“Perverse” incentives in the insulin supply chain lead to artificially high prices, as well as limited competition in the markets, according to a bipartisan report released Thursday by two lawmakers.
The report from Reps. Diana DeGette (D-Colo.) and Tom Reed (R-N.Y.), co-chairs of the Congressional Diabetes Caucus, took more than a year to complete and concluded that several factors drive insulin prices up, while forces that would typically drive prices down are “blunted.”
“Many cannot live without it, but countless patients struggle to afford it,” DeGette and Reed said in a statement.
“As their out-of-pocket costs continue to rise, the current system is unfairly putting insulin out of reach – placing millions of lives at risk.”
The price of insulin has doubled since 2012, after nearly tripling in the previous 10 years, the lawmakers say, despite no recent major breakthroughs that warrant the increases. Only three companies in the U.S. manufacture insulin, and they repeatedly get extended patents to keep cheaper generics out of the marketplace.
In their recommendations, DeGette and Reed said any legislative response to the rising prices of insulin should focus on generating more competition and creating price transparency.
They also recommend reforming the convoluted rebate system, in which manufacturers give discounts to wholesalers and insurers in exchange for a larger market share over their competitors and more favorable terms with insurers that encourage patients’ to use their products.
This system artificially raises the prices of insulin, and the prices are rarely passed on to consumers, they said.
These rebates are based on the drug’s list price, and when wholesalers and middlemen push for larger rebates, manufacturers often raise their list prices.
This most impacts patients who don’t have insurance and have to pay the full list price for insulin.
In their recommendations of how to drive down insulin costs, the lawmakers said Congress could introduce legislation requiring that wholesalers use standardized fees instead of rebates based on list prices.
They also recommend Congress require drug plans in federal health insurance programs disclose how much money they get from rebates. This information is closely held by the middlemen who manage prescription drug benefits for insurers, drugmakers and insurers, and was not even provided to DeGette and Reed’s offices, the report said.
Creating more transparency surrounding rebates could drive down prices, the lawmakers said.
Additionally, the amount patients’ pay out of pocket for insulin should be linked to the negotiated prices health plans get, not the list price, they argue.
“Some patients’ out-of-pocket costs are based on insulin’s list price,” the report says.
“As a result, patients do not benefit from the discounts and negotiated prices generated by rebates.”
In challenging the limited competition there is in the insulin marketplace, the lawmakers recommend Congress pursue legislation cracking down on “evergreening,” a process in which drug manufacturers get extend patents on their drugs by claiming innovations in their formulas.
But these innovations appear to be more incremental compared to past breakthroughs, the report says.
Allowing manufacturers to repeatedly extend their patents keeps cheaper generic competitors out of the markets, and keeps insulin prices high, the report says.
The report notes that, since the discovery of insulin in the 1920s, three manufacturers have produced brand-name formulations without generic competition.
To address this, Congress could introduce legislation requiring drug makers show that new formulations of insulin result in improved disease management.
Congress could also introduce legislation banning “pay-for-delay agreements,” in which brand- name insulin manufacturers pay generic manufacturers not to produce older, off-patent formulations of insulin.
Manufacturers could also be required to disclose how they set their insulin prices, the report says, placing downward pressure on prices.