Senate Finance Committee Report on Rising Insulin Costs Criticizes Industry, PBM Practices

Date: January 27, 2021 | Country: UNITED STATES | Region: NORTH AMERICA | Type: Pricing & Reimbursement | Keywords: #diabetes #insulin #medicare #outofpocketcosts #pbms 
#pcma #phrma #policy #pricechanges #rebates #regulation #savings #senatefinancecommittee

PRICENTRIC BRIEF:

  • The Senate Finance Committee has released the results from its two-year investigation into the “surging” list price of insulin in the United States and its impact on patients, Medicare Part D, and private health plans
  • The investigatory committee has accused insulin manufacturers of unjustified price increases, “shadow pricing,” and doing little by way of preventing further increases, while PBMs came under fire for their pricing and rebate tactics, all of which have culminated in higher costs for patients at the pharmacy counter
  • In response, the Pharmaceutical Care Management Association (PCMA) underscored how PBMs have stepped up their efforts to help patients with diabetes by introducing new programs to cap or eliminate out-of-pocket costs on insulin, while PhRMA argued “perverse incentives in the market drove up insulin costs for patients,” suggesting key steps that can be taken to ensure patients reap savings

 

THE DETAILS

WASHINGTON, D.C., The United States – The Senate Finance Committee has released the results from its two-year investigation into the allegedly “surging” list price of insulin in the United States and its impact on patients, Medicare Part D, and private health plans.

The Senate’s report was announced shortly before newly-inaugurated U.S. President Joseph Biden issued a 60-day halt on drug pricing rules introduced by former President Donald Trump, in particular, the requirement for community health centers to pass on savings to low-income patients for insulin and EpiPens. It is being delayed until March 22, 2021.

During its investigation, the Committee reviewed over 100,000 pages of internal documents, memoranda, and rebate agreements from three of the largest insulin manufacturers and three largest pharmacy benefit managers (PBMs). More than 1,700 pages of documents containing emails, contracts, and presentations that were used in the investigation will be released.

Committee investigators determined that insulin manufacturers raised prices despite no new advances in the efficacy of these products, and the Committee alleged the use of lock stepping – or “shadow pricing” – tactics among relevant companies, which resulted in customers paying more for insulin at pharmacies.

The investigators also concluded that neither pharmaceutical companies nor PBMs made attempts to prevent insulin price increases to avoid any changes to the current rebate structure practiced in the U.S. As noted by the Committee, “…the drug makers were aware that higher list prices meant higher revenue for PBMs, and that lowering list prices could be viewed negatively by PBMs and health plans, even though it meant higher out-of-pocket costs for patients.”

Other key findings from the investigation more heavily scrutinize the practices of PBMs. The Committee claims the three largest PBMs have significant market power and despite their use of exclusion lists to pressure companies to increase rebates, little has been accomplished when it comes to reducing the list price of insulin. Moreover, PBMs increased administrative fees, adding another major source of revenue for them that benefits from list price increases and the “price protection” clauses utilized by PBMs in contracts allow drug manufacturers to increase prices by 12% per year.

 

Grassley, Wyden Say Consumers Are Losing Out

The report was presented by Finance Committee Chairperson Chuck Grassley and Ranking Member Ron Wyden, who were responsible for a previous reform bill that would rein in the costs of insulin by capping seniors’ out-of-pocket (OOP) spending and limiting price increases. However, the bill died before being called for a vote in the Senate due to a lack of bipartisan support.

Regarding the report, Grassley commented, “We found that the business practices of and the competitive relationships between manufacturers and middlemen have created a vicious cycle of price increases that have sent costs for patients and taxpayers through the roof. This industry is anything but a free market when PBMs spur drugmakers to hike list prices in order to secure prime formulary placement and greater rebates and fees.”

Wyden added, “This investigation makes clear that consumers are the only ones losing out in America’s broken drug pricing system, since every part of the pharmaceutical supply chain benefits from higher list prices. Insulin manufacturers lit the fuse on skyrocketing prices by matching each other’s price increases step for step rather than competing to lower them, while PBMs, acting as middlemen for insurers, fanned the flames to take a bigger cut of the secret rebates and hidden fees they negotiate. Consolidation within the PBM industry has not improved the situation.”

 

PBMs, PhRMA Argue Findings

In response to the Committee’s findings, JC Scott, President and CEO, the Pharmaceutical Care Management Association (PCMA), underscored how PBMs have stepped up their efforts to help patients with diabetes by introducing new programs to cap or eliminate out-of-pocket costs on insulin. Scott cited a recent industry report that shows PBMs have held net insulin costs flat, and that rising insulin list prices can be blamed on market dominance by a few companies and a lack of alternative generic or biosimilar insulins.

US pharmaceutical industry PhRMA said the report confirms what the association has been claiming all along, quoting the Committee: “perverse incentives in the market drove up insulin costs for patients.” PhRMA argued that the net prices for the most commonly used classes of insulin have gone down by 40%-50%, on average, since 2014, making insulins less expensive today than in 2017. Further, PhRMA said that the net price of insulin was lowered by 83%, on average, last year. through market dynamics.

The problem is, patients are not sharing in on any of these savings, said PhRMA. The body said the Finance Committee answered its own questions about whether insurers and PBMs have patient interests in mind, as they noted, “PBMs have an incentive for manufacturers to keep list prices high.”

PhRMA has suggested the following steps be taken to help patients:

  • share the savings health plans receive from biopharmaceutical companies with patients to lower costs at the pharmacy counter;
  • allow more patients to access insulin without worrying about deductibles;
  • require that fees for PBMs and other entities in the supply chain are tied to the value of their services, rather than calculated as a percent of medicine prices;
  • modernize the Medicare Part D program by establishing an annual cap on OOP costs and allowing seniors to spread costs throughout the year;
  • provide flat copays for insulin for patients in commercial health plans and those with health insurance through the Affordable Care Act; and
  • count OOP costs paid through third-party discount programs and cost-sharing assistance toward the deductibles and out-of-pocket limits patients face.

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