RICHMOND, Va. (CN) -Virginia sued the nation's largest pharmacy benefit managers and insulin manufacturers Friday, claiming they work together to raise the price of insulin at the expense of patients. 

"Insulin is essential to life. For years, a group of powerful companies artificially drove up the cost of life-saving diabetes medication, enriching themselves while Virginians paid inflated prices just to survive," Virginia Attorney General Jason Miyares said in a statement. "That system operated without transparency, deceived Virginians, and put profits over patients for far too long. This office will defend consumers from these deceptive practices."

In the lawsuit filed in Richmond's state court, the commonwealth claims that pharmacy benefit managers and insulin manufacturers are selling insulin at high prices despite the decline in insulin manufacturing costs, in violation of the Virginia Consumer Protection Act. 

Virginia names pharmacy benefit managers, PBMs Express Scripts, CVS Caremark and OptumRx, along with insulin manufacturers Sanofi-Aventis and Novo Nordisk as defendants. The pharmacy benefit manager companies and the drug manufacturers did not immediately respond to a request for comment. 

Miyares asked the state court for restitution for consumers, maximum civil penalties and an injunction blocking the defendants from further violations of the consumer protection act. 

"Virginia diabetics have been overcharged millions of dollars a year in out-of-pocket costs as a result of the insulin pricing scheme," Miyares wrote in the suit. "For Virginia diabetics, the physical, emotional, and financial tolls of paying such excessive prices for diabetes medications is devastating. Unable to afford the drugs their doctors prescribe, diabetics in Virginia ration or under-dose their insulin; inject expired insulin; reuse needles; and starve themselves to control their blood sugars. This behavior is extremely dangerous and has led to serious complications or even death."

Pharmacy benefit managers are middlemen who manage prescription drug plan benefits for insurers through negotiating rebates and discounts with manufacturers and setting drug formularies. According to Miyares, drug formularies are tiered lists that determine which drugs are available, at what out-of-pocket costs and with what restrictions for insured consumers. The defendant pharmacy benefit managers control 80% of the market and also own three of the nation's largest pharmacies. 

"Given the PBMs' market power and the crucial role their standard formularies play in the pharmaceutical pricing chain, both defendant groups understand that the PBM defendants wield enormous control over drug prices and drug purchasing behavior," Miyares wrote in the complaint. "The unlawful and deceptive scheme at the root of this complaint - the insulin pricing scheme - was born from this mutual understanding."

Miyares claims the scheme works by requiring pharmacy benefit managers to inflate drug prices to gain formulary access. The manufacturers then pay an undisclosed amount of the cost back to the pharmacy benefit managers. 

"PBMs then grant preferred status on their standard formularies based upon the largest manufacturer payment and the highest inflated list price - which the PBMs know to be artificially-inflated, and which the PBMs insist that their payor clients and diabetics use as the basis for the price they pay for the at-issue drugs," Miyares wrote. "To make matters worse, rather than pass on these manufacturer payments to diabetics or their clients to lower the prices, the PBM defendants instead obfuscate and retain significant amounts of these manufacturer payments as profit."

The pharmacy benefit managers profit from exclusionary formularies that exclude one or more drugs used to treat the same condition, according to Miyares. 

"Manufacturer defendants are able to make these undisclosed manufacturer payments to buy preferred formulary position-which significantly increases their revenue and protects their market share-without sacrificing their profits," Miyares wrote. "For the PBM defendants - contrary to their representations - they make more money from diabetic drugs with higher list prices and higher manufacturer payment amounts."

According to Miyares, insulin costs manufacturers less than $2 to produce, yet the pharmaceutical industry charges upwards of $700 per prescription. Miyares pointed out the contrast between insulin's origins and its current price. 

"The discoverers sold the original patent for $1 to ensure that the medication would remain affordable," Miyares wrote. "Today, insulin has become the poster child for inflated drug prices." 

According to the Virginia Department of Health, 11% of Virginia's population, or roughly over 740,000 people, have diabetes, with millions more having prediabetes. The American Diabetes Association estimated in 2023 that the price of dealing with diabetes and its complications, including heart disease, amputations, blindness and kidney disease, is $8.4 million per year.

Source: Courthouse News Service