One Little Vial…
Travel Season is upon us. With advertising and social media, we now have exotic places on our bucket list. After hours and hours of endless searches and pop-up ads, eventually we give up and seek the help of a travel agent. The agent puts together the itinerary of our dreams for a ‘bargain’. The travel agent usually receives a modest commission from the vendors (airlines, cruise lines, resorts, hotels, etc) for recommending them and coordinating the booking. Everybody walks away happy… assuming your bags get to the destination at the same time you do!
The health industry also uses travel agents. These ‘travel agents’ are called Pharmacy Benefit Managers (PBMs). But these travel agents don’t charge a small fee, and very few people walk away “happy”.
What is a Pharmacy Benefit Manager?
Pharmacy Benefit Managers negotiate drug prices with drug companies and device manufacturers on behalf of health insurance companies. Basically, they are the middle-men between insurer and the manufacturer. Based on their negotiations with the manufacturers, the PBMs design “formularies” for the health insurance companies. This formulary is then used as a guide for insurance companies to cover one drug versus the other for patients.
How do drug companies price their insulin?
Here’s where it gets interesting. To compete for preferential placement on the PBMs’ formularies, drug companies offer PBMs “rebates” off their benchmark (list) prices. PBMs pocket a percentage of the difference between the reported benchmark price and the undisclosed real price they are able to secure. This difference in prices is known as the “spread.” The larger the spread, the higher the PBMs’ profits. Thus, the manufacturer offering the largest spread is more likely to secure a position on the PBMs formulary list. That’s just simple economics.
Now, considering that the analog insulins are so similar and usually interchangeable (think traveling to the same destination, with same airline, booking same hotel), you’d figure the drug manufacturers would keep reducing their prices to undercut their competitors and secure a spot on the formulary. But that’s where you’re wrong. The drug companies created a 2-faced public / private system where they set two different prices for their insulin treatments: a publicly-reported, benchmark price (your list price) and a much lower price that they offer to the PBMs. To make a profit, the drug companies hike their publicly-reported benchmark prices, while maintaining the real prices they offer to PBMs.
Another point to consider, America is one of only 2 countries that allows direct-to-consumer advertising for prescription medications. Billions of dollars are spent on advertising (think of all the TV ads we now see for the plethora of meds on the market), which is eventually built into the price WE pay for the products.
A recent study showed that the insulin users in North America make up 14% of all insulin users worldwide, but they account for nearly 50% of total world-wide sales. With so many profit-making avenues, you can see why this three-company oligopoly (Lilly, Novo Nordisk, Sanofi) is keen to keep raising insulin prices. Insulin users in North America contribute a disproportionate amount to pharmaceutical companies’ bottom lines.
When Humalog® hit the market in 1996, it sold for $21 a vial. Its current list price is $452 per vial. The cost of making insulin has not changed; even the drug manufacturers admit that. Yet, the price charged to consumers has increased 10 to 20-fold over the past couple of decades.
Now consider this. If you needed to get to Los Angeles and your travel agent quoted you a ridiculously high price for airfare, you might try booking on your own or finding an alternative means of travel, such as train or car. Unfortunately, people with diabetes don’t really have other options. It’s not as if we can magically bring the pancreas back to life or mix up a batch of insulin in the bathtub.
Many unfortunate patients are now forced to ration their insulin. Some people drop out of college to start working or marry early just to have insurance so they can afford insulin. Some patients force themselves into DKA so they can get insulin from their hospital’s emergency department.
Before 1920, a diagnosis of Type 1 diabetes was a death sentence. Then along came insulin, and it was no longer a death sentence. But now insulin is unaffordable for many who need it, and it seems like a death sentence all over again.
In January 2017, patients in Massachusetts brought a class action lawsuit against Sanofi, Eli Lilly, and Novo Nordisk, the only 3 manufacturers of insulin, claiming that each of the companies set artificially high prices for their drugs in order to gain preferred status within the insurance companies’ lists of covered drugs. While the lawsuit is ongoing, what are patients to do?
With such inflated prices, what are insulin users options?
There are a few options, some more dangerous than others:
1) Make your own insulin. No, Really. Those with access to sterile beakers and raw materials have been dabbling and are close to fruition. I’m sure they won’t mind sharing the “process” when they make a breakthrough.
2) Make a friend in a country where insulin is subsidized by the government, such as Canada; have them procure and ship insulin to you in a temperature-controlled package.
3) Purchase insulin off of craigslist or some other non-secure site and pray that it’s not expired, spoiled, or tainted.
4) Try Walmart, which sells older/generic insulin (such as Regular and NPH) under their ReliOn label at discounted prices.
5) Visit manufacturer websites to apply for savings cards that lower patient co-pays. Eli Lilly will provide insulin at up to 40 percent off for patients on high-deductible plans. (The downside is that it may not count toward their deductibles.)
6) Consider shifting to older, less costly insulins. This can be dangerous for Type 1 diabetics because the older insulins are not as efficient or consistent in glucose control as the newer analogs are.
7) Sign the online petition launched by the American Diabetes Association at MakeInsulinAffordable.org
8) Support lobbying efforts. Pressure on drug makers has started to bring small changes. Novo Nordisk announced they will limit future price increases to single-digit hikes per year. Transparency bills are being introduced all over the country to force drug manufactures to unveil their behind-the-scenes business practices. Many states are requiring manufacturers and PBMs to provide detailed public reports on the pricing structure of prescription drugs that are popular in that state.
9) Check resources at https://cheapinsulin.org
There’s hope yet. We know the answer to the question: Why is insulin so expensive? Greed. Plain and simple.
Unfortunately, the solution isn’t as obvious.
ABOUT THE AUTHOR: ADWOA BEKOE
Originally from Ghana, Adwoa Bekoe is a Registered Pharmacist in Sicklerville, NJ with a specialized interest in diabetes care and treatment. She is completing a mentorship at Integrated Diabetes Services, and plans to become a Certified Diabetes Educator.
Really? “Generic insulin” literally (by its chemical makeup) cannot exist. It’s bad enough when the mainstream press gets this confused, but a professional pharmacist writing on behalf of IDS is an inexcusable muddying of the waters about the difference between drugs that are inexpensive because there are better alternatives, and those that are inexpensive because they are chemically simple enough they can be produced by enough different companies as to create actual competition in the marketplace. Aside from that, RelIiOn NPH and R aren’t even “generic” — they’re brand name Humulin or Novolin sold under a different label at Walmart and some Sam’s Club stores (which one depends on who gave Walmart the best price that year)
The use of the term “Generic” int this sense is because this is how the medications are classified by pharmacies. Essentially there are “brand names” and everything else gets the descriptor “Generic” when a Walmart pharmacy tech pulls up a brand listed insulin for example these would be listed at the generic alternatives.