innovation, development, manufacture, or production of the drugs,” it said.

The lawsuits claim violations of the Racketeer Influenced Corrupt Organizations Act, common-law fraud, unjust enrichment and civil conspiracy. They demand  restitution and damages.