Insulin Pricing
The constant and traumatic rise in the cost of insulin is hitting the population that lives with diabetes hard. How did it happen and what can we do to help? When inventor Frederick Banting discovered insulin in 1923, he refused to put his name on the patent. He felt it was unethical for a doctor to profit from a discovery that would save lives. Banting’s co-inventors, James Collip and Charles Best, sold the insulin patent to the University of Toronto for a mere $1. They wanted everyone who needed their medication to be able to afford it.
Today, Banting and colleagues would be spinning in their graves: Their drug, which many of the 30 million Americans with diabetes rely on, has become the poster child for pharmaceutical price gouging. The cost of the four most popular types of insulin has tripled over the past decade, and the out-of-pocket prescription costs patients now face have doubled. By 2016, the average price of insulin rose to $450 per month — and costs continue to rise, so much so that as many as one in four people with diabetes are now skimping on or skipping lifesaving doses. For example, the cost of a vial of the short-acting insulin lispro (Humalog) increased 585% (from $35 to $234) between 2001 and 2015. By January of 2017, it reached $270, according to the drug-price website GoodRx.com.
First, we need to understand that there are four or five players in the field forcing this issue. We begin with the insulin manufacturers. They produce insulin and then need to get it to the clients that have prescriptions. Next are the wholesalers who buy the insulin to hold and ship it to the pharmacies or hospitals. Wholesalers typically perform same task as Pharmacies Benefit Managers, but they do it for the pharmacies and the hospitals. In the middle of this are the Pharmacy Benefit Managers (PBM’s) who work for the insurance companies. They negotiate pricing for the insurance companies by deciding which insulin is on which tier of the plans (who gets the best coverage or gets the lower copay of the three insulins). Then there are the rebates that manufacturers pay the PBM’s to get tier one and therefore preferred. But then the other manufacturer finds out and ups the ante or rebate to get the competitor moved to higher tier so they can get the preferred tier one.
The insulin manufacturers include Novo Nordisk, Sanofi Aventis and Eli Lilly. The wholesalers that account for more than 90 percent of all revenues from drug distribution in the United States are AmerisourceBergen Corporation, Cardinal Health, Inc. and McKesson Corporation. It is estimated that in calendar year 2017, U.S. revenues from the drug distribution divisions of the Big Three wholesalers reached $425.1 billion, a 4.5 percent increase over the 2017 figure. Wholesalers’ combined share of the market has grown in recent years, from 87 percent in 2013 to 92 percent in 2017. This growth occurred due to acquisitions of smaller companies and a shift by large retailers to purchasing generic drugs via wholesale distribution.
The other major player is the pharmacy benefit managers or PBM’s. This group was created back in the late 1960’s to process the numerous drug claims the insurance companies were dealing with each month. They claim to save the insurance plans millions of dollars. According to Wikipedia, In the United States, a pharmacy benefit manager is a third-party administrator of prescription drug programs for commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program, and state government employee plans. According to the American Pharmacists Association, "PBMs are primarily responsible for developing and maintaining the formulary, contracting with pharmacies, negotiating discounts and rebates with drug manufacturers, and processing and paying prescription drug claims. For the most part, they work with self-insured companies and government programs striving to maintain or reduce the pharmacy expenditures of the plan while concurrently trying to improve health care outcomes." PBMs operate inside of integrated healthcare systems, as part of retail pharmacies, and as part of insurance companies. Three PBM’s hold 80% of the market > CVS Caremark, Optimum Rx, Express Scripts. They work through rebates, spreading the gap & repackaging and repricing & mail order waste. Rebates are paid by the manufacturers to the PBM to move up the tier list but these rebates do not get back to the patient. Then sometimes they repackage the drugs and adjust the administration fee and add a discount but ends up costing more for the patient and less to the plan. Another issue is the mail order companies that keep sending drugs or equipment that the patient no longer uses or has dose changes.
Then there are the pharmacies who have to answer the patient’s concern over the ever- increasing prices. So, in summary, the system is broken, and all five players are at fault for letting the system drive up the cost of our life sustaining hormone. The only solution is more transparency on what the different insulins cost in production and where the administration fees, rebates, insurance plans, co-pays, repackaging costs and all the other hidden mark-ups are coming from. Do we need 5 players between the person with the diabetes and their doctor’s prescription?? There must be a better method