Capping the Flood: Efforts to Address the Ever-Rising Price of Insulin

by Emmaline Fisher, Associate Member, University of Cincinnati Law Review Vol. 91

I. Introduction

There is a need for a cap on the high cost of insulin in the United States.¹ It is the most expensive chronic illness in the country, totaling a cost of about $327 billion per year.² Over the last twenty years, the leading manufacturers have increased insulin prices by more than 600%.³ Within the United States, there are thirty-seven million people who have diabetes, and it is estimated that about one of every three seniors has this chronic illness.⁴ Diabetes is one of the leading causes of death in the United States, causing 100,000 deaths in 2021.⁵ Since costs have steadily increased over the past few years, more and more people have had to ration and hoard insulin, which can potentially lead to complications and even death.⁶

This article discusses the enacted and pending legislation that seek to address this problem. Section II provides background on pharmaceutical middlemen as a major cause of the rising price of drugs in the United States, the enactment of the Inflation Reduction Act, and pending legislation that seeks to address remaining gaps in the Inflation Reduction Act’s insulin cap. Section III compares the pending legislation and points out flaws in the way it seeks to solve the problem. Finally, Section IV concludes by naming the two pieces of legislation that have the greatest likelihood of alleviating the financial burden for the greatest number of diabetic Americans.

II. Background

A. A Major Cause of Rising Prices: Middlemen and the Lack of Transparency

Pharmacy Benefit Managers (“PBMs”) negotiate discounts with drug manufacturers, determine patients’ copayment amounts, create formularies (lists of prescription drugs covered by an insurance plan), and decide how pharmacies are reimbursed for distributing prescriptions.⁷ There are three main PBMs that control the vast majority (eighty-five percent) of the market: OptumRX, CVS Caremark, and Express Scripts.⁸ Critics of their practices believe that PBMs have contributed to rising drug prices.⁹ PBMs are able to keep part of the discounts and rebates that they negotiate with manufacturers.¹⁰ They are supposed to pass on both the rebates and discounts to consumers and health insurance plans.¹¹ However, there is very little transparency about how much of the discounts and rebates are passed along.¹²

Drug manufacturers argue that the rising prices are caused by PBMs because they have to pay the PBMs rebates and give discounts in order to ensure that their products have a preferred formulary placement.¹³ There appears to be a direct relationship between the increase in rebates and list prices of drugs.¹⁴

Spread pricing, where PBMs pocket the difference between what they charge insurers or employers for a drug and what is reimbursed to the pharmacies, is another practice that has led to increased drug prices.¹⁵ These tactics by PBMs are likely a major contributor to the rising cost of drugs, specifically insulin.¹⁶

There is some effort to address PBMs’ questionable practices.¹⁷ The Pharmacy Benefit Manager Transparency Act was introduced on May 24, 2022.¹⁸ This piece of legislation would force PBMs to provide more transparency regarding their practices by granting the Federal Trade Commission (“FTC”) the ability to hold them accountable.¹⁹ PBMs would have to report their profits made through spread pricing, and they would be required to explain why they moved drugs to different formulary tiers, resulting in increased costs.²⁰ It would also create incentives for PBMs to actually pass along all of their rebates to health plans.²¹

B. Inflation Reduction Act

The Inflation Reduction Act, which was recently passed in August 2022, seeks to partially address the rising cost of insulin.²² It limits insulin copays to $35 per month, starting in 2023.²³ However, the Act fails to apply to diabetics who have private health insurance.²⁴ The bill went through the budget reconciliation process.²⁵ As a result, the broad cap of insulin prices was removed, and the insulin cap was only applied to Medicare Part D beneficiaries.²⁶

The two bills that intend to cap the out-of-pocket costs to $35 per month for those under private health insurance and Medicare are the Affordable Insulin Now Act and the Improving Needed Safeguards for Users of Lifesaving Insulin Now Act (“INSULIN Act”).

