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Judge sends California’s suit over insulin prices back for a rewrite

The judge sustained two separate motions for demurrer, based on the argument that the statute of limitations had lapsed.

LOS ANGELES (CN) — A Superior Court Judge, on Tuesday, told lawyers for the state of California that they would have to revise their lawsuit challenging insulin drug prices, sustaining two motions for demurrer filed by drug makers and pharmacy benefit managers.

Last year, California Attorney General Rob Bonta sued the nation’s largest insulin makers — Eli Lilly, Novo Nordisk and Sanofi — for driving up the cost of insulin, a drug which enables diabetics to regulate their blood sugar levels. The suit said the drugmakers, responsible for 92% of all insulin sold in the world, had established an “oligopoly,” cornering the market and artificially inflating prices.

The suit was also aimed at pharmacy benefit managers CVS Caremark, Express Scripts and OptumRx, entities that administer prescription drug programs, which insurance companies, by law, must cover. The companies negotiate with drug makers and have outsized influence over which drugs get covered and which don’t. They often receive a rebate from the drug makers after a drug is sold to a consumer. Those rebates are secretly negotiated, and have the effect of artificially raising the price of the drug for some consumers, including those without insurance.

“Inexplicably, list prices for insulin have risen several hundred percent over the last two decades,” the state said in its complaint. “Today, California diabetics who require insulin to survive and who are exposed to insulin’s full price, such as uninsured consumers and consumers with high deductible insurance plans, pay thousands of dollars per year for insulin.”

A few months after the suit was filed, Eil Lilly announced that it was cutting the prices for some older versions of insulin. It also developed a plan to cap monthly out-of-pocket costs for people who need the drug and who aren’t on Medicare at $35 — something President Joe Biden had advocated for. But the price of insulin remains a hot-button political issue.

The drug makers, in their demurrer, argued that their similarity in drug pricing was not collusion, but a form of “price parallelism,” akin to how gas stations located across the street from one another inevitably end up with similar prices.

“Price parallelism is not illegal,” Novo Nordisk attorney Neal Potischman told the judge. “Simple price-matching is not sufficient to state an antitrust claim.”

California’s suit is not technically an antitrust claim; nor is it a suit over price gouging. Rather, the suit is based on the unfair competition law, which prohibits a person or business from engaging in “any unlawful, unfair or fraudulent business act or practice.” The drug makers, the state said in its complaint, “raised the list prices of analog insulins in lockstep with each other.” That behavior, said Deputy Attorney General Darcie Tilly, “has same effect as an antitrust violation.”

As for the claims made against the pharmacy benefit managers, or PBMs, Tilly said it was an unfair business practice “for discounts go to PBMs and not consumers.” In other words, the practice of giving rebates to large PBMs is an effective tax on poor, uninsured people who need insulin to survive.

Though Superior Court Judge David Cunningham entertained arguments on a variety of legal grounds throughout the roughly three-hour hearing, he based his decision to sustain both demurrers on the statute of limitations — California, he agreed, had waited too long to sue.

Tilly argued that both the drug makers and the pharmacies were engaged in a “price conspiracy” with each other, and that each and every sale of allegedly overpriced insulin reset the statute of limitations clock. But Alex Gazikas, the attorney representing the PBMs, argued that the practice of drug makers giving rebates to pharmacies has already been expressly approved by the California State Legislature.

“The complaint does not allege facts in support of collusion or a conspiracy beyond what the Legislature allowed,” Gazikas said.

Judge Cunningham agreed to sustain both demurrers, but gave California’s lawyers 45 days to amend their complaint. They will attempt to bolster the argument that they are not barred from suing by the statute of limitations. There is also a chance that a Ninth Circuit ruling will send the case to federal court.

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Categories / Health, Regional

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