Insulin Prices: Are PBMs and Insurers Doing Their Part?

Substantial increases to the listing price of insulin over the past few decades have led those inside and out of the pharmaceutical industry to question the practices of its major players.

In 2015, a study by Xiaohui Zhou, health economist at the CDC, and colleagues published in Diabetes Care found that an individual diabetes patient in 2011 paid approximately $2800 more per year on their health care than a patient in 1987, with more than half of the increase attributed directly to medication expenses. Further investigation by Xinyang Hua, MSc, of the University of Melbourne, and colleagues published this year in JAMA identified the increasing price of insulin from 2002 to 2013 as a driving force of this growth, which far outstripped that of other antihyperglycemic therapies.

Unfortunately, these upward trends have persisted—and potentially skyrocketed—in more recent years, according to Irl B Hirsch, MD, of the University of Washington’s division of metabolism, endocrinology, and nutrition. In a presentation given at the American Diabetes Association’s Annual Advanced Postgraduate Course in March, Dr Hirsch said that three of the top six drugs which have doubled in price over the last 5 years are insulin products, and noted that the average whole price of a vial of Lantus (insulin glargine; Sanofi) and a box of five Humalog (insulin lispro; Eli Lilly) pens increased 593% and 522%, respectively, over the past 13 years—a “staggering” increase when compared to the 46% overall medical inflation rate of the same time period.

“Average whole prices of insulin, similar to list prices, are not what is paid by most patients,” Dr Hirsch said during the presentation. “Still, for traditional third-party insurances, the dramatic cost increases of [average whole pricing] in the past decade in most cases [have] resulted in much higher copays, to the point many can’t afford the insulin at all.”

Manufacturers, PBMs Trading Blame

“While most of the attention with the rising prices of insulin [has] focused on the manufacturers, it is actually the [pharmacy benefit manger (PBM)] responsible for much of the problem, since they are the ones directly dealing with the insulin companies,” Dr Hirsch said. “The PBM receives a rebate, [while] the health plan and copay from the patient pays for the drug. But how much profit does the PBM make?”

Dr Hirsch’s criticism of PBMs and rebate-driven pricing structures is one being echoed throughout the pharmaceutical industry. During her recent testimony in front of the United States House of Representatives Committee on Oversight and Government Reform, Heather Bresch, CEO of Mylan, cited “rebates and various fees” and “the complicated world of pharmaceutical pricing” as key contributors to the controversial listing price of an EpiPen (epinephrine; Mylan) Auto-Injector. Meanwhile, Ian C Read, chairman and CEO of Pfizer, said that PBMs’ rebates, tiered formularies, and other practices may have initially been a means to ensure purchasing efficiency, but have since become bloated and harmful to the industry. 

“The consumer sees the pharmaceutical price increase… and then assumes that’s happening everywhere, and they equate these price increases with their huge copay or deductible increases,” Mr Read said at a Wells Fargo Securities’ Healthcare Conference in September. “The rebates should have been there to provide the cost and the small profit margin of a PBM to function. And now they’ve become more than that. So, I think [the] absence of rebates would be healthy for the system.” 

Both Brian Henry, a spokesperson for Express Scripts, and Mark Merritt, president and CEO of the Pharmaceutical Care Management Association—a PBM trade group—denied that PBM practices are indirectly raising prices or harming patients, and stressed that the organizations exist first and foremost as an market force to reduce insurers’ payments.

“This is drug company mythology that’s been floating around for the last year or so,” Mr Merritt said in an interview. “The one company that controls how much the drug is priced is the manufacturer of that drug. If they want to move beyond this discussion, just lower the price. That’d be simpler for everybody.”

To obtain a preferred spot on a PBM’s formulary, drug companies are forced to bid against their competition by offering greater and greater rebates, Arthur F Shinn, PharmD, FASCP, president and founder of Managed Pharmacy Consultants, LLC, and member of the First Report Managed Care Editorial Advisory Board, explained. Although the widespread adoption of drug exclusion practices by PBMs over the last few years may have caused rebates and listing prices to surge, he argued that the rebate system effectively stabilizes the net price of insulin and other drugs for payers and their members, and is unlikely to disappear.

