Health Law Daily Wrap Up, PRESCRIPTION DRUGS—D.N.J.: Illinois ICFA claim against insulin manufacturers survives motion to dismiss in all respects, (Sep 9, 2025)

By Justin Marcus Smith, J.D.

The manufacturers failed to show that a regulatory body affirmatively and specifically authorized their conduct.

Insulin manufacturers defending a state of Illinois action for alleged pricing misconduct under the Illinois Consumer Fraud Act (ICFA) failed to justify dismissal of the claims against them, held the federal district court in Newark, New Jersey, in an unpublished opinion. First, ICFA safe harbor did not apply to “active and direct” pricing conduct in the absence of statutory authorization. Second, Illinois satisfied the elements of consumer fraud under ICFA insofar as the state pleaded with particularity that the manufacturers worked with the pharmacy benefits managers (PBMs) to create a “hide-the-ball” kind of pricing system for insulin that caused Illinois diabetics to self-ration. The state’s unjust enrichment claim survived along with the ICFA claim. The court also thoroughly excluded any possibility that the state’s complaint was untimely. The court denied the manufacturers’ motion to dismiss in all respects (The State of Illinois v. Eli Lilly and Co., No. 2:23-cv-04242 (D.N.J. Sept. 5, 2025)).

Background. In this multi-district action about insulin pricing, the State of Illinois challenged the allegedly unfair and unconscionable insulin pricing practices of drug manufacturers Eli Lilly and Company, Sanofi-Aventis US LLC, and Novo Nordisk Inc. (collectively, the manufacturers) under the Illinois Consumer Fraud Act (ICFA). Illinois also sued PBMs including Evernorth Health, Inc.; various Express Scripts entities; CVS Health Corp., CVS Pharmacy, Inc., and Caremark Rx (collectively, PBM defendants).

Illinois alleged the manufacturer defendants worked in lockstep to raise the prices of insulin medications and then paid a significant “secret” manufacturer rebate back to the PBMs for preferential placement on PBM formularies. Illinois said this caused the state and its residents to overpay for insulin. The state attributed the alleged pricing scheme to insulin list prices becoming completely detached from actual prices and misrepresentative to the point of becoming unlawful under ICFA, 815 ILCS 505/1, et seq. The state also asserted a claim for unjust enrichment.

Over two years ago, in March 2023, the manufacturers filed a motion to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6). The state opposed dismissal, and the manufacturers filed a reply. However, before the Northern District of Illinois could decide the motion, the state, along with the States of Arkansas, Kansas, Mississippi, and Montana, filed a joint motion for transfer of their respective actions under 28 U.S.C. 1407 for consolidation. The Judicial Panel on Multidistrict Litigation (JPML) ordered transfer of this and the other matters to the District of New Jersey. In May 2024, the parties re-filed their respective briefings pursuant to case management order.

Safe harbor. The court held the manufacturers’ actions did not fall under ICFA’s safe harbor provision. The manufacturers argued ICFA contains an express safe harbor that barred the state’s consumer fraud claim. They said their reporting of the insulin list price, otherwise known as the “wholesale acquisition cost” (WAC), fell under ICFA safe harbor protecting actions or transactions authorized by laws administered by any regulatory body. The manufacturers said they accurately reported their list prices as legally prescribed by federal law while Illinois law authorized the disputed rebates.

The state countered that the manufacturers could not rely on the Medicare WAC definition as safe harbor because it is not a disclosure statute. Nor did ICFA safe harbor cover “active and direct” conduct, as here, the alleged publication of false list prices. The manufacturers had to show a regulatory body affirmatively and specifically authorized their conduct. The state also argued the Medicare WAC methodology was irrelevant.

The court concluded it could not find the manufacturers were acting as “specifically authorized” when they calculated their list prices. The court said it had previously remarked, during the course of this MDL and in another matter, that manufacturers, not federal regulations, generally determine drug list prices. The list prices generally do not include rebates.

Congress has not specified how pharmaceutical manufacturers should set the list price or WAC. Moreover, conduct has not been specifically authorized merely because it has not been specifically prohibited. The court accordingly denied the manufacturers’ motion to dismiss the State’s ICFA claims because the ICFA safe harbor provision did not apply here.

Deception. The court held the state sufficiently pleaded deception at this stage of the litigation. The manufacturers argued the court should dismiss the state’s ICFA claim because the state failed to allege deceptive list pricing. The manufacturers asserted their list prices could not be deceptive for four reasons: (1) the state never alleged how the list prices would have misled a reasonable consumer; (2) requiring the manufacturers to disclose more information about list prices and profits would be contrary to settled Illinois law; (3) ICFA does not require the manufacturers to say more about the relationship between list price and rebates because ICFA liability only attaches to material concealment of knowledge that is almost exclusive; (4) the state failed to plead deception with the required R. 9(b) specificity.

The state responded it pleaded the elements of ICFA deception sufficiently and congruent with R. 9(b) such that the only remaining question, whether the list prices were deceptive, was something only a jury could decide.

The court held the state pleaded with sufficient particularity the who, what, when, where, and how of the alleged deception under R. 9(b). The state also plausibly pleaded that the manufacturer’s involvement in the alleged insulin pricing scheme was a deceptive act or practice within the meaning of ICFA. There was nothing implausible about the state’s allegations that the manufacturers concealed artificially inflated list prices to gain PBM formulary access, thereby causing the state and others to unknowingly pay a substantial part of their diabetic drug costs based on false list prices.

