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Why is insulin so expensive? California alleges manufacturers and pharmacy benefit managers are gaming the system

Here’s why pharmacy benefit managers CVS Caremark, Express Scripts, and Optum have a lawsuit on their hands over the price of insulin.

Let’s be real: Insulin is already expensive. A 2021 RAND report found that insulin costs approximately 10 times more for Americans than it does in other countries. So, we don’t need drug companies and pharmacy benefit managers (PBMs) making it more expensive.

But according to a recent lawsuit, they are.

This January, the state of California filed a lawsuit against three major manufacturers of insulin and three PBMs—CVS Caremark, Express Scripts, and Optum—for using their control of the market to overcharge patients. (On life-managing medication, nonetheless.)

Just how much of a market share do these guys have? From Fierce Healthcare: “The three drugmakers produce 90% of the global insulin supply, and the three PBMs manage 80% of prescription claims in the U.S., according to the lawsuit.”

Now, as a reminder, PBMs are the ones behind the curtain that handle prescription drug benefits on behalf of health plans. Although PBMs are considered to be third party affiliates, the three largest PBMs just happen to be owned by—you guessed it—the three largest insurers.

When insurers bring pharmacy operations under their larger corporate umbrella, it keeps more revenue streams in-house and allows more control as to who gets what medication and when—regardless of the clinician doing the prescribing.

And the more that the power of prescription drugs is in the hands of one (or a few) single entities, the more leverage they have in overcharging patients, who often have no choice but to pay more. Which they allegedly did in California, hence the massive lawsuit.

“The lawsuit argues both set of companies are complicit in the high cost of insulin as manufacturers are responsible for setting list prices and then PBMs negotiate rebated costs on behalf of health insurers,” states Fierce Healthcare. “Because rebates are based on list price, drugmakers will increase list prices to secure higher rebates.”

Not to mention the fact that insulin is a necessary drug for millions of Americans. In California alone, more than 10% of the adult population have diabetes. Insulin saves the lives of individuals with diabetes, and the more unaffordable and inaccessible it becomes, the more dangerous it is for patients.

It’s a sneaky system, isn’t it? The lawsuit calls it “unlawful, unfair, and deceptive practices.” And we couldn’t agree more.

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