Dec. 14, 2021 -- Medicare could have saved more than $16.7 billion on three kinds of insulin products from 2011 to 2017 if it had secured the same discounts as other federal health programs get through negotiations, congressional Democrats argue in a new report.
The Democrats of the House Oversight and Reform Committee on Dec. 10 released a final staff report, which they say culminates an almost 3-year investigation into pharmaceutical pricing and business practices. The report draws from 1.5 million pages of internal company documents, the committee said.
Documents from insulin makers Eli Lilly, Novo Nordisk and Sanofi indicate that these firms “raised their prices in lockstep in order to maintain pricing parity,’” with senior executives encouraging this practice, the committee staff write in the report.
“In a discussion among Novo Nordisk employees about an Eli Lilly price increase for a different diabetes product on Dec. 24, 2015, a Novo Nordisk pricing analyst remarked, `[M]aybe Sanofi will wait until tomorrow morning to announce their price increase ... that’s all I want for Christmas’,” the report said.
House Democrats want to use the findings to help their Senate colleagues pass the sweeping “Build Back Better” bill, which includes many provisions to address the costs of drugs.
It’s still unclear when the Senate will act on this measure. The House passed the Build Back Better bill, 220-213, in November. It includes a provision that would allow Medicare to negotiate prices of certain drugs covered by Part D pharmacy plans.
That would mark a reversal of the stance taken when Congress created the pharmacy benefit in a 2003 law, which left the negotiations to the insurers that cover Part D plans.
Republicans have long argued the insurers get the best deals on drugs for people on Medicare. Democrats say this approach sacrifices much of Medicare’s bargaining clout, scattering it among plans.
“This fight has been going on since the Medicare Part D legislation, which gave away the store,” to drugmakers, Speaker Nancy Pelosi (D-CA) said at a Dec. 10 press conference about the House Oversight report. “And they got used to having the store to themselves.”
Better Deals for Military, Medicaid Programs
Medicare is unusual among federal programs in that it doesn’t directly leverage its clout to lower drug costs.
Total Part D expenditures were approximately $105 billion last year, according to Medicare’s board of trustees. This spending is divided among the many insurers that run Part D plans, which then make myriad decisions about formularies and other factors that affect pricing.
For drugs administered by doctors and thus covered by Medicare’s Part B, the program pays a premium to the reported average sales price. Part B drug spending was $39 billion in 2019, an increase of about 11.6% from the previous year, according to the Medicare Payment Advisory Commission (MedPAC).
In contrast, federal law calls for steep drops in the prices of drugs for people on Medicaid.
The Department of Veterans Affairs and the Defense Department’s Tricare program use several bargaining strategies to lower prices. To control costs, VA and DoD often use formularies of preferred drugs, steer patients to lower-cost drugs, and buy drugs in large volumes — “all of which increase their leverage with drug
manufacturers,” the staff of the Congressional Budget Office (CBO) wrote in a February 2021 report.
In its report, CBO examined how those different federal agencies’ approaches played out for the prices, net of applicable rebates and discounts, of 176 top-selling brand-name drugs in Medicare Part D.
The average price for this group of drugs was $118 in Medicaid. The average prices for VA and DoD were $190 and $184, respectively, for drugs that were dispensed at the agencies’ medical facilities or by mail.
But for Medicare Part D, the average was $343, CBO said in the report. This was one of the sources consulted by the House Oversight staff in developing the report the committee released on earlier this month.
Insulin Still of Interest, 100 Years After its Discovery
The House Oversight report runs to almost 270 pages. It addresses several issues with drug prices, including strategies drug companies have used to thwart generic competition. The trade group America’s Health Insurance Plans (AHIP) separately on Monday released its own report looking at patents and the delays of introductions of generic drugs.
Yet, much of the debate on drug prices has focused on one of the oldest widely produced prescription drugs, insulin.