C. Affordable Insulin Now Act

The Affordable Insulin Now Act, which passed the House near the end of March 2022, plans to cap cost-sharing (the amount paid by the insured) of insulin for those under Medicare and private health insurance at $35 per month or at 25% of the plan’s negotiated price (whichever is less).²⁷ However, this bill fails to include any component that would result in drug policy reform.²⁸ It focuses solely on simply reducing the cost of insulin, which is ultimately a short-term solution to a much larger problem.²⁹

D. INSULIN Act

The bipartisan INSULIN Act was introduced in the Senate in June 2022.³⁰ It has several methods aimed at controlling the price of insulin.³¹ One is that it plans to prevent insurance plans and PBMs from collecting rebates on insulins that limit list prices to 2021 net prices for Medicare Part D or equivalents.³² Additionally, it will create a certification process, through which insulin manufacturers can have their insulin designated as a certified insulin.³³ To receive this designation their list prices must not be greater than the average of the Medicare Part D negotiated price for that specific insulin.³⁴ If list prices increase above the certified price, the insulin may be decertified.³⁵ It will limit copays to $35 per month or 25% of the list price of the certified insulin, as well as waiving any applicable deductibles.³⁶ This must be done for at least one insulin of each type and dosage form.³⁷ The INSULIN Act also has a component that works to ensure that prior authorization, step therapy, and imposed medical requirements cannot be used to limit beneficiaries’ use of certified insulin.³⁸

III. Discussion

Unfortunately, while the Inflation Reduction Act did cap insulin costs for some consumers, specifically those on Medicare Part D, it failed to benefit many other diabetics who are either on private health insurance or uninsured.³⁹ The INSULIN Act and the Affordable Insulin Now Act both seek to reduce insulin costs for those on Medicare and private health insurance.⁴⁰

When comparing the INSULIN Act and the Affordable Insulin Now Act, it appears that they are very similar.⁴¹ Both have the goal of capping cost-sharing at $35 per month for both those on private health insurance and Medicare.⁴² The main problem with the INSULIN Act is that it is entirely voluntary.⁴³ From an objective standpoint, there is very little motivation for manufacturers to participate in this program, other than having their insulin be listed as certified.⁴⁴

By preventing PBMs from receiving rebates on certified insulin, the INSULIN Act does place some limits on them.⁴⁵ But it truly does not address any of the major issues surrounding PBMs.⁴⁶ They will continue to do spread pricing, collect rebates on noncertified insulin and other drugs, and their industry as a whole will continue to act with almost complete opacity.⁴⁷ Ultimately, the INSULIN Act appears to be an ineffective, shortsighted fix to a problem that continues to worsen.⁴⁸

The Affordable Insulin Now Act, while it would cap insulin copays at $35 a month, only applies to those who are on private and public health plans.⁴⁹ However, it does not have price protections for those who do not have insurance, completely excluding the people who are already paying exorbitant amounts for their insulin.⁵⁰ Like the INSULIN Act, it does not address any of the major problems in the pharmaceutical industry, like the lack of transparency surrounding the practices of PBMs.⁵¹ The Pharmacy Benefit Manager Transparency Act would potentially have a greater effect on reducing drug prices overall.⁵² By creating more transparency surrounding the practices of PBMs and limiting the amount of money that they pocket instead of passing the discounts on to consumers, perhaps there may be some reduction in prices.⁵³ However, this may take a longer time, and there are still many other causes of the high costs of insulin that are beyond this article’s scope.⁵⁴

IV. Conclusion

The best outcome here would be the passage of both the Pharmacy Benefit Manager Transparency Act and the Affordable Insulin Now Act.⁵⁵ However, the Affordable Insulin Now Act would still exclude those who are uninsured, and they would still have to pay high prices for insulin.⁵⁶ Ultimately, the Affordable Insulin Now Act is still a short-term fix, and it is necessary to continue to search for solutions.⁵⁷

Cover Photo by Alan Levine on Flickr

Emmaline Fisher

Emmaline Fisher graduated from Georgia Tech with a degree in Chemical Engineering, and after working for a bit, she decided to go to law school to pursue a career in intellectual property law. When she has free time, she enjoys spending it outdoors with her dog, Penny.

References

1
Senator Baldwin Cosponsors Legislation to Cap Insulin Prices at $35 Per Month, Bladwin.Senate.Gov (Mar. 10, 2022), https://www.baldwin.senate.gov/news/press-releases/senator-baldwin-cosponsors-to-legislation-to-cap-insulin-prices-at-35-per-month [https://perma.cc/E3XZ-9NFK].
2
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27
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