The manufacturers contended no reasonable consumer could have been misled where the manufacturers had reported list prices in a way that complied with the federal government’s definition of list price. However, the state particularly pleaded the manufacturers worked with the PBMs to create a “hide-the-ball” kind of system where the consideration exchanged between them, and not shared with payors, was labeled and relabeled. ICFA applies to omission of material information in the conduct of trade or commerce, as the state pleaded adequately here. Reliance was a fact-intensive question that could not be resolved on a motion to dismiss. The court accordingly denied the manufacturers’ motion to dismiss the state ICFA deception claim.

Unfair conduct. The court concluded the state alleged the manufacturers actions were at least within a penumbra of some established concept of unfairness. The manufacturers contended the state did not plead unfair conduct adequately because (1) it failed to allege a violation of public policy; (2) it did not plead immoral, unethical, oppressive, or unscrupulous pricing; and (3) it did not allege a “substantial injury” to consumers. The state responded it sufficiently alleged unfair conduct under Illinois standards.

The court noted a practice offends public policy if it violates a standard of conduct embodied in a statute, and here, the state alleged the manufacturers violated public policy in multiple ways: (1) Illinois diabetics should not be priced-out of life saving medications; (2) Claims of actual savings should be based on meaningful list prices. The state also contended the FTC Act bars fictitious pricing as a “deceptive practice.”

The manufacturers responded the state only recited the ICFA bar on deceptive conduct in a way that did not support a discrete claim for “unfairness.” They also argued they provided the insulin, a valuable good, and the Illinois legislature had only imposed price controls on insurers, not drug manufacturers.

The court found the state sufficiently pleaded the manufacturers’ conduct violated public policy. The manufacturers were correct that Illinois does not regulate manufacturers or their prices, but that did not negate the underlying public policy of the statute regulating insurers, and the state pleaded a diabetes public health crisis. The state sufficiently pleaded the manufacturers participated in a scheme to cause insulin prices to skyrocket, thereby placing diabetics under duress that included self-rationing.

The manufacturers further contended the state failed to plead immoral, unethical, oppressive, or unscrupulous practices by the health industry or that diabetics had no choice about insulin prices. The state agreed a high price, alone, would not be enough, but it said it alleged other facts about the necessity of insulin and the manufacturers here were responsible for about 99% of the insulin supply.

The court reasoned that conduct would be oppressive if it left customers with no meaningful choice, and it was hard to see otherwise taking the state’s allegations here as true on a motion to dismiss. The court held the state sufficiently alleged immoral, unethical, oppressive, and unscrupulous conduct.

Substantial injury. The court also found the state alleged substantial consumer injury through reduced competition that amounted to a claim for unfairness under ICFA. The manufacturers argued they provided substantial benefit, or countervailing benefit, by ensuring insulin placement on PBM formularies. They also contended the state admitted it lacked visibility into how PBMs actually used rebates. However, in the court’s view, it was apparent that the alleged pricing scheme posited a facially noncompetitive market that negated the supposed countervailing benefits. Significantly, the state alleged that a lack of competition hurt diabetics by not only driving up prices, denying choice, and causing self-rationing, but also by hindering further research and development. The court denied the manufacturers’ motion to dismiss the state’s unfairness claim.

Unjust enrichment. The court found the state adequately pleaded the manufacturers procured a benefit through wrongful conduct. The manufacturers argued for dismissal of the state’s unjust enrichment claim because it was derivative of the state’s ICFA claim. They also argued the unjust enrichment claim failed on the merits because (1) the state admitted it had contracts with some PBMs in this dispute and (2) nothing in the complaint alleged that the manufacturer received any benefit from Illinois or Illinois consumers. The state responded it adequately stated an ICFA claim that was not barred by any relevant contract because the manufacturers admitted they did not have a contractual relationship with any Illinois consumers, and the complaint sufficiently alleged conferral of benefits on the manufacturers.

The court acknowledged unjust enrichment is not a separate cause of action under Illinois law, but the court had already determined the ICFA claim survived dismissal, and by extension, so did unjust enrichment. The state pleaded the elements. There was no express contract between the state and the manufacturers, and the state pleaded conferral of a benefit in the form of retained revenue from the sale of insulin during the alleged pricing scheme. The court accordingly denied the manufacturers’ motion to dismiss the state’s claim for unjust enrichment.

Timeliness. Last, the court held the claims were not time-barred. The manufacturers argued the state’s claims were time-barred under a five year limitations period. The state countered there was no limitations period for state ICFA claim. The court found the date of constructive notice was January 14, 2021, the date the Senate Finance Committee released the results of its bipartisan investigation into the rising price of insulin. The state filed this matter on December 2, 2022, within any five-year limitations period. The court accordingly denied the manufacturers’ motion to dismiss the state’s claims as untimely.

The case is No. 2:23-cv-04242.

Judge: Martinotti, B.

Attorneys: David Francis Buysse, Office of the Attorney General of Illinois, for State of Illinois. Andrew A. Kassof (Kirkland & Ellis LLP) for Eli Lilly and Co. Andrew David Yaphe (Davis Polk & Wardwell LLP) for Novo Nordisk Inc. Jordan Melissa Matthews (Jones Day) for Sanofi-Aventis U.S. L.L.C. Elizabeth Brooke Herrington (Morgan, Lewis & Bockius LLP) for Evernorth Health Inc. and Express Scripts Inc.

Companies: State of Illinois; Eli Lilly and Co.; Novo Nordisk Inc.; Sanofi-Aventis U.S. L.L.C.; Evernorth Health Inc.; Express Scripts Inc.

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