Eli Lilly is defying California law with its insulin price hikes. A lawmaker calls its actions ‘offensive’

Seven months after a controversial California law took effect requiring advance notice of planned price increases for prescription drugs, many pharmaceutical companies appear to be in compliance.

But not Eli Lilly.

The Indianapolis-based drugmaker — one of the largest producers of insulin — has been under fire from consumer advocates for jacking up prices on its lifesaving diabetes medication. And the company has chosen not to follow the California law, which requires it not only to disclose but justify significant price hikes to drug purchasers.

Eli Lilly has informed customers that it will not be providing such notices until an industry lawsuit challenging the law’s constitutionality is resolved in court.

That has angered state Sen. Ed Hernandez (D-West Covina), who wrote the law. He reacted sharply when the company last week announced a new “helpline” to assist patients struggling to pay for its insulin — and asked California lawmakers to publicize it.

“I should promote to my constituents a company that’s breaking the law and raising prices?” Hernandez, who recently stepped down as chairman of the Senate Health Committee, said in an interview with California Healthline. “Insulin has been around for decades and there hasn’t been any new innovation. Why not just lower the price so we can all afford it?”

In a July 30 letter, Hernandez told Eli Lilly’s chief executive, David Ricks: “Your company’s egregious defiance of state law makes your promotion of a ‘Diabetes Solution Center’ even more disingenuous and offensive.”

Hernandez said Eli Lilly did not respond to his letter. The drugmaker did not respond to a request for comment from Kaiser Health News.

The numerous pharmaceutical manufacturers heeding the law apparently see no need to follow Eli Lilly’s lead. The California Public Employees’ Retirement System (CalPERS), one of the nation’s largest purchasers of prescription drugs, has received 17 notices under the law, said the agency’s spokeswoman, Stephanie Buck.

Under California’s law, drugmakers must notify insurers and some state agencies of any price increase that exceeds 16% over two years on medications with a wholesale cost of more than $40 for a course of therapy. They must explain the reasons for the increase. They also must alert healthcare purchasers and the state when they introduce drugs that cost $10,000 or more per year or per course of treatment. But drugmakers face no penalties if their prices are considered too high.

About one-quarter of the roughly 30 million Americans with diabetes rely on insulin, for which the average price nearly tripled from 2002 to 2013, according to the American Diabetes Assn. Nearly 40% of insulin users reported an increase over the last year in the amount they pay for the drug, according to the association’s 2018 insulin affordability survey.

Because of the high cost, many patients are using less insulin than prescribed, imperiling their health, according to a study from Yale University.

Eli Lilly and two other companies, Novo Nordisk and Sanofi, control nearly all of the U.S. insulin market. The three manufacturers are the targets of several state investigations and a lawsuit that accuses them of conspiring to drive insulin prices sharply higher.

Eli Lilly’s insulin price rose threefold during the 10 years that Alex Azar, President Trump’s Secretary of Health and Human Services, was a senior executive at the company — including serving as head of its U.S. operations.

Insulin, first developed more than 90 years ago, is not available in generic form.

California’s drug price transparency law, which took effect in January despite fierce opposition from the pharmaceutical industry, is intended to shine a spotlight on fast-rising prescription drug costs and the extraordinarily high prices of some medications.

The law’s sponsors hope the notifications will pressure drugmakers to keep prices down. It is possible that the law has influenced some manufacturers’ recent decisions to lower prices or withdraw planned increases for some drugs. The Trump administration’s recent pressure on drugmakers to lower their prices also appears to have played a role.

Others say the law’s effect is uncertain. However, “the more attention that is paid to it, the greater the demand for policy action,” said Michael Miller, policy director of Community Catalyst, a health advocacy group. “It’s still early days to say whether this is working or not.”

Some health experts say that the state’s law lacks teeth and that, like similar laws in other states, it may not do much to actually lower prices in the long run. Compared with the federal government, “states have relatively few tools to take on the drug industry,” Miller said. Nevada, Vermont, Oregon, Louisiana, New York and New Jersey also have drug price transparency laws.

The Pharmaceutical Research and Manufacturers of America lobbying group, known as PhRMA, sued California in federal court last December, challenging the law’s constitutionality. It argued that the California law violates both the commerce clause of the U.S. Constitution by seeking to regulate drug prices beyond state borders and the 1st Amendment by “compelling speech by manufacturers” who are required to justify their price increases.

California officials contend that the law is constitutional in part because it does not require drugmakers to lower prices. The case is pending.

PhRMA and another industry association dropped a similar lawsuit against drug transparency regulations in Nevada that specifically targeted diabetes drugs, after state officials weakened them by allowing drugmakers to protect certain information they give the state from public disclosure.

PhRMA also argues that California’s drug price transparency law unfairly “singles out drug manufacturers as the sole determinant of drug costs” and “will cause market distortions such as drug stockpiling.”

This law and others like it, said spokeswoman Priscilla VanderVeer, only “look at one part of the supply chain — the inventors and manufacturers of the medicines — and completely leave out those in the middle, and have no provisions in them that will help patients access or afford their medicines.”

Ostrov is a senior correspondent for Kaiser Health News, an editorially independent publication of the Kaiser Family Foundation.