“[Drug manufacturers] have been talking about doing away with rebates forever—it’s not going to happen,” Dr Shinn said in an interview. “If you’re a pharmaceutical company and you don’t play the game, then you’re not in the game. They’ll maybe change how it works, but it’s the driving force [and] it’s the game that’s out there.”

Cracks in the System

While the majority of plan members have not experienced any major monetary disadvantages as a result of the increased listing price, Dr Shinn said, some are still subject to its repercussions depending on their plan or provider. Among these are patients enrolled in plans with high pharmacy deductibles, who max out their contributions by paying the list price without the relief of the subsequent rebate, Mr Merritt said. 

“Some drug companies say ‘hey, we offered a discount, but the patient still had to pay out of pocket because of their high-deductible plan,’ and that’s something that we definitely sympathize with,” he said. 

According to the Kaiser Family Foundation’s 2016 Employer Health Benefits Survey, 29% of workers enrolled in employer-sponsored health coverage chose plans with lower premiums but higher deductibles, as opposed to 20% in 2014. The increasing cost of health care and drugs such as insulin is “the single biggest contributor” to adoption of high-deductible plans, Mr Merritt said, and as such is out of the hands of payers and PBMs. 

“While there may be some frustration with the insurers, there’s an understanding [among members] that the insurers have limited dollars, and it’s ultimately the providers and suppliers that generate the higher costs,” he explained. “There is certainly no benefit that PBMs get from high deductible plans. In fact, it would be better for us if people could just get their drugs at first-dollar coverage—but that’s not our call.”

Furthermore, not every contract between payers and PBMs ensures that 100% of the rebate is returned to the payer. According to the Pharmacy Benefit Management Institute’s 2015-2016 Prescription Drug Benefit Cost and Plan Design Report, a survey of 302 employers offering prescription drug benefits, only 39% of employers reported an arrangement stipulating 100% rebate pass-through. Others reported receipt of flat per-script guaranteed rebates, a percentage share of actual rebates with or without a guaranteed minimum, or no direct receipt of manufacturers’ rebates. 

“Will that, therefore, have a detrimental effect on the patient and their copay?” Dr Shinn asked. “Sure, because the payers are going to spend more on drugs and, ultimately, they’re going to adjust the copay to offset that.”

Mr Henry wrote in an email that the decision to pass along all or part of a rebate is always made by the Express Scripts’ clients, and that “the vast majority of rebates go directly to our clients to drive savings for their members as they see fit.” More than 90% of all rebate dollars received by PBMs are directly returned to the client, Mr Merrit elaborated, although more and more payers are negotiating for 100% pass-through.

“When a company hires a PBM, there’s a number of PBMs they can choose from, so the payer calls the shots in terms of the contract,” he said. “It’s really up to the client.” 

Despite these and other areas within the drug distribution system that reduce savings—such as consulting firms who charge PBMs by claim as opposed to by job—Dr Shinn argued that the benefits of current PBM practices outweigh their flaws. 

“Are there things that could be corrected, that need to be revised or changed in the distribution chain? Absolutely,” Dr Shinn said. “However, [PBMs] are an extremely valuable proposition to the equation. I would hate to see what we would have as an end result today if we did not have PBMs in the channel.”

Reducing list price impact

This month, Eli Lilly and Boehringer Ingelheim are expected to begin sale of Basaglar (insulin glargine) in the United States as the first follow-on biologic to Lantus. CVS Health and Express Scripts have both added the biosimilar to their formularies, and are incentivizing patients to switch over to the new treatment through value programs (Express Scripts) or exclusion of Lantus from the formulary (CVS Health).

Alongside these large-scale efforts to reduce insulin costs, Mr Merritt  said that the PBMs he represents are continuing to leverage their formulary to obtain greater discounts while offering point-of-sale rebates to aid patients in high-deductible plans. In addition, Mr Henry highlighted his company’s initiatives to monitor nonadherent patients and protect clients from “significant price increases” via inflation caps.

On the payers’ side, Dr Shinn said that the best drug savings come when payers take an active role with their PBMs.  

“Like any vendor, the bottom-line is they are probably only as good as they are managed,” he said. “If you don’t work with the PBM, and you’re not involved with the PBM, you’re not going to get what you should out of it.”