Insulin Prices: How Trump’s Proposal Aims to Lower Drug Costs

Complaints from patients and diabetes advocacy groups about the high cost of insulin are finally being addressed. Earlier this week Eil Lilly announced plans to sell Humalog at half price. Here's how we got here and a summary of how the current administration plans to lower drug costs.

insulin and glucose meter on tableBetween 2002 and 2013, prices tripled for some insulins. Many cost around $300 a vial and generic alternatives are limited and not viable for many people who live with diabetes. Lawmakers and struggling patients are putting more pressure on pharmaceutical companies to lower the prices for this life-saving hormone. (Photo:123rf)

President Trump proposed a new rule recently that would lower prescription drug prices and out-of-pocket costs by encouraging drug manufacturers to pass discounts directly on to patients, instead of the Pharmacy Benefit Managers (PBM’s).

This is part of the “American Patients First” plan. Health and Human Services Secretary Alex Azar and Inspector General Daniel Levinson proposed this rule at a press conference in late January (2019). They said, “This proposal has the potential to be the most significant change in how Americans’ drugs are priced at the pharmacy counter, ever, and finally ease the burden of the sticker shock that millions of Americans experience every month for the drugs they need.” They went on to discuss what’s wrong with our current system.

Why Insulin Costs so Much in the US 

Here's a simple synopsis of what's wrong with our system:

#1. Rebates reward ever-increasing prices.
Rebates are negotiated as a percent of the list price for a drug or biosimilar. So, the higher the cost of the medicine, the more the companies benefit, but the patients do not.

#2. Drug companies pay rebates and other payments to PBM’s, but these payments are not reflected in patient out-of-pocket drug costs. 
These account for 26-30% markups for the patients. If this plan passed, it would offer incentives for the drug manufacturers to extend discounts directly to the patient, instead of the PBMs.

#3. The current rebate system discourages the use of safe, effective lower-priced generics and biosimilars.
Drug manufacturers of insulin can prevent competition by simply raising the size of the rebates under the condition that if they will only do that if they are granted the exclusive formulary position. This has discouraged other insulin manufacturers to enter the US market, thus making the price higher when there is less competition.

How the Proposed Changes Will Lower the Cost of Insulin

So what does this mean for people living with diabetes and struggling to afford their insulin? As a practicing pharmacist, with 40 years of experience, I see this new ruling as a first step in reducing the high cost of insulin. 

The current regulations encourage pharmaceutical companies to give large rebates to PBM’s (pharmacy benefit managers) who are in a powerful position as they represent the insurance companies in defining pharmacy benefits. Put another way lets use Eli Lilly as an example.

When Eli Lilly makes Humalog insulin. To get their product as part of the drug formulary of a certain insurance plan, they’ll give a kickback or rebate to the PBM. Their product may be the only short-acting analog insulin that the plan then offers in return for the rebate.

According to the Trump administration, drug rebates, which include biosimilars like insulin, average 26-30% in a rebate. For a vial of Humalog which retails for around $275, that rebate could be as high as $82.50 per vial. The PBM currently pockets this rebate and charges the patient the full $275.

According to the new proposed Trump administration regulations regarding rebates, they’re asking the PBMs to pass that rebate on to the patient, thus bringing that vial of Humalog down to $192.50.

While this is certainly a start in the right direction there is a long way to go!

How This Mess Got Started: Greed and PBMs

Why is it that there are only three primary pharmaceutical manufacturers of insulin in the United States and both Humalog and Novolog have been around for over 20 years?

The patents on these insulins expired long ago but why aren't any other drug companies stepping forward to manufacture a biosimilar insulin as is usually the case when pharmacuetical patents expire?

Why is it that you can go either north of the US border to Canada or south of the border to Mexico and purchase the exact same vial of Novolog or Humalog for $40-50 a vial.

The answer is greed!

Eli Lilly, Novo Nordisk and Sanofi along with the PBM’s have smelled the millions in profits and don’t want to lose it even though many of the patients they treat with their life-saving insulin products are going without, thus becoming hyperglycemic or putting their own lives in jeopardy.

Thank you to the Trump administration for recognizing that we have a crisis in the diabetes community! However, the fight isn’t over! We need to continue to ask for transparency in insulin pricing so we can get prices down to where Canada, Mexico and many countries in Europe already are.

To read the full release click here.

*Shortly before this article was published Eli Lilly announced on March 4, 2019 that it will see a half-price version of Humalog. Learn more here.

Updated on: March 25, 2019
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