You Pay a Lot For Insulin, But Who Gets Paid?

Giles Bruce
March 26, 2021
Giles Bruce


Nicole Rawson remembers when she could get her son’s insulin for a $25 copay. Those days are over.

With a high-deductible insurance plan and consistent hikes to her out-of-pocket charges, she says a three-month supply of the medication now costs her $800, even with a prescription discount card.

Rawson, a-stay-at-home mom who lives in Toronto, Ohio, a small town about 45 minutes west of Pittsburgh, doesn't think she and her husband can withstand any further increases. Her son, 18-year-old Jack, has Type 1 diabetes, and needs to take insulin every day to live.

"No mother should ever feel they can’t provide life-saving medicine for their children — not in America, not in the United States," said Rawson, 43. “When it’s affordable in other countries, we’re doing it wrong. We have to do better.”

After the amount she was charged shot up by about 20 percent in early 2020, she says she called both her insurance company and the insulin manufacturer. She learned the cost had risen because her pharmacy benefit manager, or PBM, a middleman of sorts that is paid to negotiate drug prices for insurers, had changed the pricing “tier” for the insulin her son uses. She still hasn’t gotten an explanation why.

Rawson’s son is one of an estimated 7.4 million Americans who take insulin to treat their diabetes, according to the American Diabetes Association. About 1.6 million of them have Type 1 diabetes, and insulin is their only treatment option. High prices and high out-of-pocket costs put them at real risk.

In recent years, insulin has come to symbolize the failures of the American healthcare system, with patients protesting its unaffordability and lawmakers demanding to know why a life-saving medication is out of reach of so many. While insulin has evolved since it was discovered a century ago by scientist Frederick Banting, who subsequently sold the patent for $1 because he wanted the drug to be affordable for all, many patients and healthcare advocates don’t believe today’s prices are justified.

Insulin prices are four to 10 times higher in the United States than in other developed countries, according to an October 2020 Rand Corp. study. Experts blame a confluence of causes — from the lack of generic alternatives and market competition among drug manufacturers to the influence of the little-known PBMs.

At the same time, net prices — what the health system pays — actually declined for nine of the top 10 insulins from 2018 to 2019, according to a report from the Institute for Clinical and Economic Review, a Boston-based nonprofit that analyzes healthcare costs. But that doesn’t help people who are uninsured or have high deductible plans, experts say.

A few big players

The U.S. insulin market is controlled by three companies: Eli Lilly, Novo Nordisk and Sanofi. Meanwhile, the three largest PBMs — CVS Caremark, Express Scripts and OptumRX — account for more than 80 percent of the PBM market, according to Johns Hopkins researchers.

“Despite rhetoric about skyrocketing insulin prices,” said Jon Florio, a spokesman for Paris-based Sanofi, “the net price — meaning the amount that Sanofi actually receives from health plans and pharmacy benefit managers — of insulin has been falling for five consecutive years, making our insulins significantly less expensive for insurance companies.”

Florio said that’s because Sanofi has been paying increasingly higher rebates to PBMs and insurers, “with the goal of improving or maintaining people’s access to their insulins — often in the face of threats from PBMs of exclusion from coverage.” Even so, he said, patients’ out-of-pocket costs continue to rise.

Those rebates have grown tremendously, from 13 percent of list price in 2007 to 70 percent in 2018 for non-Medicaid patients. That’s the highest such increase for any drug, according to a 2020 study by the Journal of the American Medical Association. Study author Inmaculada Hernandez called his “disconnect” between list prices and net prices concerning, since it’s unclear who profits most in these deals between drug companies and PBMs because their contractual arrangements aren’t public.

The trade association for PBMs, the Pharmaceutical Care Management Association, says the rebates help moderate costs for most consumers who have health insurance The association also lays much of the blame for unaffordability on pharmaceutical companies.

“Strategies used by drug manufacturers to avoid competition through ongoing patent extensions on insulin products are a significant barrier to getting costs down even further,” said Greg Lopes, an association spokesman. "The key to reducing drug costs is by increasing competition among brands, biologics and generics, including for insulin products.”

Greg Kueterman, a spokesman for the drug maker Eli Lilly, said there has been a breakdown in the “system” that “collectively, has not worked for too many people who use insulin.” He added that patients with high-deductible insurance plans don’t benefit from the rebates paid by insulin manufacturers such as Eli Lilly.

So the company introduced a $35 copay card that, along with the recent changes to Medicare Part D that cap copays, means that no one should be paying more than $35 a month for Eli Lilly insulin, he said. Other drug makers also point to their patient assistance programs as a way they are making insulin more affordable, although patients say those programs can be difficult to navigate and require them to re-enroll annually in order to re-qualify for the help.

Change in prices

The ICER report found that while net prices declined for the majority of the top insulins from 2018 to 2019, the list prices rose for five of those insulins, stayed the same for four, and declined for one. Four of those increases were higher than the medical consumer price index.

As institute spokesman David Whitrap explained, “While the overall decrease in net spending may help moderate rising insurance premiums, the ongoing increase in list prices continues to present real affordability concerns for patients who are exposed to the unrebated price.”

That includes patients who are uninsured, who have yet to reach their insurance deductible, or whose health plans require them to pay a percentage of the insulin’s list price as coinsurance, he said.

Others say there is plenty of fault to go around. A recent U.S. Senate investigation into high insulin prices placed the blame on both pharmaceutical manufacturers and PBMs.