Even with generic competition allowed for the basic diabetes medicine, branded versions of insulin have been some of the costliest products for Medicare in recent years. Eli Lilly, Novo Nordisk, and Sanofi dominate the insulin market.
Medicare’s Part D spent about $2.5 billion in 2019 on Sanofi’s Lantus Solostar insulin, or about $2,585 for each person using it. The program also paid about $1.1 billion for another form of Lantus, or about $2,746 for each person using it.
Medicare Part D also spent about $1.84 billion in 2019 on Novo Nordisk’s Novolog Flexpen, or about $3,063 per person in the program using this form of insulin.
Medicare Part D’s drug spending dashboard also lists eight versions of Lilly’s Humalog, with combined 2019 spending of more than $2 billion. The cost per-patient in Medicare Part D ranges from $5,619 to $1,462.
“Over the past 20 years, they have repeatedly and dramatically raised the list prices of their rapid-acting and long-acting insulins and reaped billions of dollars in revenues,” write the House Oversight staff in their report.
The Republicans on the House Oversight and Reform Committee disagree with their Democratic colleagues on many points in the debate on drug prices. But they also looked at insulin as a cause for concern.
The GOP committee members released a separate report of their own on Dec 10. They call for greater clarity into the role middlemen in the drug-supply chain --known as pharmaceutical benefit managers (PBMs)-- may play in rising costs of medicines. The GOP report notes that there are bills pending in the House that would seek to steer any discounts offered within the supply chain on insulin toward consumers.
The Democratic staff in the committee’s report drew attention to how manufacturers priced their insulin products, including the comment from the Novo Nordisk employee wishing for a price hike for a competitor’s product.
In a statement, Novo Nordisk said the committee’s report reflects “a limited picture of the efforts put forth by our company and other companies to manage formulary access.”
“This glimpse into the complexity of pricing, formularies and the health care system demonstrates why Novo Nordisk continues to advocate for comprehensive solutions,” Denmark’s Novo Nordisk said in the statement.
$35 a Month for Insulin?
Paris-based Sanofi said it makes its insulin pricing decisions independently from those of its competitors. Sanofi said the net price of its insulins declined by 53% since 2012, arguing the high prices charged to patients reflect decisions made elsewhere in the supply chain.
“Over the same period, the net price for commercial and Medicare Part D plans of Lantus has fallen 44.9%, while average out-of-pocket costs for patients with commercial insurance and Medicare Part D has risen approximately 82%,” Sanofi said.
“For all the focus on the growth of list prices, today, the average net price of Lantus is below 2006 levels. That is why we support policy reforms to require health plans to share negotiated savings with patients by requiring patient cost sharing be tied to the net prices.”
Indianapolis-based Lilly offered a similar response in a statement.
“Lilly, like other companies, monitors competitor list price changes that are available through publicly available services,” the company said. “However, any changes we make to our list prices are independent decisions, and to the extent they consider competitors they are informed only through publicly available data.”
Despite rising insurance deductibles, the average monthly out-of-pocket cost for Lilly insulin has dropped 27%, to $28.05, over the past 4 years, Lilly said. Lilly also noted that there are “several affordability options now available” allowing people to purchase their monthly prescription of its insulin for $35, “whether they are uninsured or use commercial insurance, Medicaid, or a participating Medicare Part D plan.”
The Build Back Better Act would require insurers, including Medicare Part D plans and private group or individual health plans, to charge patient cost-sharing of no more than $35 per month for insulin products, said the staff of the nonprofit Kaiser Family Foundation (KFF) in a review of the bill.
“Private group or individual plans would not be required to cover all insulin products, just one of each dosage form (vial, pen) and insulin type (rapid-acting, short-acting, intermediate-acting, and long-acting), for no more than $35,” the KFF staff said in the report.
People enrolled in Medicare can already choose to enroll in a Part D plan participating in an federal test program that can secure for them certain insulin products at a monthly copayment of $35. In 2022, a total of 2,159 Part D plans will participate in this model, a 32% increase in participating plans since 2021, KFF said.