What is the price of profit? The true cost of insulin in the United States

Jack Woodfield
By Jack Woodfield
3rd February 2016
In Depth
 
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The price of Eli Lilly and Company’s Humalog insulin is rising in the United States, and it is more expensive than ever before. The situation is a sad contrast to 1923, when the University of Toronto granted Indianapolis-based Lilly a license to manufacture insulin on a large scale “for humanitarian purposes”.

29.1 million people in the US have diabetes. It’s a colossal market, almost 10% of the population, and a 2010 report from the Centres for Disease Control and Prevention predicted that this figure could rise from one in 10 people to one in three by 2050.

With diabetes rates increasing, it’s perhaps not surprising that drugmakers are hiking the prices of medication. The free-market nature of American healthcare encourages companies to squeeze every penny from their customers in order to thrive, and the value of insulin to patients is so important that the financial value can be manipulated – because what else are patients going to do? They need insulin simply to survive.

Struggling to pay for essential supplies to manage diabetes, such as insulin, is not going to help patients. Increased stress is not conducive to optimal diabetes management, and according to 72-year-old type 1 diabetic, Carol Hammond, the situation “is out of control”.

Ms. Hammond told The Philadelphia Inquirer: “My rent isn’t too bad, but after paying for insulin, I don’t have much left”. She added that she sometimes has to skip buying or taking doses because her Medicare and Medicare Advantage health insurance plans don’t always cover the cost of insulin at her pharmacy.

Discussing how insurance currently affects people with diabetes, Lilly spokesman Greg Kueterman said in a statement: “Someone who previously paid $25 to $40 co-pay for a medicine could now face ‘list price’ costs of hundreds of dollars for a prescription until they meet their higher deductible.”

83 years after receiving their license to manufacture insulin, Lilly announced last month that its US revenue increased by 15% for the fourth quarter. However, the company explained that the growth was “driven by higher realised prices, and, to a lesser extent, increased volume”.

Lilly’s Chief Executive Officer, John Lechleiter, added that higher prices enable the company to fund research into finding better diabetes treatments. “Yes, they (drugs) can be expensive, but disease is a lot more expensive,” said Lechleiter.

Lilly have since teamed up with Think Anthem, also based in Indianapolis, to find a solution to rising drug prices. Tony Mader, Anthem’s vice president of public policy, said: “What we’re hoping to achieve is really to nudge the debate on high-cost drugs in a more productive and actionable direction.”

A “nudge” will not be enough.

The price of Lantus and Humalog rose 22.7% and 19.9%, respectively, from 2014 to 2015, according to Express Scripts

Eli Lilly explained their fourth quarter revenue increase was “driven by higher realised prices”

Soon, the increasing diabetic rates in the US could coincide with rising rates of diabetic-related complications patients might experience. Those struggling to afford insulin may eventually consider following Ms. Hammond’s lead and skip injections, which can raise glucose in the blood to dangerous levels, resulting in short-term complications, such as diabetic ketoacidosis.

At this rate, it might take a drastic decline in the health of type 1 and insulin-treated type 2 patients to eventually bring down the price of insulin in the US.

The role of PBMs

A pharmacy-benefit manager (PBM) plays a big role in the pricing of drugs in the US.

PBMs are companies hired by insurers and large employers to manage drug plans and pay prescription drug claims. They also create lists of drugs, which include patient prices, and negotiate discounts with drugmakers.

“For the most part, they [PBMs] work with self-insured companies and government programs striving to maintain or reduce the pharmacy expenditures of the plan while concurrently trying to improve health care outcomes,” according to the American Pharmacists Association.

However, these “improved health care outcomes” don’t always seem to benefit patients.

PBMs exclude some drugs from their lists, and “by dropping products to gain negotiating leverage, PBMs get significant marketing advantages with their plan sponsor clients”, says Adam Fein, president of Philadelphia-based Pembroke Consulting Inc. “Basically, the PBMs can claim to be standing up to pharma on behalf of payers, regardless of the actual dollar or patient impact.”

Express Scripts reported that the price of Lantus and Humalog rose 22.7% and 19.9%, respectively, from 2014 to 2015. In 2014, Sanofi got $6.93 billion in revenue from Lantus.

Steve Miller, chief medical officer of Express Scripts, the largest PBM in the US, said that its clients spend more on diabetes than any other health category, and the yearly increases in drug pricing by manufacturers are “extravagant”.

Express Scripts reported that the price of Lantus and Humalog rose 22.7% and 19.9%, respectively, from 2014 to 2015. In 2014, Sanofi got $6.93 billion in revenue from Lantus.

This is extorting patients, plain and simple. And something needs to be done.

Novo Nordisk spokesman Ken Inchausti said in a recent company statement: “Every day, we negotiate with health plans, pharmacy-benefit managers, and other intermediaries to make sure our medicines are accessible for as many people as possible.”

Until every drug manufacturer is striving to ensure their insulin prices are affordable for everyone, and evidence can be produced to display progress made, the moral fibres of diabetes care in the US will continued to be ripped apart.

Information in this article was adapted from The Philadelphia Inquirer.

Lead image: www.zmescience.com

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