With the price of a crucial diabetes drug skyrocketing, at least fivestates and a federal prosecutor are demanding information frominsulin manufacturers and the pharmaceutical industry’s financialmiddlemen, seeking answers about their business relationships andthe soaring price of diabetes drugs.

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Attorneys general in Washington, Minnesota and New Mexico issuedcivil investigative demands this year and are sharinginformation with Florida and California, according to variouscorporate financialfilings.

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Related: 2 main reasons drug costs are expected to rise in2018

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Insulin makers Eli Lilly, Novo Nordisk, Sanofi and top pharmacybenefit manager CVS Health are targets in the state investigations.Several of the financial filings note that the state and federalprosecutors want information regarding specific insulins forspecific dates in relation to “trade practices.”

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They appear to be looking into potentially anti-competitivebusiness dealings that critics have leveled at this more than$20 billion niche market of the pharmaceutical industry,according to analysts and court filings reviewed by Kaiser HealthNews. These include whether drugmakers and middlemen in the supplychain have allowed prices to escalate in order to increase their profits.

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At the same time, prominent class-action lawyers are bringingsuits on behalf of patients. Steve Berman, an attorney best knownfor winning a multibillion-dollar settlement from the tobaccoindustry, alleged collusion and said it was time to break up the“insulin racket.”

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The price of insulin — a lifesaving drug — has reached recordhighs as Eli Lilly, Novo Nordisk and Sanofi raised prices more than240 percent over the past decade to often over $300 a vial today,with price rises frequently in lockstep, according to informationtechnology firm Connecture.

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Those prices take a toll on patients like 21-year-old HunterSego, who needs about four vials a month for his Type 1 diabetes.When he went to the pharmacy last year, the drug was no longer on apreferred tier and the price had risen to $487 a vial, comparedwith about $200 from a few years ago. Insurance companies oftentake drugs off a preferred list in response to pharmaceutical pricerises to discourage overuse, a business strategy that leavespatients stuck in the middle.

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“I was absolutely floored,” Sego said.

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Kaiser Health News, a nonprofit health newsroom whosestories appear in news outlets nationwide, is an editoriallyindependent part of the Kaiser FamilyFoundation.

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The DePauw University junior began skipping doses, knowing thathis parents were paying cash until they met their health plan’shigh deductible. Sego lost weight and felt lethargic, and hisgrades suffered. Sego’s college football coach finally called hismother to ask what was going on.

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“I have to watch him like a hawk because I know he is trying tosave money,” said his mother, Kathy Sego.

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Last year, before the states took action, the U.S. Attorney’sOffice for the Southern District of New York, one of the nation’smost powerful federal prosecutors, issued civil investigativedemands to Eli Lilly, Novo Nordisk, Sanofi and Express Scripts,according to financial filings.

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“There is enough concern about competition in the drug industryto have galvanized forces at the state and federal level to createspecific pictures of abuse,” said Diana Moss, president of theAmerican Antitrust Institute after hearing of the investigativedemands.

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Attorneys general use the legally binding demands to collectevidence, such as documents and emails, and testimony to help“piece together any number of stories about potential competitiveharm,” Moss said.

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Insulin prices have risen at regular intervals for years,Connecture’s research shows, but the trend has become morepronounced in the past few years. For example, in the final monthsof 2007, Sanofi’s Lantus cost $88.20 per vial and Novo Nordisk’sLevemir $90.30 a vial. Today, after increasing in tandem over theyears, Lantus costs $307.20 per vial and Levemir runs $322.80 forthe same amount, based on average wholesale prices.

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The increases “don’t all happen on the same exact day, but theyhappen pretty close to each other on the calendar,” said Jim Yocum,senior vice president of federal contracts with Connecture. “Idon’t know of any other industry where such regular price increaseshave been the norm.”

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The United States is one of the few developed countries withoutregulations on prescription drug pricing. So, one of the few toolsavailable for the government to curb price increases is to showfraudulent or anti-competitive practices.

