Lawsuit says Novo, OptumRx 'mutually benefited' from rebate scheme, while consumers paid the price

Novo Nordisk
A new lawsuit claims Danish drugmaker Novo Nordisk and pharmacy benefit manager OptumRx figured out a scheme in which Novo raised the price of diabetes med Victoza to subisdize profitable rebates to the PBM.

Novo Nordisk is the target, along with pharmacy benefit manager OptumRx, of a proposed class action lawsuit claiming a conspiracy to raise the price of diabetes medicines so that the drugmaker could pay rebates to the PBM, with U.S. consumers getting the sharp end of the stick in the deal.

The action, filed this week in federal court in California on behalf of diabetes patient Ruth Johnson, claims that Danish drugmaker Novo artificially inflated the price of injected Type 2 diabetes med Victoza in order to subsidize kickbacks to OptumRx.  

The 65-page lawsuit claims that the practice was a big reason the price of Victoza more than doubled between 2009 and 2017, from just about $400 a package to more than $900. Johnson, as a Medicare patient, has had to shoulder a growing portion of that cost, the suit points out.

In an emailed statement Friday, Ken Inchausti, director, reputation & media relations for Novo said, "We’re aware of the complaint and disagree with the allegations. We’re prepared to vigorously defend the company in this matter. At Novo Nordisk, we have a longstanding commitment to supporting patients’ access to our medicines. Since this is an ongoing litigation, we can’t comment further."

OptumRx has not responded to a request for a comment by publication time. 

One reason for the dramatic increase in the cost of Victoza and other diabetes meds, the suit claims, is that PBMs and drugmakers have figured out how to “game the system for their mutual benefit.” PBMs demand rebates from drugmakers if they want to get a favorable position on their drug formularies and drugmakers raise their prices to cover the rebates while maintaining their margins.

The lawsuit says PBMs claim to be helping patients by getting rebates from drugmakers, and therefore lowering the costs of medications, but contends they are not telling the whole truth because the rebates are secret and PBMs don’t divulge how much of the rebates they pocket.

“This rebate scheme creates the best of both worlds for the Defendants, at the expense of consumers like Plaintiff Johnson,” the lawsuit claims.

RELATED: Sanofi, Novo and Lilly face class action over 'astounding' insulin price hikes

This lawsuit is similar to some others that have been filed in recent months. In March, a federal lawsuit was filed in New Jersey against top insulin makers Novo, Sanofi and Eli Lilly as well as PBMs OptumRX, CVS and Express Scripts. It alleges the drugmakers significantly ratcheted up list prices on insulins, raising them in lockstep with one another, then shared the additional revenues with the PBMs through rebates.

RELATED: Amid insulin market scrutiny, Novo faces class action alleging 'collusive price fixing'

Before that, Novo was sued by a Pennsylvania county's public retirement system over its investment in Novo. The suit alleged the company “reported materially false and misleading earnings and forecasts” that were “inflated” by price fixing.

The growing practice of PBMs demanding rebates and drugmakers admittedly raising drug prices to pay them has become a flashpoint between PBMs and drugmakers in the growing controversy over rising drug prices. Tired of taking all the heat over high drug prices, drugmakers last year began pointing the finger at PBMs, blaming the demanded rebates for part of the rise in drug prices, which they consider a dirty industry secret.

Related: Insulin costs are way up, but drugmakers say PBMs are collecting the loot

The California lawsuit filed this week claimed that PBMs, in fact, use the rebates to “make outsize profits” by using them to exploit the complex prescription distribution system in the U.S. “While the role of PBMs in the supply chain is well known, the size of the rebates and other fees they extract from companies for formulary placement, and the portion of these payments they pocket (the “PBM Kickbacks”) are carefully guarded secrets,” it claims.

Oregon Sen. Ron Wyden picked up on the fight and has introduced a bill that would “lift the veil of secrecy” around PBMs and their finances. Dubbed the C-THRU Act, Wyden's legislation would first require PBMs to report the total amount of rebates they collect from drugmakers and then share of that amount returned to health plans. After two years, the bill would mandate that PBMs return a minimum proportion of their drug rebates to insurers to help alleviate patient expenses.