Insulin Price: The Cost of a Life

Insulin price the cost of a life

The cost of a life can be measure by the price of insulin. For someone living with Type 1 Diabetes, insulin is more than a medication, is a necessity. Insulin is said to be among the most expensive liquids in the world. In the United States, insulin has been in the spotlight lately because of the accelerated price increase. For people with diabetes in insulin therapy, insulin is not an optional treatment, therefore, the price tag is not debatable either, it must be paid to continue to live. As tragic as it sounds, this a reality millions of people in the United States face every month when refilling their prescriptions. However, the cause of why the increase in the price remains, still, an open debate as to whom hold accountable.

Most people place responsibility on the pharmaceutical companies as they are, after all, the manufacturers; but they are not the only players in the arena. The other players are the pharmacy benefit managers (PBM), wholesalers, pharmacies, health insurance/plans and to some extent the government. The exorbitant price of insulin has caused strain in people lives, not only financially but mostly to their health, leaving them with limited solutions on what to do.

To an extent, this has becomes a moral debate since money and people lives mingle to weight which is more valuable. This topic got front-centered as the pressure mounted for all those involved, and the government has been making attempts to correct the situation; however, this is just one branch of a much larger problem, the healthcare system. Nevertheless, understanding and correcting the insulin pricing crisis will make a difference in the life of millions of people living with Diabetes in the United States who need insulin to stay alive.

Insulin Price: The Cost of a Life

How the Prices are Set

The know how we got to the point where, according to Hua et al, the mean price of insulin triple between 2002 and 2013, we need to start by understanding the complex system behind the pricing. First we need to identify the players in the supply chain of insulin and who directly influence the price, we have manufacturers, wholesalers, pharmacy benefits managers, and health insurances. This is not exclusive for insulin pricing, unfortunately, it’s a multilayer process that almost every medication undergoes starting from manufacturers to finally in the consumers hands.

The process starts with the manufacturers, as Beran et al explain, the totality of the insulin market in the United States is held by pharmaceutical companies Eli Lilly, Novo Nordisk, and Sanofi, and on a global scale they dominate in terms of value 99% of the market and in terms of volume 96%. The manufacturers are the ones that set the list price of the medication, in this case, insulin.

Then, there are three paths the manufacturers use to sell the medication. The first path is directly to the wholesalers, who then sell the medication to pharmacies at almost the same list price or a little markup price, then the pharmacies sell the insulin to patients with another markup of the price. The second path is selling the medication directly to the pharmacies who then sell the medication to patients at a markup price from the list price. The third path is the manufacturers dealing with the pharmacy benefits managers (PBMs), who are the middlemen between manufacturers and health plans (employers and health insurers for Medicaid, Medicare, and private health plans).

Insulin Price: The Cost of a Life

Pharmacy Benefit Manager (PBM)

It is worth to emphasize that the Pharmacy Benefit Managers represent the interest of a health plans not the patients. The PBM negotiate with manufacturers rebates against the list price which is then given to the health plans not the patients. The patients ultimately see a markup in the price at the pharmacy. The first two path are pretty much direct sales. However, it is not as simple as it seems. The third path is quite more difficult to explain, to follow, and to find information, the PBMs keep their information tight. In all three instances, who pay the most and have no voice in the process is the patient, especially the ones who do not have health insurance and have to pay out-of-pocket.

The problem starts with the manufacturers, Eli Lilly, Novo Nordisk, and Sanofi, who set the list price for insulin. The list price has increased exponentially compared to the net price, which is the list price minus any rebates to PBM/health plans, discounts paid to pharmacies, and fees paid to wholesalers. The disparity across the list prices and net prices is the game land for fees, rebates, and discounts for PBMs, health plans, and pharmacies. It is unclear what the percentage is for each, all is known is that it is a percent of the list price; prompting the list price to continue to grow.

To understand the role of the PBMs have on this process, it is important to understand that they have leverage over all of the parts involved. They are the ones that negotiate discounts, rebates, and fees with manufacturers, with the leverage of the formulary discretions and tiers in which the medications will end up for health plans and pharmacies. Besides all of this, the PBMs also receive payment from the health insurers they represent and look after, so it is a double win for them.

They also negotiate with the pharmacies, with the leverage as to which pharmacies are included within the health insurance network. The process leaves a loophole for the PBMs to take advantage and get bigger rebates and discounts from manufacturers and pharmacies, but those discounts are never seen by the patients. Furthermore, they are the ones that negotiates the percentage that the patients and the health plan pays for a medication, determined by the amount of discounts the manufacturers gave to that medication.

