Insulin
Rachel Balick
The conventional wisdom used to be that high—and continuously rising—prices for insulin were the mandate of drug manufacturers. The inventors of insulin intended for the lifesaving medication to be easily accessible, selling their patent for a dollar. Now patients with type 1 diabetes are dying because they’ve rationed insulin due to cost. How can insulin manufacturers—there’s only three of them serving the American market—justify cost increases that put lives on the line?
The system is the problem
The truth is that the real picture is far more complicated, just like the convoluted list price–rebate–reimbursement puzzle, where each player can point the finger at the other when asked to justify massive increases in insulin costs. According to Cefalu and colleagues in a December 2018 article in Diabetes Care, insulin prices tripled just between 2002 and 2013 and 15% to 17% every year between 2012 and 2016. The cost pharmacies paid to purchase insulin rose by similar rates.
No one player is solely responsible—rather, the blame lies in the complexity of the insulin supply chain and the drug supply chain in general.
How it works
There are several major stops on the U.S. insulin supply chain, starting with the manufacturer, then the PBM, the health plan or insurance company, the drug wholesaler, the pharmacy, and finally the patient. But the connection between them isn’t a straight line, and multiple transactions among the stakeholders factor into a patient’s cost-sharing burden. A dense web of prices, rebates, and fees negotiated among the stakeholders has been spun by the time the patient reaches the pharmacy counter, and that web’s design determines what the patient pays.
Several states—most recently Connecticut, Delaware, and New Hampshire—have taken steps to cap copays. But insulin affordability advocates worry that state measures don’t go far enough, and they may say federal governmental intervention is the only way to ensure patients retain access to the lifesaving drug.
The reason for the problem and how to fix it
S. Vincent Rajkumar, MD, a hematologist and professor of medicine at the Mayo Clinic in Rochester, MN, submitted commentary to the January 1, 2020, issue of Mayo Clinic Proceedings breaking down the multiple factors in the high cost of insulin. These factors perform in concert to make the tangled insulin price problem so challenging to unravel. Rajkumar also posed a set of possible solutions to ensure insulin becomes affordable for the patients whose lives depend on it.
The problems
1. Vulnerable population who is willing to pay high costs to have access to a lifesaving drug
Rajkumar characterized this as the number one contributor to high insulin prices. “The desperate need for a lifesaving product allows insulin to be priced at high levels because it is not a luxury item that one can forego,” he wrote. “The manufacturers of insulin know that patients who need it will spend whatever it takes to acquire it, regardless of price. It is a matter of life and death.”
2. Virtual monopoly/oligopoly
There are three insulin manufacturers serving the U.S. market: Eli Lilly, Novo Nordisk, and Sanofi-Aventis. Although insulins from other manufacturers have recently become available, the three companies still control most of the insulin supply with limited competition and no regulations on prices.
3. Patent abuse and evergreening
New formulations of existing insulin bring more reliable control of diabetes or more convenience, but they bring new patents. For example, Sanofi-Aventis has filed for 70 new patents for Lantus since it was introduced. Additionally, insulin and other drug manufacturers can bring lawsuits alleging patent infringement or can enter into “pay-for-delay” arrangements with competitors to postpone the entry of competing products into the marketplace.
4. Barriers to biosimilar entry
On March 23, 2020, FDA announced that insulins and other biologic drugs will be “transitioned” to regulation as biologics, as opposed to their traditional classification as drugs. “After the transition, it will be possible for manufacturers to submit and [FDA] to approve marketing applications for biosimilar and interchangeable products that reference transitioned biological products, which will help ensure that the market is competitive, and patients may have more affordable access to the medications they need,” FDA stated. FDA has encouraged the development of biosimilars, but manufacturers have filed lawsuits— with or without merit—to prevent their approval and market entry. The limited biosimilars that have entered the market have provided only modest savings because competition is still insufficient. Insulin biosimilars also face an uphill battle to be included in health plans’ formularies—an issue tied to PBM rebates.
5. PBMs and other middlemen who benefit from a high list price
It’s not news to pharmacists that PBMs wield significant influence over a drug’s market share. “Payments from the insurance company go through a [PBM] who negotiates the price of insulin with the retail pharmacy (negotiated price) as well as with the pharmaceutical company (in the form of rebates),” Rajkumar wrote. “Rebates paid by the manufacturer to the PBM lower the net price of insulin, but unfortunately, although most of the rebates are passed back to the insurance company, they have also become a major source of income for PBMs. … The higher the list price, the bigger the rebate can be, resulting in more revenue for a PBM. Together, the entire supply chain benefits from a high price—except the patient.” PBM and wholesaler monopolies also worsen the situation—manufacturers must negotiate by the three PBMs that control 70% of the market and three wholesalers that control 90% of the market. If manufacturers don’t give in to PBM demand for rebates, they risk their products not being preferred in health plans’ formularies. This is the cause of the phenomenon of the simultaneous, comparable insulin price increases.
6. Lobbying power of insulin manufacturers
Manufacturers spend huge sums on lobbying and advertising, preventing changes to the system and thwarting many efforts to lower insulin prices.
Possible policy-level solutions
1. Value-based reimbursement and pricing, and laws and regulations governing price increases
2. Easier path for biosimilar entry, including reciprocal approval of biosimilars
3. Patent reform
4. Governmental or nongovernmental agency to oversee pricing
5. Transparency on rebates
6. Nonprofit manufacturing
7. Emergency access laws
8. Increased advocacy
Solutions that can be implemented by institutions, physicians, and other health care providers
1. Discussion with patients about affordability
2. Awareness about sources of information on prices
3. Practice guidelines that take cost into account
4. Preference of lower-cost biosimilars in formularies
5. Advocacy
Source: Rajkumar SV. “The High Cost of Insulin in the United States: An Urgent Call to Action.” Mayo Clinic Proceedings. January 1, 2020.