The cost of insulin has been kept artificially high for millions of Americans because drug manufacturers and middlemen work together to maximize their profits, a new bipartisan investigation shows.
This maneuvering around the growing price tag for medicine needed by diabetics to combat America's No. 7 killer represents a microcosm of the reasons prescription drugs cost so much in the U.S.
It also demonstrates one of the consequences of growing consolidation within American health care, a trend The Dispatch is investigating.
“Insulin is Exhibit A of why America’s drug pricing system is broken from top to bottom," said U.S. Sen. Ron Wyden in a statement to The Dispatch/USA TODAY Network. "Our bipartisan report reveals how large corporations benefit from high prices while consumers and taxpayers foot the bill.”
The Oregon Democrat and Iowa Republican Sen. Chuck Grassley oversaw a two-year probe by investigators for the U.S. Senate Finance Committee, who used 100,000 internal documents and emails that for the first time lay out a detailed pattern of abuse by PhRMA and pharmacy benefit managers (PBMs). Grassley was chairman of the panel; Wyden is expected to be named his successor soon.
"The explosive Senate Finance Committee report exposes what pharmacists have known all along. PBMs were supposed to lower prescription drug costs and protect medication access. Instead, they are doing the exact opposite," said Scott Knoer, CEO and executive vice president of the American Pharmacists Association.
"Despite their promises of lowering prescription drug costs, PBMs have used their secret dealings with drugmakers to push prices higher as a means to increase kickbacks for themselves," added Knoer, who for the previous nine years was chief pharmacy officer at the Cleveland Clinic.
Key findings from the investigation into United States insulin and drug costs:
• Drug manufacturers "aggressively" raised the list price of their leading insulin brands an average of 300% over the past decade "absent significant advances in the efficacy of the drugs." As Sen. Grassley remarked, "There is clearly something broken when a product like insulin that’s been on the market longer than most people have been alive skyrockets in price."
• Getting on a PBM's formulary — the list of drugs covered by health insurance plans that hire the PBMs — is critical to pharmaceutical companies. Thus, the drugmakers offer rebates of as much as 70% of the drug's list price to the PBMs. While most of the rebate is passed on to health insurers, PBMs keep a certain percentage — meaning the higher the drug price the more money the PBMs make. It's the same incentive for an administrative fee of as much as 5% often collected by PBMs.
• Despite pressure from the public and Congress on drugmakers to lower what they charge, internal communication shows PhRMA's biggest barrier to cutting prices was possible multibillion-dollar retribution from the rest of the drug supply chain. In other words, if the drug company dropped the price of insulin, that would mean less money via rebates and other fees for the PBMs. And that prospect raised fears that the PBMs would retaliate by dropping the consumer-friendly drugmaker's product from the formulary by placing it on an "exclusion list." Then the PBM simply would add to the formulary the product of a competitor that kept the price — and rebate — high.
• In theory, competition drives down prices, as consumers sometimes see in "gas wars" between filling stations on opposite corners. But newly divulged emails from the drug companies show the reverse: Instead of seeking to undercut their competitors' prices, drugmakers closely monitored what their rivals charged so they could raise their own prices as quickly as possible — sometimes matching the competitor's increase in as little as 25 minutes. This practice is dubbed "shadow pricing."
• Pharmaceutical companies often attempt to justify their high prices by pointing to big outlays for needed research and development. But records show that Eli Lilly, for example, spend far more on sales and promotion (including those ubiquitous TV ads, which are tax deductible) than R&D. In fact, just one line item in Eli Lilly's budget, spending for its global diabetes salesforce, far exceeded the total for research and development into diabetes treatments.