The dollar amount or percentage of said rebates and discounts negotiated between PBMs and manufacturers and pharmacies is unclear, there is no information available and it consider confidential by the PBMs. It is also unclear how the rebates and discounts are distributed among the parts involved. It is without a doubt that the pharmacy benefit managers have the decision power on this process.

The insurance companies utilizes the PBMs to ensure to get the best price possible for each medication cover under their plans. Also, PBMs oversees the authorization (prior) of medications for the patients, including quantity limits for each medication. The deductibles in each plan the insurance companies offer to patients are directly affected by the amount of rebates and discounts negotiated with the manufacturers and pharmacies year to year. Also, patients can see these placements during the year when their insurance companies suddenly stop covering a medication they currently use or the medication is move to a different tier. Leaving the patients and the doctors with little choice as to what medication to use. Not just that, it also means that the patients are left with increased financial costs because of the medication movements along the tiers and formularies.

The Patients Insulin Price: The Cost of a Life

The patients are the ones that are left with the burden, in the majority of cases, of the high out-of-pocket price, high deductibles, and no choices as to what type of insulin to use. The possible solutions are scarce and limited. Patients who are already using analog insulin (newer type of insulin), do not want to go back to the previous generation, human insulin, which is sold over the counter at a much cheaper price.

Organizations as the American Diabetes Association and JDRF have suggested the use of human insulin for those patients that can not afford the pricier analog insulin. The problem with this solution is that for patients to use an older insulin, they need to be re-educated, the therapy is completely different as it is when using analog insulin. This implies more visits to the doctor and/or diabetes educator. Not to mention the individual conditions that need to be evaluated before making the change. This type of insulin, cheap and all, is not for everybody and the risks of using it have to be consider.

Another reason, more a moral one, is the differentiation that would make among the population, the people who can afford the medication can use the newer more effective insulin compared to the ones that cannot afford their medication will end up using over-the-counter insulin.

Insulin Price: The Cost of a Life

More Competition?

On the other hand, we have the insertion of more competition for the top three pharmaceutical companies. This competition come in the form of biosimilar insulins, which are the generic version of it. However, Gotham et al. came to the conclusion that the insertion of biosimilars in the market would not depress radically the current price of insulin. In part because of the regulatory process they have to undergo by the U.S. Food and Drug Administration (FDA) to be approved since it is a medicament produced from live cells and has a complex manufacture process, hence causing higher production costs.

All the manufacturers, have in place patient assistance programs to help patients who cannot afford their medications. All of the programs have eligibility requirements and a determined period of time. For example, Eli Lilly’s program is a year-long (Eli). Likewise, Sanofi and Novo Nordisk also have similar programs, providing medication at no cost for people who meet the requirements. These programs are specially beneficial for people without insurance, however, they are a short-term solution. Remember that insulin is a medication that people with Type 1 Diabetes needs to take for life and the programs helps, if qualified, only for a period of time.

At the same time, all major chain pharmacies have in place their own patient assistance programs by becoming club members where the patient pays a fee and can get discounts for their medications, which in some cases can be combined with the insurance plans but have proven extremely beneficial, to a degree, for people without insurance.

Insulin Price: The Cost of a Life

The Government

Up to this point the government has had no involvement in this complex process of the insulin pricing chain. Nevertheless, the government has their share of guilt on this problem. The current patent laws, which are in place to protect innovation, have been used to continue to secure a monopoly in the manufacturing of insulin. Not diminishing the innovation and breakthroughs the manufacturers have done to the original formula of insulin, however, they have protected themselves and their profits by preventing access to other competitors.

Also, the actual healthcare law leave the patients at the health insurance companies mercy. With the amounted pressure put on the government by the people affected to act on transparency, the Congress have held hearings with the pharmaceutical companies to hear their side of the story and to find a common ground in the resolution of this crisis.

The States have been making their own efforts, passing bills to assure transparency in insulin pricing, making the manufacturers release their lists prices and how they come to that price. Among the States that been in the forefront are California, Nevada, and Oregon, passing the bills California SB-17, Nevada SB-539, and Oregon HB-4005, respectively.

Insulin Price: The Cost of a Life

Insulin, in my view, is a right, not a privilege. Dr. Irl Hirsch

What’s Next?

All of these initiatives, program assistance programs, use of human insulin, introduction to biosimilars to the market, and governmental and state intervention on transparency, although good-willed, they are still not enough to mitigate this crisis. In the end, the patients are the one who carry the burden not only financially but health-wise, by rationing their insulin supplies, transitioning to older version of insulin, or giving up altogether the use of insulin to finally paying the ultimate price, death.

