The Oceanside Unified School District filed a lawsuit in U.S. District Court for the District of New Jersey against pharmaceutical and pharmacy benefit companies. The lawsuit alleges that three pharmaceutical manufacturers – Eli Lily, Novo Nordisk, and Sanofi – and three pharmacy benefit managers – Express Scripts, CVS Caremark, and Optum RX – colluded to inflate the price of insulin paid by the district’s self-funded health plan.

The lawsuit describes a scheme in which pharmacy benefit managers (PBMs) secure billions of dollars in rebates from pharmaceutical manufacturers in exchange for including their insulin products on the PBMs’ list of approved drugs, known as formularies. Manufacturers then artificially raise their prices to pay for those rebates, shadowing each other in lockstep rather than competing to offer lower consumer prices.

The lawsuit points out that insulin is a century-old medication, and while its production costs have decreased with little need for new investments in innovation, research, or development, its price has surged by more than 1000 percent since 2003. This dramatic increase is attributed to a pricing strategy involving pharmaceutical manufacturers and pharmacy benefit managers.

One of the attorneys representing the School District said in a press release that “like many organizations with self-funded health plans, the Oceanside Unified School District should not be forced to pay inflated and unreasonable insulin prices created by a scheme between big pharma and benefits managers to engage in unfair and deceptive trade practices.

This lawsuit aims to address these practices under state unfair business laws and federal Racketeer Influenced and Corrupt Organization (RICO) laws.”

According to the story published by NBCSandiego.com, Oceanside Unified School District is one of more than 200 school districts joining in the lawsuits nationwide. The attorney representing it says they’re anticipating more districts from San Diego County to come forward.

However, some employers with self-insured pharmacy benefits plans may become targets of litigation themselves. A study published by The American Journal of Managed Care last July conducted a national survey of 110 employer drug benefit decision makers for organizations with self-insured pharmacy benefits.

The study found that nearly two-thirds of employers reported having rebate agreements with a rebate guarantee for specialty drugs.The person or entity most influential to rebate strategy decisions was often a benefits consultant (37.3%), a human resources/benefits leader (29.1%), or a benefits broker (21.8%). Employers with rebate guarantees ascribed a higher level of importance to guarantees when selecting a PBM than employers receiving rebates without a guarantee and those who do not receive rebates.

The study concluded by saying “As the public discourse on PBMs and drug rebates continues, it is important to recognize the role employer benefits consultants may play in perpetuating employer reliance on guaranteed rebate arrangements.”

Responding to this study, the Mahoney Group warned “the reliance on drug rebate guarantees poses an elevated fiduciary risk for employers, especially in light of the Consolidated Appropriations Act (CAA) of 2021, which imposes tighter fiduciary duties on sponsors of group health plans.”

Large, self-insured employers are also beginning to face lawsuits from their workers over claims of mismanaging health and pharmaceutical benefits and violating their fiduciary duties under the Employee Retirement Income Security Act. Employees at Johnson & Johnson earlier this year filed a federal class-action lawsuit against their New Jersey-based employer alleging that over the years they have paid millions of dollars more for drugs than they should have. Wells Fargo was also sued by employees in a July class action for allegedly paying inflated prices to its contracted pharmacy benefits manager, Express Scripts.

In a statement to NBC 7, Eli Lily said, in part: “These allegations are baseless. It is the school district and other health plans – not Lilly – who negotiate the terms of their rebate arrangements, including whether to pass those rebates on to people who take insulin.”

CVS Caremark also responded, saying, in part, “Pharmaceutical companies alone are responsible for the prices they set in the marketplace for the products they manufacture … we intend to vigorously defend against this baseless suit.”