Facts about diabetes:
* 7th leading cause of death in America
* More than 34 million Americans have the disease
* 7.3 million adults were not even aware of, or reported having diabetes
* 88 million Americans have prediabetes, which can lead to Type 2 diabetes
* Another 1.5 million are expected to be diagnosed with the disease this year
* Medicaid enrollees are twice as likely to have diabetes
* Racial minorities and less educated people also are more susceptible
* Diabetics are thought to be more prone to contract COVID-19
Sources: Centers for Disease Control and Prevention, National Diabetes Statistics Report, 2020; Centers for Medicare and Medicaid
Insulin makers, middlemen stonewall, strike back
"This industry is anything but a free market when PBMs spur drug makers to hike list prices in order to secure prime formulary placement and greater rebates and fees," Grassley said in a statement.
"Our investigation worked to get to the bottom of this. We found that the business practices of and the competitive relationships between manufacturers and middlemen have created a vicious cycle of price increases that have sent costs for patients and taxpayers through the roof."
Wyden said, "Insulin manufacturers lit the fuse on skyrocketing prices by matching each other's price increases step for step rather than competing to lower them, while PBMs, acting as middlemen for insurers, fanned the flames to take a bigger cut of the secret rebates and hidden fees they negotiate."
The American Diabetes Association notes that determining actual costs to consumers is difficult: "out-of-pocket costs vary depending upon the type of health insurance each individual has and the type of insulin prescribed."
A study by Ohio-based 3 Axis Advisors of 41,000 prescriptions from more than 1,500 independent pharmacies for a three-pack (one-month supply) of Lantus Solostar insulin pens shows an average co-pay of about $34, and a median of about $9, for January through October 2020. About 1 in 12 co-pays topped $110.
The Senate report noted that none of the three pharmacy benefit managers studied — CVS Caremark, Express Scripts/Cigna and OptumRx, which together control three quarters of the PBM market — fully complied with the Finance Committee's request for information.
"Some companies in the insulin pricing and supply chain have decided it’s in their interest to stonewall the committee while Americans continue to ration their medicine, sometimes with fatal consequences," Grassley and Wyden said during the probe.
J.C. Scott, president and CEO of the Pharmaceutical Care Management Association, the trade group representing pharmacy benefit managers, said in a statement:
“While we are reviewing the committee’s findings, it’s important to understand that PBMs have stepped up efforts to help patients living with diabetes afford their medications and improve health outcomes. For example, some PBMs have introduced new programs to cap, or outright eliminate, out-of-pocket costs on insulin.”
The group would not respond to Dispatch/USA TODAY Network questions beyond the statement.
What is diabetes?
Diabetes occurs when the body cannot produce insulin (Type 1) or use insulin properly (Type 2), resulting in higher-than-normal levels of sugar in the bloodstream. More than 90% of people with diabetes are diagnosed with Type 2.
Insulin injections are the cornerstone of treatment for many people with diabetes, and patients depend on them to avoid severe health complications and death.
The body uses carbohydrates, proteins and fats as sources of energy to function. Primarily, the body breaks down carbohydrates for energy, producing glucose. As glucose levels rise in the bloodstream, the pancreas releases the hormone insulin.
Insulin moves glucose from the blood into the cells, where it can be used as a source of energy. Without insulin, glucose accumulates in the blood stream leading to high blood sugar (or hyperglycemia).
Type 1 diabetes is an autoimmune endocrine disorder that can be diagnosed at any age, but more often presents in children, teens, and young adults. Unlike Type 2 diabetes, which can be treated through diet and exercise, Type 1 diabetes cannot be prevented and can only be treated with insulin, through multiple daily insulin injections or a continuous insulin pump.
Sources: Centers for Disease Control, Mayo Clinic, American Heart Association, via U.S. Senate Finance Committee
Ashleigh Koss. head of global media relations for Paris-based Sanofi, blamed the PBMs for the continuing high cost of insulin. While the drugmaker's list price climbed dramatically in recent years, the net price fell 41% from 2012 to 2019 "because Sanofi paid higher and higher rebates to PBMs and health plans ... often in the face of threats from PBMs of exclusion from coverage. Despite Sanofi paying billions in rebates that lower insulin costs for middlemen, people’s costs at the pharmacy counter have continued to rise."
Greg Kueterman, senior director of Lilly Diabetes Communications for Indianapolis-based Eli Lilly and Co., said, "Revenues from diabetes medicines are used to find new innovations for people with numerous diseases."
