Governments Suing Pharmacy Benefit Managers Over Insulin Prices Have Long Benefited From Their Rebates

Several state and local governments have filed lawsuits against drug companies and pharmacy benefit managers (PBMs), accusing them of inflating insulin prices.

While these entities claim they’re fighting for patients, they’ve quietly benefitted from the very system they now condemn.

For years, these states and cities have demanded a share of the rebates PBMs secure when negotiating which drugs are covered, profiting from a practice they’re now attempting to challenge.

PBMs have become powerful gatekeepers in the prescription drug market, dictating which medications are covered and at what cost.

The same government plaintiffs currently suing have long benefited from these arrangements, the Forbes report notes.

Drug makers and patients, meanwhile, bear the brunt of this dysfunctional system. The lawsuits primarily argue that insulin prices are unreasonably high and blame drug companies and PBMs.

However, this argument doesn’t hold up under scrutiny, as insulin prices have been steadily declining. For instance, Eli Lilly And Co LLY reported that the net price for its Humalog insulin dropped from $62 per vial in 2018 to $26 in 2023, with its biosimilar Lispro costing just $17 per vial last year.

Last year, Sanofi SA SNY and Novo Nordisk A/S NVO slashed the prices of their insulin products.

The report further noted that the more credible accusation in these lawsuits is that PBMs drive up patient costs by demanding rebates and fees from pharmaceutical companies. These payments are tied to a drug’s list price, incentivizing PBMs to favor higher-priced medications, where more significant rebates can be negotiated. Unfortunately, these savings don’t reach patients; instead, PBMs and the health plans that hire them pocket the rebates.

Ironically, several of the states and local governments now suing PBMs insisted that their PBMs pass along rebates for drugs taken by their beneficiaries.

Yet, these health plans chose not to share those savings, highlighting their complicity in the problem. Between 2017 and 2019, PBM profits grew by 12%, reaching $28 billion, the report highlighted. Today, rebates and fees account for 42% of every dollar spent on brand-name drugs, totaling $72 billion in 2022.

Patients remain sidelined in this scheme, as their cost-sharing is based on the list price, not the discounted rate.

Consequently, PBMs and the health plans that employ them profit twice: from substantial rebates collected from drug makers and artificially inflated copays imposed on patients.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Image By Natalia Varlei On Shutterstock

Read Next:

• FDA Classifies Recall Of Inari Medical’s Large Vessel Clot Removal Catheter Device As Most Serious.