US Senate committee questions leading pharmaceutical companies, PBMs on insulin pricing
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Key takeaways:
- A U.S. Senate committee discussed issues regarding insulin affordability during a May 10 hearing.
- The committee discussed transparency, generic competition and differences between list and net prices.
Members of the U.S. Senate Committee on Health, Education, Labor and Pensions conducted a hearing on May 10 to investigate insulin affordability and what caused prices to increase during the past decade.
Executives from the three leading insulin manufacturers and the three leading pharmacy benefit managers (PBMs) in the U.S. provided testimony and answered a wide range of questions from committee members about the rising cost of insulin as well as prescription drugs in general. The hearing comes less than a month after a new Senate bill (S.954) was proposed to cap out-of-pocket cost for insulin at $35 for Americans with commercial insurance, require PBMs to pass on insulin rebates to health care plan sponsors and help promote the development of generic and biosimilar drugs. Sen. Bernie Sanders, (I-VT), chair of the U.S. Senate Committee on Health, Education, Labor and Pensions, noted that while there has been progress in recent months with the three insulin manufacturers all announcing price cuts, more action is needed.
“The bottom line is, we appreciate the work being done on insulin,” Sanders said during the hearing. “We thank all of the advocates out there for fighting, but we’ve got to make sure Americans can afford the price of prescription drugs.”
Sen. Bill Cassidy, MD, (R-LA) minority ranking member of the committee, said the goal of the hearing was to determine why insulin and other prescription drug prices are so high so that solutions can be devised.
“I suspect that if we realign incentives, we can actually find a way to benefit patients,” Cassidy said during the hearing.
Insulin manufacturers say rebates, fees drive up costs
David Ricks, chair and CEO of Eli Lilly, said his company has made affordable insulin a priority in recent years, claiming the company has only reduced prices since 2017 and that the typical person pays an average of $20.48 per month for Lilly insulin. As Healio previously reported, Lilly announced large price reductions and an out-of-pocket cap of $35 on insulin costs for people with commercial insurance in March.
Ricks noted that simply lowering insulin prices will not entirely fix the issues with insulin affordability. In the past, he said, list price increases went almost entirely to paying increasing fees and rebates. Ricks said that last year, 20% of the list price of insulin went to Lilly, with 80% going to other companies in the form of fees and rebates.
“Reforms are needed,” Ricks said. “We need a system that supports both world-leading innovation and lower out-of-pocket costs for Americans. Those reforms must help patients at the pharmacy counter, while also incentivizing U.S. companies to continue investing in world-leading amounts of research and development, which results in Americans having access to more and newer medications than any other country in the world.”
Paul Hudson, CEO of Sanofi, made similar comments to Ricks’, saying 84% of Sanofi’s gross insulin sales went to payers as rebates in 2022. Additionally, he said, the average net price for insulin glargine (Lantus) decreased by 55% from 2012 to 2022. As Healio previously reported, Sanofi announced further price cuts on insulin glargine and other insulins beginning next year, as well as a $35 out-of-pocket cap on insulin costs for people with commercial insurance.
Hudson noted the decrease in net price for insulin over time has not translated to lower out-of-pocket costs due to the structure of how drugs are delivered in the U.S.
“Today, there are just three payers in the system that cover 80% of American lives,” Hudson said. “These consolidated entities encompass PBMs, health insurance, specialty pharmacies and group purchasing organizations. This vertical integration gives these corporations near total control over the products patients can access and the price they have to pay.”
Lars Fruergaard Jorgensen, president and CEO of Novo Nordisk, said about 75% of his company’s insulin sales go to payers in the form of fees, discounts and rebates. He noted that Novo Nordisk has made efforts to help people struggling to afford insulin by providing a one-time supply of free insulin for people who face insulin rationing. He added that the company’s patient assistance program provides free insulin for people living in households below 400% of the federal poverty line. As Healio previously reported, Novo Nordisk announced price reductions on several insulin formulations that will take effect in 2024.
“Patients often find themselves trapped by a health care system with misaligned economy incentives,” Jorgensen said. “It’s a system where more and more dollars flow to insurers, newly created subsidiaries, so-called group purchasing organizations and the PBMs, but not to patients.”
PBM representatives say more competition is needed
While the pharmaceutical companies pointed to rebates as a major cause for high insulin prices, representative from the PBMs said that was not true. David Joyner, executive vice president of CVS Health and president of CVS Caremark said his company has made progress on insulin affordability through negotiations, promoting competition and encouraging the pharmaceutical companies to adopt plans to lower out-of-pocket costs.
“Clients and plan members paid one-third less on average for a 30-day supply of insulin in 2022 than they did in 2017,” Joyner said. “At CVS Caremark, the average member cost for a 30-day supply of insulin was less than $25, and for those using the preventive drug list, was $0.”
Adam Kautzner, PharmD, president of Express Scripts, said his company has been at the forefront of driving down prices for insulin. He said the company’s Patient Assurance Program caps out-of-pocket insulin costs at $25 and that the company announced the launch of a copay assurance plan this year to allow employers and health plans to cap out-of-pocket costs for specialty and non-specialty prescription drugs.
