Written by: Sam Orlando
ROANOKE, VIRGINIA - In a groundbreaking legal action, the City of Roanoke, Virginia, and the Roanoke City School Board have filed a federal lawsuit against several Fortune 500 companies, accusing them of engaging in criminal behavior under the Racketeer Influenced and Corrupt Organizations Act (RICO). Among the defendants named in the lawsuit are CVS Health Corporation, Eli Lilly and Company, Novo Nordisk Inc., Sanofi-Aventis U.S. LLC, and others.
Background of the Lawsuit
The lawsuit underscores the soaring cost of diabetes medications over the past two decades, with prices increasing over 10-fold while the average cost of consumer goods and services rose only 1.75-fold. A representative from the City of Roanoke remarked, "These price hikes have been engineered to maximize profits, placing an undue burden on payors, including the City of Roanoke."
Insulin Pricing Scheme
The Insulin Pricing Scheme, as detailed in the lawsuit, involves the Manufacturers setting artificially high list prices for insulin medications. CVS Caremark and other PBMs allegedly grant formulary status to these medications based on these inflated prices, receiving substantial undisclosed payments from the Manufacturers in return. In essence, the lawsuit claims that PBMs intentionally incentivize Manufacturers to inflate list prices, resulting in higher demand and profits for both parties.
Serious Allegations - Allegations of Mail Fraud and Wire Fraud
At the heart of the accusations are allegations of mail fraud and wire fraud committed by the defendants. The complaint contends that the Manufacturers and PBMs engaged in a systematic scheme to defraud payors, including the City of Roanoke, by knowingly and willfully manipulating insulin prices. The use of the mail and wire services is alleged to have been instrumental in executing the Insulin Pricing Scheme.
Alleged Conspiracy under RICO
The lawsuit invokes the Racketeer Influenced and Corrupt Organizations Act (RICO), alleging a complex and illicit conspiracy among the Manufacturers and PBMs. The defendants are accused of conspiring to artificially inflate insulin prices, with PBMs actively incentivizing Manufacturers to increase list prices. This alleged collusion, referred to as the "Insulin Pricing Scheme," is posited as a deliberate effort to deceive payors and maximize profits at the expense of those dependent on life-sustaining insulin medications.
Complex Legal Action to Follow
This lawsuit represents a significant government action against major corporations accused of engaging in criminal behavior. The outcome of this litigation could set precedents for the pharmaceutical industry, influencing the pricing of essential medications and shaping healthcare policies. The defendants have not yet publicly responded to the allegations in the complaint. The case, filed with the civil action number 7:23cv-00816, is set to proceed in the United States District Court for the Western District of Virginia, Roanoke Division.