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  • Writer's picture Shannon Wightman-Girard

New insulin report highlights how incentives benefit middlemen, harm patients

The US Senate Finance Committee has released a new report detailing findings of its investigation into the role that market dynamics play in the pricing of insulins.

The report conclusions further solidify what we already know: perverse incentives in the market drove up insulin costs for patients, according to a posting on the Pharmaceutical and Research Manufacturers of America website, by Brian Newell, deputy vice president of public affairs at PhRMA.

Key Details

Many insulins have experienced significant net price declines in recent years.

  1. Since 2014, the net prices for the most commonly used classes of insulins have declined by 40%-50%, on average. In fact, insulins are less expensive today than in 2007. Save

  2. As the Senate Finance Committee explains, “insulin manufacturers compete fiercely, using rebates as bargaining chips,” to secure favorable coverage on pharmacy benefit managers’ (PBMs) formularies. In fact, according to SSR Health, last year these dynamics lowered the net price of insulins by 83%, on average.

But patients are NOT sharing in the savings. While the existing system results in increasing rebates and discounts and declining net prices for insulin, these savings are often not used to lower patients’ out-of-pocket costs at the pharmacy counter.

  1. Patient costs at the pharmacy counter can take the form of deductibles or coinsurance, which expose patients to the undiscounted list price of a medicine, even though health plans and PBMs pocket sizable discounts and rebates.

  2. In fact, according to an analysis by IQVIA, patients with deductibles and coinsurance taking brand diabetes medicines paid 3.6 times more out of pocket, on average, in 2019 compared to patients with flat co-pays.

Middlemen Benefit at the Expense of Patients

Economists and actuaries have observed that the distorted incentives within the pharmaceutical supply chain may create a dynamic where middlemen involved in distributing and paying for prescription medicines benefit from higher list prices and higher rebates. This raises questions about whether insurers and PBMs are more focused on the size of rebates than on achieving the lowest possible costs and best outcomes for patients.

The Senate Finance Committee has answered these questions, concluding that “PBMS have an incentive for manufacturers to keep list prices high, since the rebates, discounts, and fees PBMs negotiate are based on a percentage of a drug’s list price – and PBMs retain at least a portion of what they negotiate,” Mr Newell concluded.



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