Here's Why Insulin Costs So Much In The U.S.
There are 7.4 million insulin-dependent diabetics in the U.S. According to the American Diabetes Association, 650,000 of them are rationing insulin because of the cost. Why are people struggling to pay for a drug that's been around for 100 years? It has to do with the bizarre way drug prices are set in this country.
The conventional wisdom is that when there are several suppliers, they compete to drive prices down. But that’s not what happens with insulin.
"The pharmaceutical pricing system is just rigged, and it’s rigged so patients pay more each year," said U.S. Sen. Ron Wyden of Oregon. "Competition does not drive prices down."
In fact, the prices many diabetics pay have been going up a lot. Wyden co-led a two-year bipartisan investigation into insulin prices, and last month his Senate Finance Committee issued its report.
It found the price of one commonly used insulin was $404 in 2019, an increase of $101 from just five years earlier. Another cost $462, an increase of $159 over the same period. Part of the problem, according to the report, is the pharmacy benefit managers. They’re companies that negotiate down prices for health insurance plans.
"What our investigation found," said Wyden," is that the middlemen companies — the pharmaceutical benefit companies who negotiate these contracts ... with drug companies — actually have a financial incentive to keep prices high."
The prices Wyden are referring to are the “list prices”— the amount the manufacturers set for their product. The pharmacy benefit managers, or PBMs,negotiate rebates based on those prices and pass some or all of the savings on to the plans, which they can use to keep premiums low.
But PBMs insist on increasingly larger rebates, and that puts pressure on manufacturers to keep list prices high. They worry that if they lower prices, PBMs will retaliate against them by refusing to carry their products.
The committee examined internal documents from the three large insulin manufacturers — Eli Lilly, Sanofi and Novo Nordisk — and the three largest PBMs. It concluded that drug companies “aggressively” raised list prices “absent significant advances in the efficacy of the drugs.”
It also found PBMs earn administrative fees from manufacturers each time a drug gets dispensed from the pharmacy, and those fees can be a percentage of the list price. Wyden says the amount PBMs earn is a mystery.
Rising list prices hurt alot of people. Those without insurance pay the full list price. Others, like people with high deductible plans and those with coinsurance-- instead of flat rate copays-- pay a percentage of the list price.
And seniors with Medicare drug benefits pay 25% of the list price when they reach the coverage gap in their policies after they’ve spent $ 4,130 out of pocket.
Even before the pandemic, Matthews resident Raymond Ireland had difficulty affording his monthly $125 insulin copayment.
“For someone that’s not making a tremendous amount of money, $125 is a lot of money," Ireland said. "But it’s a drug that you have to take in order to survive.”
When the pandemic hit, Ireland lost his job and his employer-based insurance. He got replacement coverage for a while and he rationed the drug.
"You try to kind of have a stockpile of insulin so if something catastrophic happens to you, at least you’ll be able to have that insulin," he said. "Maybe not for long, but it's something."
After Ireland exhausted his savings, he got help from NC MedAssist, which provides free medication to those who are ineligible for Medicaid but earn less than 200% of the poverty level.
Ireland counts himself fortunate. For many diabetics, paying for insulin is a way of life.
"I’m, you know, constantly looking for programs or coupons on the internet to bring that cost down," he said. But he worries about relying on manufacturers' coupons since "they can cut that off at any time."
WFAE reached out to all three manufacturers and the trade association for the pharmacy benefit managers. Only Eli Lilly was willing to speak. Spokesperson Gregory Kueterman said the company worries about those who can’t afford insulin. It’s offering a $35 copayment coupon
But Kueterman thinks the problem is inadequate insurance.
"This is a problem that we know has evolved over many years for a variety of reasons, including the fact that so many more people are using high-deductible insurance plans than they were 10-15 years ago," Kueterman said.
Asked why the company doesn’t just lower its price instead of issuing coupons, Kueterman said that would be complicated.
"There are agreements in place with PBMs and other insurers around the country, and, you know, it’s a very large number," he said.
Just before Congress held hearings on insulin prices in 2019, Eli Lilly introduced a half-priced version of its brand-named insulin, which it termed the “authorized generic.” Novo Nordisk followed suit, and insulin spending dipped for the first time in years, according to Good Rx. But the publication also notes that half-priced drugs can be more expensive for those with insurance since some plans won’t cover them.
Now change may be in the offing.
Last month, the Trump administration initiated a test program to allow certain Medicare plans to charge a $35 monthly copayment. A lot of plans signed on, as did the three manufacturers.
President Biden campaigned on lowering prescription prices. He wants to allow the government to negotiate with drug companies and supports limiting price increases to the rate of inflation. Both ideas are in bills that have bipartisan support, and Wyden thinks the stars are now aligned to pass a bill limiting prices.