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Late last year, Sen. Bernie Sanders (I-Vt.) and Rep. ElijahCummings (D-Md.) asked the Department of Justice and the Federal TradeCommission to investigate, noting “the potential coordination bythese drug makers may not simply be a case of ‘shadow pricing,’ butmay indicate possible collusion.”

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Spokespeople for Eli Lilly, Novo Nordisk and Sanofi said inseparate statements that each company sets prices independently.Novo Nordisk’s Ken Inchausti added: “We monitor market dynamics andour competitors’ pricing through public and subscription databasesthat track list prices.”

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Each of the pharmaceutical companies said it is committed toensuring patients have access to medicine. Novo Nordisk, whichmakes Novolog and Levemir, also pledged to limit price increases. Eli Lilly has announced adiscounted insulin program.

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State and federal prosecutors often begin investigations becauseof consumer and whistleblower complaints, several civil andantitrust attorneys said, and gripes about rising insulin priceshave been roiling the online diabetes community for the past fewyears.

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Indeed, James Tierney, formerattorney general of Maine and a lecturer at Harvard Law School,said the civil investigative demands are not uncommon and thecompanies “may be totally innocent.”

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Continued on next page>>>

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Kaiser Health News, a nonprofit health newsroom whosestories appear in news outlets nationwide, is an editoriallyindependent part of the Kaiser Family Foundation.

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It’s difficult to know exactly what the state and federalprosecutors are looking for, though, Tierney said. Theinvestigations are often sealed from the public, revealed primarilywhen public companies acknowledge receiving them in their financialfilings.

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Nearly all of the federal and state officials declined toconfirm or deny the investigations, except Washington and NewMexico officials, who confirmed the existence of the civilinvestigative demands.

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Still, clues about the insulin investigations can be piecedtogether from corporate filings. They focus on issues like pricing and business relationships. Several ask for information aboutspecific insulins regarding certain years.

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In January — at about the same time states began filing civildemands — the first of a handful of potential class-action lawsuits thatwere national in scope were filed.

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A U.S. district judge combined Berman’s suit and several othernational cases last month, adding the pharmacy benefit managers, orPBMs (Express Scripts, CVS and UnitedHealth Group with its divisionOptumRx) as defendants.

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Berman and the other attorneys declined interview requests. Butattorneys at Keller Rohrback, one of the firms whose case wasrolled into Berman’s, explained the reason for adding the PBMs ina May letter to the court: “The PBM defendants play a centralrole in the scheme — selling formulary access in exchange for‘rebates’ or other payments” from the manufacturers.

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Rebates, or negotiated discounts, occur when a manufacturer setsa list price and then agrees to pass money back to the PBMs inreturn for something, generally a spot on the formulary thatdetermines which drugs can be purchased.

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The PBMs say their negotiations ensure drugs are affordable, andtwo of them pointed fingers back at the drugmakers.

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Express Scripts spokesman Brian Henry declined to comment on theinvestigations or lawsuit but stated in an email that “if priceshave gone up in lockstep, that is because they have been priced bythe drug makers in lockstep.” UnitedHealth did not respond toquestions. And CVS Health called the lawsuit without merit.

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CVS spokesman Michael DeAngelis said in an email:“Pharmaceutical companies alone are responsible for the prices theyset in the marketplace for the products they manufacture. Nothingin our agreements prevents drug manufacturers from lowering theprices of their insulin products and we would welcome such anaction.”

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Such lawsuits generally take years to resolve. In the meantime,the suits and the investigations may provide answers to the demandsof lawmakers like Sen. Amy Klobuchar (D-Minn.), who sent a letterto drugmakers in July asking for an explanation for the “extremeprice increases.”

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Kaiser Health News, a nonprofit health newsroom whosestories appear in news outlets nationwide, is an editoriallyindependent part of the Kaiser FamilyFoundation. KHN’s coverage of prescription drugdevelopment, costs and pricing is supported in part by the Laura and John ArnoldFoundation.

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