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How to Explain Insulin Price Insanity in Just One Image. Or Several Images. – Diabetes Daily

Insulin prices in the United States are insane. This isn’t exactly news—if you have insulin-treated diabetes, you surely already know it. And even those without a connection to diabetes should recognize that insulin affordability is one of the most talked-about healthcare topics in politics. It’s also the rare issue that finds widespread agreement across the political spectrum, at least with regard to the existence of the problem, if not the solution.

What’s less well-understood is exactly why insulin prices are so outrageously high. This one image may help you understand:

source: Drug Channels

Oh, what’s that? It didn’t explain everything?

Maybe one image wasn’t enough. Try this one. It’s a bit simpler:

Source: diabetespac.org

If you’re confused, well, that’s the point. It’s a total mess! But don’t worry, we’ll walk you through it.

These two images were bravely prepared by Dr. Adam Fein of Drug Channels and the Diabetes Patient Advocacy Coalition (DPAC), an influential nonprofit diabetes advocacy group. There are many other versions of this chart, and none of them is easy to understand.

The “insulin-payment journey” is a bizarre and complex path that is poorly understood by outsiders. A recent congressional investigation took two years to conclude, and relied on an immense volume of internal documents to tease out what the heck is going on.

The relationships are messy, but a couple of things are clear:

  • The amount of money that you fork over the pharmacy counter has essentially nothing to do with supply and demand.
  • The higher the price, the more everyone benefits. Everyone except for you.

The images above identify the many different players shoving their fingers into the pie. Here’s a look at who some of these different forces are, and how they conspire to push your insulin costs into the stratosphere.

The Drug Company

It’s probably safe to say that most people in the diabetes community tend to blame high insulin prices on the greed of the insulin manufacturers.

Just three companies—Lilly, Novo Nordisk, and Sanofi, each a multinational pharmaceutical giant—make 90% of the world’s insulin and 100% of the insulin approved for sale in the United States. It sure seems like the Big Three have locked down the market and can charge whatever the heck they want. Patients, especially those with type 1 diabetes, have little or no ability to shop around or reduce their reliance on the life-giving medication, and get stuck paying the price whatever it is.

Make no mistake—the insulin manufacturers have plenty to answer for. The Big Three engage in a variety of hijinks, such as “evergreening” patents and paying off (or suing) would-be makers of affordable biosimilars, to help keep their iron grip on the insulin market. The insulin makers tend to raise prices almost in lockstep. This image from Business Insider should cause outrage:

source: Business Insider

But it turns out that insulin manufacturers are by no means the only organizations pushing prices up. If you look at the first two images, you’ll see multiple other participants in the insulin-payment journey—insurance companies, pharmacies, pharmacy benefit managers and drug wholesalers—all of whom profit when insulin prices increase.

In a nutshell, everyone makes more money when prices go up, and patients have hardly anything that they can do about it.

The Pharmacy Benefit Manager

If there’s a second major villain in this story, it’s the pharmacy benefit managers (PBMs), perhaps the one source pushing insulin prices up even more forcefully than the insulin manufacturers.

The PBMs is a middleman that negotiates deals between the big pharmaceutical companies, health insurance companies, and pharmacies. And because PBMs determine which medications insurers will cover—deciding whether millions of patients will use this insulin or that one—they wield immense power. There’s another Big Three here: CVS Caremark, Express Scripts, and OptumRx combine to dominate the market.

PBMs like high prices because they take a cut out of every transaction, through administrative fees and insulin rebate programs. The higher the price, the higher the rebate, so PBMs are strongly motivated to choose higher-priced medications. The result is that insulin makers find themselves competing with each other to raise prices in order to offer higher rebates to PBMs. PBMs aggressively encourage this competition.

The size of rebates has increased “exponentially” in the last decade. For more detail on this ridiculous situation, check out this summary from Beyond Type 2.

The Insurer and the Wholesaler

Insurance companies also share some of the PBM’s bounty, as the PBM’s usually pass through a percentage of those big rebates. In theory, some of this value should get trickle down to individual patients in the form of reduced insurance premiums. In reality, it is still patients with chronic conditions like diabetes that bear the brunt of the system, especially those that can only afford to choose high-deductible plans.

There’s something similar going on with drug wholesalers, middlemen that purchase insulin directly from manufacturers and then sell it to pharmacies and other medical facilities.

Believe it or not, there’s yet another Big Three here—in 2018, just three businesses held over 95% of the American drug wholesale market—again facilitating the use of monopolistic practices. These powerful drug wholesalers can bully their suppliers and customers; the Senate report mentioned above reports that they use “aggressive disruption techniques” to secure favorable deals and boost their profits.

The Consumer

There’s a reason you come last: the consumer is an afterthought in this system. When insulin manufacturers set the list prices of their medications, they think an awful lot about how that price will impact their relationships with PBMs and drug wholesalers, and insurance companies, and somewhat less about the number that eventually hits the patient. After all, you have virtually no ability to “vote with your wallet”. Whether you had to pay $30 or $300, the manufacturer long ago made its profit.

Bottom Line

There’s a lot of blame to go around. Insulin prices are determined by a closed system of warped incentives, full of greedy middlemen that hike up the price with no discernible benefit to patients. It’s a vicious cycle in which higher prices make more money for everyone except the patient.

The inefficiencies and absurdities that drive up insulin prices are at work in many other ways throughout our byzantine healthcare system. Insulin is particularly plagued by these problems because there are no generic insulins available and because demand is inelastic.

You can help advocate for change, big or small. New laws in several states have capped insulin prices, and many similar grassroots efforts are underway throughout the nation. You can also advocate for yourself, your loved ones, and even your employees on a smaller scale: check out DPAC’s Affordable Insulin Project, which connects people with diabetes to patient assistance programs, and helps those with employer-sponsored insurance get the most out of their plans.

 



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