T1DF president moves to establish a PBM/insurer litigation track in the insulin class action

On Friday, March 16, in New Jersey federal court, Julia Boss, president of the Type 1 Diabetes Defense Foundation, moved to establish a dual litigation track against PBMs and insurers in the insulin class action (In Re Insulin Pricing Litigation, Case No. 3:17-cv–00699-BRM-LHG). She thus challenged interim co-lead counsel Steve Berman and James Cecchi’s and Keller Rohrback’s coordinated attempt to prevent T1DF from implementing a dual-track litigation against PBMs and insurers, concurrent with the manufacturer-only consolidated complaint filed in December 2017. PBM rebating expert Larry Abrams recently wrote on his blog that Berman and Cecchi’s manufacturer-only consolidated complaint “makes no sense.” In light of increasing public knowledge and expert consensus, throughout 2017, regarding the impact of insurers’ failure to pass through rebates, Boss argued on Friday that pursuing a PBM/insurer track parallel to the manufacturer track is “critical to delivering immediate, tangible relief to the class.”

PBMs negotiate rebates, and they act as insurers’ agents in managing the pharmacy payment transactions for most insulin purchases that happen in America today. Now opening a PBM/insurer track in the insulin pricing litigation will thus allow the class to seek redress for the injury they suffer when insurers pocket large rebates from drug makers instead of using them to reduce the prices patients pay at the pharmacy counter. For analog insulins, the patient overpayment is now estimated at $200 or more per vial when a PBM directs her to pay list price.

Since March 2017, when T1DF filed the Boss case (Boss et al. v. CVS Health Corporation et al., Case No. 3:17-cv-01823-BRM-LHG), we have worked to add essential PBM/insurer claims to this litigation and to bring accurate related claims against drug makers. As T1DF explained in December 2017 to members of the U.S. Senate H.E.L.P. Committee, resolving the current cost-sharing crisis (where some patients now pay more than their insurers do for life-saving insulin) is crucial to solving the larger insulin pricing crisis. Once insurers no longer derive any financial benefit from inflated list prices and large rebates, competitive pressure can bring list prices down toward insurers’ much lower net costs, thus also benefiting the uninsured. 

Suing PBMs and insurers is a practical imperative. It is also legally sound: Insurers have discretionary control over rebate allocation, as demonstrated by UnitedHealth’s March 6, 2018, announcement that it will shift to full rebate pass-through. A discretionary function may give rise to an ERISA duty. A corporate function such as rebate negotiation may not. Since insurers and other third-party payers control what they do with the rebates manufacturers pay, engaging the PBM/insurer rebate-capture enterprise would involve the parties that are directly and proximately causing the plaintiffs’ injury. Only T1DF’s fact pattern can thus support ERISA allegations as the potential basis of a RICO scheme. 

Conveniently, insurers now own most of the largest PBMs, and PBMs would qualify as RICO defendants. Because RICO does not require that a defendant have “primary responsibility” over an enterprise's operations, a judge recently found that PBMs can be defendants in a RICO scheme where a PBM administered an insurer’s prescription drug benefit program. (Opinion and Order, Docket Number 156, page 40 in In re Express Scripts/Anthem ERISA Litigation, Case Number 1:16-cv-03399-ER.)

There is no place for ineffective sequential litigation when lives are at stake. In the ongoing opioid litigation, Judge Dan A. Polster has stressed the need “to do something meaningful to abate this crisis and to do it in 2018” (a new group of plaintiffs is also seeking to establish a PBM litigation track in the opioid case). It is equally imperative in the insulin pricing class action to move forward immediately, in 2018, against all manufacturer and PBM/insurer defendants, on parallel litigation tracks. This, Boss argued on Friday, is “the only morally defensible approach in the insulin pricing crisis.” By filing this motion for reconsideration of the consolidation order, she took a crucial step towards protecting the rights of people with diabetes to sue all actors—PBMs/insurers in addition to manufacturers—who have played a role in driving up the price of insulin.

About T1DF

Oregon-based 501(c)(3) nonprofit Type 1 Diabetes Defense Foundation is America's only legal advocacy organization dedicated to advancing equal rights and opportunities for Americans with type 1 and other forms of insulin dependent diabetes. T1DF accepts no funding from the pharmaceutical, medical device, pharmacy benefit management, or insurance industries or from any organization they fund. We support regulatory frameworks in which manufacturers compete directly on innovation and price to consumers and where drug channel actors can engage in open and efficient price arbitraging, without price discrimination and asymmetries of information.