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Can changing rebate rules stop the ‘carousel’ of insulin pricing hikes?

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In 1923, the Nobel Prize in Medicine for awarded for the discovery of insulin and its therapeutic effects. Since then, the drug has become a fundamental part of the way physicians care for millions of diabetic patients.

In recent years, however, much of the attention around insulin has been on the skyrocketing prices gating access to the life-saving medication and threatening patients’ ability to effectively manage their condition.

At an event during the annual American Diabetes Association Scientific Sessions in San Francisco, representatives from PBM, health plan, drug manufacturing and patient advocacy groups came together to discuss the causes of increasing insulin prices and potential solutions to the problem.

Central to the debate during the event was a back-and-forth over the proposed HHS rebate rule, which would eliminate the ability for PBMs to negotiate rebates with drugmakers, unless they were discounts made at the point-of-sale. The idea being that shifting rebates from closed door negotiations to patients would mean lower costs and a more transparent pricing system.

While the rule would only apply to Medicare Part D plans and Medicaid MCOs, the stated hope from policymakers is that commercial plans will also adopt the same practices.

For a panel that stressed the importance of different stakeholders working together and moving past a culture of finger pointing, there was definitely plenty blame to go around.

Lori Reilly, the executive vice president of research and advocacy for PhRMA, came out strongly in favor of the rebate rule change, which she said could lower the price patients actually pay.

“The system is complex and convoluted and the rebates in this system – while well intentioned to drive competition and lower costs – aren’t making their way to patients,” Reilly said.

Both Katie Allen with AHIP and Bill Head with the Pharmaceutical Care Management Association, pushed back on the idea that rebates would save costs for patients, pointing to projections which have found increased premiums and taxpayer burden as a result of changing the system.

“There are a number of solutions that seem logical and have an impact on patients that will actually lead to higher costs overall,” Allen said. “One of those things is the rebate rule.”

Deflecting blame over the pharma industry’s rising list prices for insulin, Reilly said in most cases the net prices seen by drugmakers have decreased over the past 10 years and called out PBMs for refusing to put lower-priced insulin alternatives onto their formularies.

She stated the theory that PBMs may be disinclined to offer lower cost drugs due to what she termed as the “addictive nature of rebates.”

In most cases discounts and rebates negotiated between PBMs and manufacturers are kept secret and higher rebates are often used as leverage for better formulary placement.

One topic where panelists from across the industry seemed leery to engage with was the idea of actually lowering insulin list prices, which could lead to lower revenues across the supply chain.

Three drugmakers dominate the global market for insulin – Eli Lilly, Sanofi and Novo Nordisk – and the trio regularly raise the list price for their insulin products. Patient advocates argue that the current rebate system cloaks the ways that members of the insulin industry extract profits from continual price increases, while passing the buck to patients.

“We keep going back to the issue of rebates, but what’s interesting is we have competition in the market between three insulins and there’s still stepwise rises in pricing,” Aaron Kowalski, the president and CEO of nonprofit diabetes research and advocacy group JDRF.

“If there were true market economics here, we would see low list prices for diabetes. I’m not a trained economist, but I know that if you have three relatively similar products in the market, prices don’t normally go up, they go down.”

Here are some of the statistics around insulin pricing in the U.S.

Between 2012 and 2016, average insulin spending for patients with Type 1 diabetes nearly doubled from $2,864 to $5,705 and a recent clinical study published in JAMA Internal Medicine found that 30 percent of patients ration their insulin.

The human cost behind those numbers is striking.

In 2017, a 26-year-old Minneapolis man named Alec Smith was found dead in his apartment from diabetic ketoacidosis, less than a month after the insurance coverage he received from his mother lapsed. Without employer-sponsored insurance, Smith was forced to ration his insulin supply because of the high cost of his medication, eventually leading to his death.

These stories have led to patient advocates to call for a wholescale revamp of how insulin is priced and offered to individuals with diabetes.

“There is a completely broken system with these rebates, the conflict on interest at the health plan and the PBM level is out of control and it’s probably going to take an act of Congress to stop it,” said George Huntley, the director of the National Diabetes Volunteer Leadership Council and a former chair of the ADA, in an interview after the panel.

Alongside the possibility of federal action, individual states are making their own moves. Earlier this month, Colorado became the first state to pass a law capping out-of-pocket costs for insulin for insured patients at $100 a month.

Last month, the attorney general of Kentucky sued the three major insulin manufacturers for violating the state’s consumer protection law.

The ADA published a white paper last year in Diabetes Care which outlined routes to improve access and affordability of insulin. The study found that manufacturer rebates are often not directly passed to diabetes patients and recommended point-of-sale discounts as a one answer.

Additionally, the researchers wrote that “the current payment system should rely less on rebates, discounts, and fees based on list price.”

One of article’s main points was that the complex network of manufacturers, wholesalers, PBMs, pharmacies, health plans and employers creates a system that feeds upon itself and where no agreed-upon price for any insulin formulation exists.

“Everybody’s on this carousel and its spinning so fast that nobody can get off. If they step off they’re going to fall and skin their knee,” Huntley said. “The only way to stop it is stop the whole thing once and let everybody get off.”

Picture: z_wei, Getty Images

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