In a free market economy, one of the advantages is that free trade keep prices low. Free trade provide producers with the ability to set their prices in order to have a profit while also providing low prices to keep competition at bay, with little or no intervention from the government. The United States is a big believer and promoter of free market economy. Pharmaceutical and insurance companies have relied on this system to set their prices with little government intervention.

Their claim is the investment in Research and Development they made. Investment, that after a drug is approved by the FDA, is recovered by sales at a determined price point. According to Research! America in its 2018 Annual Report, the investment by the pharmaceutical companies in biopharmaceutical research amounted to 97.0 billions in 2017, a 34.17% from the previous year. However, according to Cleary et al. the NIH contributed to more than 90% to all basic research from 2010-2016, translating to 210 new drugs approved by the FDA, making this basic research the ground work of a breakthrough. When a breakthrough is done, Pharmaceutical companies take over to develop and patent, leaving them with all the benefits from the government-funded basic research.

In addition, as stated previously, Eli Lily, Novo Nordisk, and Sanofi hold 96% of the insulin market worldwide. This provide them ample grounds to set prices on insulin and benefit from a monopoly in the manufacturing of insulin. The original formula (patent) was sold by Banting et al to the University of Toronto for C$ 3.00, in order to be used for a greater good. Then, the University of Toronto gave it to Eli Lilly and Nordisk Laboratories (non-profit then and before the merger with Novo), for it to be manufactured at a larger scale to benefit patients around the world. It did for period of time, however, with the introduction of synthetic insulin the price went up, and later with the insulin analog it went up yet again. The rising tendency has continued, so much, that in the most powerful country in the World, the United States of America, people are dying of lack of affordability and accessibility of their life saving medication.

In 2018, Alex Azar II, a former Eli Lilly executive, was confirmed as Secretary of Health and Human Services. It was under his authority that the price of insulin increased and now he oversees the price regulations and government interventions. In a May 2018 speech, Azar expressed that free market work incredibly good in the United States, but right now the drug prices are protected by market forces to benefit manufacturers and middlemen. He warned the companies to not rise prices more than inflation or changes in clinical benefits, yet, the insulin price has increased since.

Coincidently, according to The Center for Responsive Politics, Eli Lilly’s contributions to Federal candidates in 2016 was US$ 1.3 millions, 68.4% of which went to the Republican Candidate/Party, and US$ 1.1millions with 62.2% going to the Republican Candidate/Party in 2018. Moreover, Eli Lilly is one of the top spenders in lobbying, spending US$ 6.7 millions in 2018, focusing their efforts on research funding and the patent system. This cast a shadow of doubt as to if Mr. Azar will indeed do his duty of protect the benefit of the people from the pharmaceutical companies and up to what degree.

Whether, it’s the manufacturers, the middlemen, the pharmacies, and/or the government, all play a part in the drug prices crisis even if they defend their position and reasons as to why the prices are the way they are. The current system is not working for the benefit of the people. Something needs to be done, as expressed by Dr. Irl Hirsch “Insulin, in my view, is a right, not a privilege.” In the present time, thanks to technology, social media in special, diabetics can voice their concerns about the insulin pricing crisis. They have shown their struggles and their fears, and the consequences of the unreasonable priced medication in real time, gaining the support of non-profits like Beyond Type 1T1International, American Diabetes Association,  JDRF, who work for affordability and accessibility of insulin. This crisis has gained momentum and has been picked-up by mainstream media, leaving all involved no other choice to respond to the allegations and come together to find a solution.

Insulin, in my view, is a right, not a privilege. ~ Dr. Irl Hirsch Click To Tweet

The insulin pricing crisis will not be solve without the involvement and commitment of all the parties, manufacturers, PBM’s, wholesalers, pharmacies, and health plans. From transparency in the setting of the list price to the commitment to place medications in the tiers and formularies according of their benefits to the patients and not as leverage for negotiating discounts and rebates – which should be transferred to the patients; to better manufacturers and pharmacies patient assistance programs; to revision of the current patent and health laws, and to new transparency laws to protect the patients, all should be done, if indeed there is a will of helping the patients. In the meanwhile, the patients, The People, are claiming for a solution, but the question remains: Will they ever see a resolution to this problem? Although unclear, the hope is high that something will be done, after all, this is the United States of America.

Insulin Price: The Cost of a Life

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Insulin Price: The Cost of a Life

Insulin Price: The Cost of a Life

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(1) Comment

  1. Great article. We have got to start capping these horrible companies that are being led by Insurance companies and stock holders. There should be no more than 100% mark up on any medication from aspirin, saline bags, insulin etc! Great article

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