A vial of insulin can cost as little as $2 to manufacture. Yet at the pharmacy counter, people with diabetes often end up paying hundreds for the life-saving medicine.

In the U.S., insulin is so expensive that many diabetics struggle to afford it even when covered by health plans, and are forced to ration their use – sometimes with deadly consequences. More than 3 million adults in California – over 10% of the state’s adult population – have been diagnosed with diabetes.

The California Attorney General filed a lawsuit against the nation’s largest insulin makers and pharmacy benefit managers (PBMs) for driving up the cost of the lifesaving drug through what he alleges is unlawful, unfair, and deceptive business practices in violation of California’s Unfair Competition Law.

The lawsuit alleges manufacturers Eli Lilly, Novo Nordisk, and Sanofi, and pharmacy benefit managers CVS Caremark, Express Scripts, and OptumRx, have leveraged their market power to overcharge patients. A 2021 report found that insulin costs roughly ten times more within the United States than outside it.

The three manufacturers named in the lawsuit produce over 90% of the global insulin supply and the three PBMs administer pharmacy benefits for roughly 80% of prescription claims managed. The lawsuit argues that because competition is highly limited in both their markets, these six companies are able to keep aggressively hiking the list price of insulin at the expense of many patients.

The lawsuit alleges that manufacturers and PBMs are complicit in overcharging for insulin. Manufacturers set the drug’s list price and PBMs then negotiate for rebates on behalf of health plans. Because rebates are based on a percentage of list price, manufacturers raise their list prices to provide the largest rebates they can offer PBMs.

PBMs are often paid for their services with a portion of the rebate they have negotiated. This creates an incentive to negotiate a drug with a higher rebate, not necessarily the lowest price for consumers. As a result, the drug becomes unaffordable for uninsured or underinsured patients, who have to pay the full price of insulin. High list prices also make insulin unaffordable for other patients as well, including those with high deductible health plans or coverage gaps.

And the California Attorney general is not going it alone. The California lawsuit comes on the heels of a similar case filed in December by Illinois Attorney General Kwame Raoul.

In a 125-page fraud lawsuit filed in Cook County Circuit Court, the office accused Eli Lilly, CVS Pharmacy, Novo Nordisk and several other pharmaceutical companies of artificially inflating the cost of insulin by over 1,000% since the late 1990s.

“Today, insulin has become the poster child for skyrocketing and inflated drug prices,” the suit states.The complaint singles out Eli Lilly in particular, noting the price for a dose of its analog insulin Humalog rose by 1,527% between 1997 and 2018.