Among the investigation’s damning conclusions: “[I]nsulin manufacturers aggressively raised the list price of their insulin products absent significant advances in the efficacy of the drugs”; Novo Nordisk and Sanofi monitored each others’ price increases and hiked their prices accordingly; and the “drug makers were aware that higher list prices meant higher revenue for PBMs, and that lowering list prices could be viewed negatively by PBMs and health plans, even though it meant higher out-of-pocket costs for patients.”

The report also said there was “little, if any, attempt by PBMs to discourage manufacturers from increasing the list price of their products.” Instead, they “used their size and aggressive negotiating tactics, like the threat of excluding drugs from formularies, to extract more generous rebates, discounts and fees from insulin manufacturers.”

Patients have had to ration

One solution to the insulin pricing problem would be “cheaper versions, widely available and easily reimbursed,” said Robin Feldman, a law professor at the University of California Hastings Law in San Francisco who has studied insulin pricing.

As Feldman explained, three major factors affect insulin prices: Pharmaceutical companies strategically block competitors selling cheaper generics from entering or thriving in the market; the companies push doctors and health insurers into using the newest (and more expensive) drug versions and delivery methods; and so-called “rebate schemes” push prices higher so middlemen can pocket the difference between the list and net prices.

“These three problems plague many medicines,” Feldman said. “With insulin, however, the results can be disastrous. Patients who forego cholesterol-lowering medications may not suffer the consequences for decades. Patients who ration insulin risk immediate death.”

That’s what happened to 22-year-old Antavia Lee-Worsham, of Cincinnati.

Her mother, Antroinette Worsham, who started an advocacy organization called T1Diabetes Journey in her daughter’s honor, said the trouble began when Lee-Worsham turned 21 and aged out of a government program that had been helping pay for the insulin that kept her Type 1 diabetes in check. She had no choice but to transition to a high-deductible health plan.

Suddenly monthly out-of-pocket costs ballooned to hundreds of dollars, Worsham said. So Lee-Worsham would borrow insulin from family members who are also living with diabetes — or use less to stretch out her supply.

“Sometimes, she wouldn’t take any,” Worsham said. “That’s why her sugars got so high.”

Lee-Worsham died April, 26, 2017, from diabetic ketoacidosis.

She was among the four people who died as a result of rationing insulin that year, according to Right Care Alliance, a patient advocacy group. Four people also died that way in 2018, as did five in 2019. In 2018, researchers at Yale and Harvard universities found that one in four patients surveyed was rationing insulin due to cost.

Solutions on the way?

A major way drug makers stifle competition is through the patent system, said Tahir Amin, co-founder of I-MAK, a nonprofit dedicated to lowering drug prices. He said companies file overly broad patents or continuously tack on secondary patents to extend the life of the original.

At the same time, he added, pharmaceutical companies insist that eliminating patent extensions will end innovation. “Well, that's not true either,” Amin said, “because they're using [the patent system] to basically not do innovation because they know they can milk the cow for that much longer.”

To encourage cheaper alternatives, the U.S. Food and Drug Administration in March 2020 completed a regulatory shift mandated by the Affordable Care Act to allow for more biosimilar insulins.

For so-called small-molecule drugs, which are the majority of prescription medications, pharmacists can swap out cheaper generic versions for brand-name drugs without incident in most cases. For biologics, such as insulin, they hadn’t been able to do that.

Dr. Kevin Riggs, an assistant professor of preventive medicine at the University of Alabama at Birmingham who has researched the historical lack of generic insulin, calls the length of time it took for this change to happen a “market failure.”

“Part of that is that it’s legitimately harder to manufacture a generic or biosimilar biologic that you can be confident is safe and effective,” he said. “The regulatory pathway was inadequate. And it just may not have made financial sense for companies that were doing well making small-molecule generics to move into this new space.”

He said further advances in this arena will have to be “led by the science” but could eventually require government incentives for companies or changes to intellectual property law.

States have taken action

In May 2019, Colorado became the first state to institute a copay cap on insulin, limiting the monthly cost to $100 for insured patients. Since then, several other states have followed suit with caps of their own.

"Insulin is the poster child for what’s wrong in the pharmaceutical industry,” said  Colorado state Rep. Dylan Roberts, a Democrat who sponsored the legislation.

In Utah last year, lawmakers took it a step further, ensuring that no patients — insured or not — would pay more than about $100 a month for insulin. They did so by allowing residents to buy insulin through the state employee health plan and requiring insurance companies to offer it for low or no cost.

One of the people who testified in favor of the bill was Mindie Hooley, who in 2019 discovered her son, then a high school senior, was rationing his insulin. She says he saw the financial devastation his $800-a-month insulin was having on the family and took matters into his own hands.

Hooley, a 44-year-old stay-at-home mom and volunteer in Brigham City, went on to start a Utah chapter of T1 International, a nonprofit that advocates for insulin and diabetes supplies for everyone who needs them. She says she’s learned more than she thought possible about insulin pricing.

“The problem is the dysfunctional supply chain that benefits everyone except the patient,” Hooley said. “There isn't significant competition in the U.S. insulin market.”

She acknowledges what’s at stake with her fight to make sure insulin is affordable, for those who have insurance and those who don’t: “Insulin to diabetics is what air and water is to everyone else,” she said.

Giles Bruce is a freelance journalist based in the Chicago area.

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