Insulin was the poster
child of the drug price wars in 2019 and early 2020, and the key facts are laid
out in Insulin Cost and Pricing Trends by
AAF's Tara O'Neill Hayes and Josee Farmer. (A shout out to Josee in Seattle;
one of many AAF interns continuing her internship remotely.)
Roughly 8.3 million individuals use insulin to control their diabetes. Hayes
and Farmer note, “Between 2012 and 2018, the price of available insulin
increased 14 percent annually, on average, and in 2016 insulin accounted for 31
percent of a Type 1 diabetic’s health care costs, up from 23 percent in
2012."
Why does this matter? Certainly it is a pressing health and budgetary issue for
some diabetics. But the impacts are even broader. Diabetes is now the most
expensive chronic condition, as 25 percent of health care dollars is spent on
someone with diabetes, and 14 percent is spent directly on diabetes-related expenses.
The rising costs of diabetes largely tracks the dramatic increase in the cost
of prescription insulin and 57 percent
of diagnosed diabetics are in a public program such as Medicare, Medicaid, or
the Children’s Health Insurance Program. As a result, taxpayers foot two-thirds
of the diabetes bill.
Given all this, the most shocking finding in the paper is that the net price – the price
received by manufacturers after paying rebates – of the most common insulin
products has fallen recently. For example, Eli Lilly released data showing
that “the list price of Humalog increased 27 percent from 2015 to 2019, while
the net price decreased 14 percent. Sanofi’s latest pricing report shows
that since 2012, the average list price for all its insulin products increased
126 percent by 2018, while the average net price has decreased 25 percent.”
How did this happen? It turns out that insulin is the extreme form of
everything that bedevils drug prices in the United States. The rebates are the
largest as the few manufacturers fight for prominent placement in formularies
and innovation costs are substantial, and until the past month, there was no
pathway for biosimilars to enter and compete for market share.
The pandemic has (properly) pushed other policy issues to the rear, but when
drug pricing re-emerges be sure that the insulin market will be front and
center.
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