INSULIN PRICES AND H.R. 5376
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Last Tuesday, during his State of the Union address, President Biden talked about the high cost of insulin. As part of the Build Back Better bill, H.R. 5376, this legislation includes provisions to reduce the cost of insulin. He wants to compel health insurance companies to cap the cost of a 30-day supply of insulin at $35. States have tried to help with the rising cost of insulin, by also mandating a $30 copay for a thirty-day supply of insulin on health insurance companies.
The health insurance companies are only a part of the problem but forcing them to limit co-pays will not fix the high cost of insulin.
Since 2019, more than 20 states have passed laws requiring health insurance companies to absorb increased insulin costs by capping the monthly co-pay between $25 and $100, depending on the state. H.R. 5376 replicates what the states have done, limiting the co-pays health plans can charge
Eli Lilly and other drug companies are resistant to capping the cost of insulin. They insist they must continue the high prices to recoup research dollars that went into developing insulin. Pharmacy manufactures have been saying this for many years, yet other drugs eventually are allowed to go generic. They want to be allowed to continue to sell insulin at the current high prices to maintain their profit margins and satisfy investors.
What about uninsured patients? They still pay more than $300 per bottle and often resort to using cheaper, less effective insulin, or rationing their insulin, a dangerous practice that has resulted in death for many. State mandates do nothing to prevent such price gouging, even though that same $300 insulin bottle costs just $10 dollars to manufacture
In 1921, Dr. Fredrick Banting discovered insulin. Dr. Banting sold the patent for $1, stating that, “Insulin belongs to the world, not to me.” In contrast to Dr. Banting’s altruism, over the past 10 years insulin prices have gone up consistently, generating outsized profits for the drug companies and hurting patients who lack the means to cover the ever-growing cost of this life-saving drug.
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The Insulin Senior Savings is a test model, part of a Medicare volunteer program in conjunction with Medicare Advantage plans. This voluntary model began on January 1, 2021 and will continue for five years, through December 31, 2025. It caps monthly co-pays at $35.
Presidents Obama and Trump both campaigned to empower Medicare to negotiate drug prices with manufacturers, but neither succeeded. In addition to President Biden’s goal to mandate reasonable pricing for insulin, President Biden stated, “And while we’re at it … let’s let Medicare negotiate the price of prescription drugs. They already set the price for VA drugs.”
Of today’s 60 million Medicare patients, one-third—20 million patients—suffer from diabetes. Who will negotiate insulin prices for the remaining 18 million Americans with diabetes who do not qualify for Medicare?
If politicians want to pass H.R 5376, the chances are slim that it will include provisions for Medicare to negotiate drug prices. The U.S. is unique in this respect. Other countries can negotiate with drug manufacturers, but not the United States. In fact, H.R. 5376 does nothing to lower the actual cost of insulin. The bill requires health insurance companies to only cap the copay for a thirty-day supply of insulin at $35. It does nothing to help the uninsured. Despite Medicare, Medicaid, and the Affordable Care Act, many diabetics must absorb an outsized portion of their insulin costs.
As an example, Alec Raeshawn Smith of Minnesota was diagnosed with type 1 diabetes at 23. When Alec turned 26, he could no longer get coverage under his parents’ health insurance. Alec earned too much money to qualify for Medicaid, but his job did not provide health insurance. The lowest-cost insurance plan had a $7,500 deductible, and so he decided to forgo health insurance. Alec was paying $1,300 monthly for insulin and supplies—nearly half his salary. He died from diabetic ketoacidosis in June 2017, less than one month after being dropped from his mother’s insurance. Alec is just one of many diabetics who have died because of rationing their insulin.
Under H.R. 5376 Private group or individual plans do not have to cover all insulin products
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H.R. 5376 replicates what the states have done, limiting the co-pays health plans can charge. This does not mandate insulin manufactures to lower prices
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Over the past decade, the list price of insulin has jumped by nearly 300 percent
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Currently, insulin manufacturers are making 2,900% profit, on on a bottle of insulin.
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WHAT IS BEING DONE ABOUT IT?
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Another huge component that contributes to the high cost of insulin is the unusual nature of the drug supply chain, which is much more complicated than supply chains for other goods.
The prices of ordinary consumer goods are determined in a straight forward manner according to supply and demand and allow for markups from manufacturer to wholesaler to consumer. In contrast, pharmaceutical drug prices are based on highly complex relationships among the drug companies, wholesalers, pharmacies, and insurance companies, involving “rebates” that are negotiated individually by insurance companies, wholesalers and pharmacy benefit managers (PBM). These rebates do not benefit the consumer. These rebates put profits back into the pockets of all the players in the supply chain. Manufactures, pharmacies, distributors, pharmacy Benefit Managers (PBM), and yes, the health insurance companies.
The insurance companies and large employers use “middlemen” to negotiate with the drug manufacturers to rebate a portion of the list price of drugs, which is how prices are reduced to an affordable level for wholesalers and pharmacies. The drug companies claim that they must continually raise their prices due to the revenue impacts of these rebates. President Biden did not address this convoluted process that rewards the middlemen with rebates. H.R. 5376 does not end these rebates or even mentions it.
State of Colorado did. When Colorado enacted its legislation to control the high cost of insulin, they knew what contributed to the problem. The State of Colorado ended the rebate process of pharmaceuticals in their state. The Federal Government must follow Colorado’s lead.
Today, biohackers are reverse engineering a way to develop cheaper insulin.
These biohackers believes that making insulin more accessible requires taking the monopoly away from the big three pharmaceutical companies that produce it. So they’ve started the Open Insulin Foundation, a non-profit with plans to develop the world’s first open-source insulin production model. This groups intention is to to give away their plans for how to make insulin for free. This group of volunteer researchers have brought the discovery of insulin full circle by doing what Dr. Banting did in 1921, giving away insulin to the world at no cost.
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