He cited two examples: Donanemab, an antibody "that has demonstrated significant slowing of cognitive and functional decline in people with early symptoms of Alzheimer’s disease," and Bamlanivimab, a new "neutralizing antibody" to treat those recently diagnosed with COVID-19 that has received emergency use authorization from the FDA.
Kueterman said a $35 monthly co-pay for Lilly insulin — originally instituted to help needy COVID victims — has been extended to anyone "regardless of their insurance status."
Michael Bachner, director of media relations for Denmark-based Novo Nordisk, said, "One of our highest priorities is to ensure that our medicines are accessible and affordable to the patients who need them. The information in the committee’s report and its accompanying documentation reflect a limited picture of the efforts put forth by our company and other companies to manage formulary access."
"Your worst nightmare...is that your child is going to wind up with the same horrible illness."
The skyrocketing prices for insulin don't come as a surprise for Mandy Seaton.
The wife and mother who lives on Columbus' North Side has battled Type 1 diabetes for almost 32 years, ever since spending a week in the hospital when she was 13.
A blood sugar reading of under 140 is considered normal. Hers was 980.
"I was very lucky I didn’t go into diabetic ketoacidosis," Seaton said, citing a sometimes-fatal condition caused by a severe lack of insulin.
Although dealing with a chronic condition is difficult, "it’s also taught me how to be really strong and have a lot of perseverance and tenacity. I just made up my mind that my diabetes is not going to stop me," she said.
Seaton lived in South America for 10 months, ran a marathon and traveled to Mongolia.
She said her toughest struggle — both physically and mentally — came with her pregnancy and delivery of son Ronin, now 9.
"Your worst nightmare is that your child is going to wind up with the same horrible illness you have,” the pre-school teacher said.
At first, Ronin had no problems. But when he was 4, his mother recognized the symptoms right away.
Now, mother and son often do their tests and treatments together. Due to recent strides in technology, she and her husband can monitor their son's blood sugar via their smart phones, even when the third-grader returns to classes this week at Colerain Elementary School.
Seaton counts herself one of the lucky ones. Because of her husband Torrey's good health insurance as a Franklin County employee, they typically have to pay about $3,000 a year to meet the deductible for insulin and equipment.
"For us, what’s hard is January through March, cutting it close budget-wise, before we hit our deductible," she said.
A bigger hassle at the moment is that a change in health insurers means the type of equipment she has used for 20 years suddenly is no longer covered.
As the Finance Committee report notes, the effect of an "excluded" drug or treatment on patients means "they are forced to either switch to a new product, which could affect adherence and health outcomes, or pay significantly more to stay on their preferred medication."
While things are OK now, Seaton realizes that "in an instant, it could change" if they lose health insurance.
She said vials of insulin that used to cost $15 to $20 now run $350.
"It is insane. I do not understand it at all."
"People...trying to water down their medicine."
Those who are not as fortunate to have good insurance often with up with Chuck Gehring, president and CEO of LifeCare Alliance, which includes the Central Ohio Diabetes Association.
He sees the diabetics who lack insurance or are stuck with a high-deductible plan. He watches the elderly struggle to keep up with higher insulin payments from their social security checks, especially if they are in Medicare's "donut hole" — a gap in coverage that hits after the recipient has spent a certain amount ($4,130 for 2021) on prescription drugs.
“If you are a family with a child who gets Type 1 diabetes, suddenly you get this bill for $400 or $500 a month, and how are you supposed to handle that?” Gehring wonders. “It’s a house payment almost, or a car payment.”
And he's very aware of the horror stories of diabetics trying to cope.
"What we have seen that people are taking this into their own hands and cutting pills in half, or trying to water down their medicine," said Gehring, who has been in his post some 19 years.
The COVID-19 pandemic has only made these problems worse. Not only are those with compromised immunity such as Type 1 diabetics more subject to the coronavirus, they are more likely among the low-income or minority communities hit the hardest financially, and thus less able to afford insulin, an American Diabetes Association study showed last July. About a quarter already had used savings, loans or money from stimulus checks to pay for diabetes care.
