Bill tackles insulin affordability; Critics say it may require a broader scope

Photo by Alexius Horatius / Wikimedia Commons. Licensed under CC BY-SA 3.0

By Sebastian Jaramillo
Boston University Statehouse Program

The cost of treating her Type 1 diabetes for 15 years has taken a toll on Claire Clendenen’s life. Clendenen, who works in public health in Boston, just recently paid $700 for a three-month supply of insulin.

“Carrying around this huge fee on your shoulders, the cost, the accessibility, the constant fights with insurance companies, the phone calls to your doctor’s office. There’s so many hurdles that we have to jump through to live,” said Clendenen, the Massachusetts chapter leader of T1 International,  an organization that works to improve access to insulin and diabetes supplies.

would cap Clendenen’s cost at $25 for a 30-day supply of insulin. The bill won initial approval in the Senate and is now pending before the House. House leaders have not said if and when they will take it up.

Clendenen is not alone in her struggle. According to a 2019 study conducted by T1 International, 43 percent of young adults aged 18 to 25 with diabetes have had to ration their insulin, which could result in long-term complications for their health.

H.S, a Boston medical student who chose to be identified by her initials, was diagnosed with Type 1 diabetes in March of 2021. The diagnosis came as a shock. She had no relatives with diabetes, and although she had heard about the high costs of insulin, she had yet to experience them firsthand.

“Even with my health insurance, the price, when they were done wrapping everything up, I just couldn’t believe it,” she said. “How in the world am I going to be able to afford this amount of supplies, particularly the insulin, every single month for the rest of my life?”

Alyssa Vangeli, prescription drug policy expert for Health Care for All, a consumer health care organization, said she expects the bill, if it passes, would provide long-lasting relief for those struggling with insulin affordability.

“Addressing both direct out-of-pocket costs, through mechanisms such as capping co-payments for certain medications, in combination with efforts to address why prescription drugs are priced so highly in the first place will be an effective way to address prescription drugs costs both in the short and the long term,” she said.

Health Care for All partnered with the Massachusetts Prescription Drug Affordability Coalition to back the bill, which was sponsored by Sen. Cindy Friedman, an Arlington Democrat who co-chairs the Committee on Health Care Financing. Members of the coalition include individuals with disabilities, faith-based groups, mental health organizations, and health policy experts, among others. 

The bill’s key provisions seek to give the state’s Health Policy Commission authority to engage drug manufacturers in reviews of drug prices to determine if prices are excessive. It requires drug manufacturers to be more transparent about their pricing. Among other provisions, the bill also seeks to increase oversight of pharmacy benefit managers, or PBMs, who serve as the middlemen between drug manufacturers and health insurance companies.

But industry players say the problem of insulin affordability is far more complicated than the bill’s advocates suggest. 

William Smith, visiting fellow at the Pioneer Institute, a Boston-based free market think tank, who has served in the White House Office of National Drug Control Policy, believes the bill will target the wrong actors. Health insurance companies and PBMs, not drug manufacturers, are the real culprits behind the high cost of insulin for patients, Smith said.

“Insulin is kind of a poster child for the problem with drug prices these days,” he said. “The real problem going on in the drug pricing world is that patients are paying much more out of pocket than they used to.”

The way drugs are priced is affected by rebates that drug manufacturers provide to insurers. For example, if a hypothetical drug’s list price is $1,000, a manufacturer might provide a 20 percent rebate, and an insurance company would purchase the drug for $800, which is considered the drug’s net price. But when a patient goes into a pharmacy and has a copay of 30 percent, the 30 percent is calculated on the list price of the drug, or $300 in this example.

If insulin manufacturing companies offer higher rebates, they have a higher chance of being the preferred drug on insurance companies’ health plans. Smith said Sanofi, Eli Lilly and Novo Nordisk are the three primary insulin manufacturing companies who have been in fierce competition to lower the net price of insulin.

But the companies have simultaneously increased the list price in order to keep profits high while still offering the rebates. When list prices rise, patients have to pay more out of pocket.

In February of 2019, Sanofi CEO Olivier Brandicourt testified before the US Senate Committee on Finance and said that in 2018, 55 percent of Sanofi’s gross sales went towards rebates, including $4.5 billion in rebates paid to government payers and $7.3 billion to commercial insurers. As a result, the average net price of insulin actually declined over the last number of years. Brandicourt said there are other reasons patients are paying more out of pocket for insulin besides the rise in rebates – for example, changes in health plan design, with more people enrolled in high deductible health plans.

Lora Pellegrini, CEO of the Massachusetts Association of Health Plans, disagrees with Smith. She thinks insulin affordability issues stem from the lack of transparency by insulin manufacturing companies.

Pellegrini said MAHP advocates for full transparency in how drug prices are set because she believes all players should be held accountable, and she believes that is one of the keys in tackling insulin affordability. “The more we can open the black box, shed light on what’s driving health care prices as it relates to pharmaceuticals, the better off as a Commonwealth we’re going to be, and the more we can look to hold pharmaceutical company manufacturers accountable to the Health Policy Commission,” she said.

However, Pellegrini thinks the $25 cap on a 30-day supply of insulin is misguided. 

Pellegrini said that pharmaceutical companies would like nothing better than if patients walked into a drug store and paid zero dollars for insulin. However, that would mean insurance companies would have to absorb the entire cost of the drug, which would cause health insurance companies to raise premiums.  She worries that if the price is capped at $25, pharmaceutical companies would still profit, but insurers would lose out, leading to higher premiums.

“I think it is a noble policy, what lawmakers are trying to do, but it’s a bad policy,” she said.

Zach Stanley, a spokesperson for MassBio, a non-profit biotechnology council, thinks a long-term solution to insulin affordability requires granting patients access to funds from drug rebates. Stanley envisions a bill that would mandate that health insurers and PBMs share a percentage of the rebates they receive for a drug to the patient, giving a discount directly at the pharmacy counter as a method of reducing or eliminating out-of-pocket costs.

“The drug manufacturers do not control what the patients pay at the pharmacy counter,” he said.

While the solution may be complex, patients are looking to government to address the problem.

Clendenen said she believes that the government can play a more active role in tackling insulin affordability. “I’m very sick of having to convince policymakers, pharmaceutical companies, that my life is more important than their next raise,” Clendenen said. 

This article originally appeared in The CommonWealth Magazine.

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