Why Does Insulin Cost So Much? Big Pharma Isnt the Only Player Driving Prices
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Why Does Insulin Cost So Much? Big Pharma Isnt the Only Player Driving Prices
By
Arthur Allen
March 9, 2023
Why Does Insulin Cost So Much? Big Pharma Isnt the Only Player Driving PricesArthur AllenEli Lilly & Co.s announcement that it is slashing prices for its major insulin products could make life easier for some diabetes patients while easing pressure on Big Pharma.It also casts light on the profiteering methods of the drug industrys price mediators the pharmacy benefit managers, or PBMs at a time when Congress has shifted its focus to them.Insulin has come to embody the perversity of the U.S. health care system as list prices for the century-old drug, which 8.4 million Americans depend on for survival, quintupled over two decades to more than $300 for a single vial. Just because Lilly which sells about a third of the insulin in the United States lowers its price doesnt mean all patients will pay less, even in the long run.Lilly capped the out-of-pocket costs of its most popular insulins at $35 effective immediately, and said that later this year the list price of its authorized generic Lispro which is identical to Humalog, its bestselling brand-name insulin would fall to $25 a vial. This followed President Joe Bidens State of the Union address, and speeches since, in which he has blamed Big Pharma and its record profits for the incredible expense of insulin.David Ricks, Lilly CEO, in interviews March 1 called for other manufacturers to join his company in taking away the affordability challenges of diabetes.Even as Lilly promotes its altruism, this move may actually save it money, said health care analyst Sean Dickson. A federal rule taking effect next year penalizes companies that charge Medicaid high prices, especially for older, branded drugs. Lowering the list price of Humalog would allow Lilly to pay significantly less in rebates to government Medicaid programs that buy the drug.Drugmakers have long ceased to be the only, or even primary, villain of the insulin price scandal. The three companies that produce nearly all the insulin in this country Lilly, Sanofi, and Novo Nordisk posted stagnant or declining revenue from their versions of the drug in recent years despite the steadily climbing list prices they charged. Theyve even advised investors that they dont see insulin sales as a high-profit area anymore.But while Lilly is cutting the wholesale acquisition price, or list price, of its big-selling insulin drugs, will other parties at play cause this price to increase before it hits my pharmacy counter? asked Rebecca Kelly of Richmond, Kentucky, who has Type 1 diabetes and is an activist for lower drug prices.Those parties include gigantic pharmacy benefit managers owned by CVS Health and insurance giants UnitedHealthcare and Cigna that have aggressively played the insulin makers off one another in a way that mainly fattened their own accounts, as was revealed in a scathing 2021 Senate Finance Committee report.In theory, when pharmacy benefit managers negotiate contracts with drug manufacturers on behalf of insurers, they pass along savings to patients. In practice, while the hard-nosed bargaining may benefit the well-insured, it can hurt patients on fixed incomes and others less able to afford their insulin.To compete for access to insured patients, according to the report, the three insulin makers in the 2010s steadily increased rebates and fees paid to the powerful PBMs, which are owned by or allied with major insurers. This spurred drugmakers to keep raising their list prices, because the more they paid in rebates calculated as a percentage of list price the better their placement on insurance formularies, the complex lists of drugs insurers cover for patients.In other words, the more the insulin makers compete, the more consumers the unlucky ones, anyway may pay.Insulin is a commodity, so formulary position is everything, said David Kliff, who edits the website Diabetic Investor. Its like location in real estate.In 2018, Novo Nordisk, amid public rancor over rising insulin prices, considered a 50% cut, according to the report. But the companys board decided against it, noting that many in the supply chain will be negatively affected ($) and may retaliate. The company also feared that irate insurers might retaliate against Novos blockbuster diabetes and weight-loss drugs like Ozempic, which compete against Lillys Mounjaro.Sanofi and Novo Nordisk did not directly respond to Lillys price-dropping move but noted, in statements, that their discount programs already provide cheap insulin for those who need them. Millions of Americans have used these coupons, but patients like Kelly say they come with red tape and can be unreliable.Lilly declined to respond to a question about how its cut in list price might affect negotiations with insurers, which have come to expect big rebates on drugs with competitively high list prices.For example, Sanofi paid rebates worth 2% to 4% of its insulin list price in 2013, but 56% in 2018, according to the Senate report. Over that period, Sanofi tripled the price of its Lantus insulin to about $275 per vial. A 2018 study estimated it costs roughly $2 to $4 to produce a vial of analog insulin, the type used by most patients.Most of the insulin list price increases have gone to PBMs, the go-between companies. For example, Lilly earned about $25 for each Humalog injection pen from 2013 to 2018, while the list price increased from $57 to $106. Net prices have remained stable the past few years and insulin revenues actually declined last year, according to recent Sanofi and Lilly financial reports.Trade secrecy makes it hard to see which portions of the kickbacks end up as profit or savings for pharmacy benefit managers, insurers, pharmacies, or patients. But patients who are uninsured, are underinsured, or pay high deductibles can end up with whopping insulin bills, because their copayments are tied to the drugs list price.The system transfers financial resources from sick patients to healthy, premium-paying beneficiaries, the opposite of what insurance is supposed to do, Erin Trish, co-director of the University of Southern California Schaeffer Center for Health Policy & Economics, told a Senate Commerce Committee hearing Feb. 16.Medicare beneficiaries, for example, paid a collective $1 billion out-of-pocket for their insulin in 2020, more than four times what they paid in 2007, according to a KFF study. So did many others.Kelly, a 48-year-old personal trainer, got insulin through her husbands insurance but had to pay out-of-pocket until she met a $5,0
Thursday, March 9, 2023 at 10:00 am