The survey of 5,000 diabetics nationwide also showed that one in four had started rationing their care to save money, whether it was skipping or watering down insulin (which essentially makes it useless) or testing their blood sugar level less often. Some even turned to underground networks to share insulin.
Gehring said Lifecare Alliance hands out supplies for diabetics but cannot provide insulin.
"We just don’t understand the price increases. We just don’t. Nobody does,” he said.
While drugmakers say the net price of insulin has not increased as rapidly as the list price, Gehring noted that the uninsured and Medicare recipients in the donut hole must pay the list price. While the share for people with insurance is dictated by individual policies, those who could afford only coverage with high deductibles will be charged more.
“It’s just horrendous what people are spending,” he said.
While Gehring said he appreciates the U.S. Senate committee probe exposing the outrages that led to over-priced insulin, he wonders what anyone is going to do about it.
Will anything change to lower drug prices?
Ohio's two senators both serve on the Finance Committee.
Ohio Democratic Sen. Sherrod Brown says a good starting point to lowering prices would be approving the major package the panel passed in 2019 before it became "another victim of (then-Senate Minority Leader) Mitch McConnell’s legislative graveyard under Republican leadership." The measure included Brown provisions designed to increase transparency for pharmaceutical manufacturers and PBMs alike.
"I’ll continue pushing for the reforms we secured now that Democrats control the Senate,” he said.
Ohio Republican Sen. Rob Portman also backed the Prescription Drug Pricing Reductions Act, which he noted "was the only major, bipartisan drug pricing reform package in the last Congress."
“The fact that the price of insulin — a nearly 100-year-old, life-saving drug which costs very little to produce — has continued to skyrocket is shameful," Portman said.
He especially took issue with PBMs keeping millions of dollars worth of rebates and other manufacturer discounts that could be passed on to consumers.
"Both drug manufacturers and PBMs must do more to lower the high cost of this and other drugs, and I will continue to pursue bipartisan health-care and drug-pricing reforms this year,” Portman said.
In a joint release, Wyden and Grassley said their measure "puts a stop to mindless price gouging and holds companies accountable when they do increase prices."
In late 2019, Columbus-area Rep. Joyce Beatty introduced the End Price Gouging for Insulin Act, and the following year supported a bill that passed the House containing a similar measure. That also died in the Senate.
"With the dramatic increase in the cost of insulin, countless people are forced to choose between paying for their prescription, keeping a roof over their head, or even putting food on the table,” the Democrat said in 2020.
During the 2019-20 Ohio legislative session, Democratic state Sens. Hearcel Craig of Columbus and Nickie Antonio of Lakewood introduced a package of bills that would have capped the price of insulin at $100 for a 30-day dosage and allowed the Ohio attorney general to investigate the price of the medication. Neither got a single committee hearing aside from obligatory sponsors' testimony.
The same thing happened to the House version of the insulin cap sponsored by Columbus Democratic state Reps. Kristin Boggs of Columbus and Beth Liston, a doctor from Dublin.
A Senate panel did pass a measure to designate April 26 as Diabetic Ketoacidosis Day in Ohio, but it went no further.
@darreldrowland
How can I give/get help for diabetes treatments?
The Diabetes Supply Donation Service, provided by the Central Ohio Diabetes Association, allows the public to donate certain unused, unopened, unexpired, and non-prescription diabetes supplies.
Examples:
Test strips
Meters
Pumps & supplies
Glucose tabs, gels, etc.
Blood pressure supplies
Lancets
Lancing devices
Sharps containers
Compression socks
Ketone strip
Federal, state, and local guidelines have been established regarding the types of diabetic supplies that may or may not be donated. All supplies must be sealed and unexpired. The service cannot accept supplies specifically prescribed to an individual, including insulin, insulin needles, and test strips.
Contact the Central Ohio Diabetes Association, part of Lifecare Alliance:
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