“Drug manufacturers seek the highest price point possible and exploit the patent system and marketing practices to maintain monopoly status for their brands,” Kautzner said. “For employers sponsoring high-deductible health plans, restrictions prevent lowering costs for patients before meeting their deductible.”
Heather Cianfrocco, CEO of Optum Rx, said there has been little substantial advancement in insulin products in recent years, even though prices have nearly doubled over the past 10 years. She said Optum Rx began offering point-of-sale discounts on insulin to fully insured group customers in 2018, eliminated out-of-pocket costs for preferred short-acting and long-acting insulins in its standard fully insured group plans in July 2022 and partnered with Sanofi to offer a monthly supply of insulin for $35 for people without health insurance.
“Cost-sharing on a monthly supply of insulin is now capped at $35 on Medicare,” Cianfrocco said. “A similar approach in the commercial market would close the gap for Americans who still cannot consistently afford insulin, but importantly, such a cap must preserve the ability for PBMs to negotiate for the lowest cost of insulin for their customers. Because even with the welcomed list price reductions by some manufacturers on some insulins, the list price for insulin is still above $35 per prescription.”
The three PBM representatives all said that rebates are not the cause of increased insulin prices, but rather serve as discounts that prevent prices from climbing higher. Instead, they said more competition is necessary to drive insulin prices down.
“Without the ability to use this negotiating tool to achieve lower drug costs, health care spending would be much higher,” Kautzner said. “Drug competition is ultimately what drives rebates, lower list prices and lower net costs.”
“Competition works,” Joyner later added. “We will continue to look for competition in the therapeutic categories, lowering the cost for the plan sponsors ... that pay and fund the benefit and then encouraging them to adopt benefit designs that allow it to be more affordable for members.”
Senators question list prices, generic options
Many questions were raised by the committee members during the hearing, with some Senators focusing on where the money from the cost of insulin was going. Sen. John Hickenlooper (D-CO) asked the PBM representatives how much of the list price of insulin goes to their company. Joyner said 98% of rebates collected by CVS Caremark are passed on to their customers. Kautzner said Express Scripts returns more than 95% of rebates to customers, and Cianfrocco said 98% of the value of the savings Optum Rx negotiates is passed on to customers.
Sen. Tina Smith (D-MN) asked the pharmaceutical companies whether they could simply lower the list prices for insulin. Joyner and Kautzner, the PBM representatives, said their companies would welcome lower list prices, and Kautzner added that the lower list prices for insulin are happening now only due to government intervention. Conversely, Hudson said Sanofi tried to reduce the list price of insulin before recent legislation was passed.
“It was 2018 when we [introduced] a lower priced analog, nothing to do with recent policies or announcements, and reduced the price of that three times to no effect,” Hudson said. “Then it was last August when we made in the same factory ... an unbranded Lantus at 60% off, long before this year’s debate, so I’m a bit perplexed. [Lower-cost insulins] have been there, we’ve stepped up and done that.”
Joyner countered by saying his company switched many of its customers away from Lantus [Sanofi] in 2017 after another lower-cost generic insulin came onto the market.
“Back in 2017, a biosimilar came to market by the name of Basaglar [Lilly], which was generic competition in that category,” Joyner said in reply. “We adopted that product as our preferred product. We lowered the list price, we lowered the overall net costs for our customers and we converted 97% of the patients on Lantus onto Basaglar. It was a significant savings for our customers, and we actually embraced a much lower list price than what Lantus was promising at the time.”
Sen. Timothy Kaine (D-VA) asked the pharmaceutical representatives about their respective companies’ unbranded insulin offerings and whether that was a solution for reducing costs. All three pharmaceutical CEOs said the lower-cost unbranded versions of insulin they offered were accepted in less than half of formularies.
“After 4 years, [insulin] lispro product, which is the copy and now costs $25, is available on one out of three formularies in America,” Ricks said. “I think it’s clear that the lower price is not preferred.”
Kaine also discussed how the nonprofit generic drug company Civica Rx plans to produce three generic insulin biosimilars at a lower cost and asked the PBM representatives if they would commit to offering the generic products for either no copay or a low-cost copay. None of the PBMs directly committed to offering biosimilar insulins at a low copay, but instead stated they would consider that if it was the lowest cost option for patients.
Sanders asked the insulin manufacturers whether they would commit to reducing the costs for newer, more expensive insulins, and Ricks and Hudson said Lilly’s and Sanofi’s $35 caps would apply to all insulins.
“I think anybody who has listened to this hearing has concluded that the system is broken,” Sanders stated at the end of the hearing. “It is enormously complicated. There’s virtually no transparency. I know that the price that Medicare will pay for a drug is different than what Medicaid will pay, is different than what the VA pays, that hospitals pay a different price, that doctors pay a different price. All of that opaqueness, lack of transparency, works for both the drug companies and I think for the PBMs as well."
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The need to make insulin affordable for all Americans. U.S. Senate Committee on Health, Education, Labor & Pensions hearing. Available at https://www.help.senate.gov/hearings/the-need-to-make-insulin-affordable-for-all-americans. May 10, 2023.
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