Health

House Lawmakers Grill Drugmakers, PBMs on Insulin Cost

Members of the US House of Representatives on Wednesday expressed clear disbelief and growing frustration with the explanations for high insulin prices charged by drugmakers and pharmaceutical middlemen.

At a hearing held by the House Energy and Commerce Committee’s Oversight and Investigations panel, Rep. John Sarbanes (D-MD) challenged arguments presented by pharmaceutical benefit managers (PBMs), who said secrecy in negotiations ultimately helps lower drug prices for consumers. More transparency about the flow of money in the pharmaceutical supply chain thus would result in higher drug prices for consumers, according to witnesses from the PBMs.

“I don’t buy it. I’m not buying it. I think a system has been built that allows for gaming to go on,” Sarbanes told the hearing’s six witnesses, who were executives representing drugmakers and PBMs. “The system is working for both of you at the expense of the patient.”

About 7.4 million people in the United States take insulin, according to a report by the American Diabetes Association. Lawmakers frequently hear stories from their constituents about what happens when people face high insulin costs, with some not paying other bills in order to buy the drug, said Rep. Diana DeGette (D-CO), chair of the Oversight and Investigations panel of the Energy and Commerce Committee. Other patients report having to ration doses or skip insulin altogether, she said.

“It is simply unacceptable that anyone in this country cannot access the drug their very lives depend on,” DeGette said. “All because the price of this drug — a drug that is nearly 100 years old — has gotten out of control.”

Although the estimated manufacturing cost of most forms of insulins ranges from $2.28 to $6.34 per vial, consumers may pay more than $400 per month for the drug, the House Energy and Commerce Committee said in a memo for the Wednesday hearing held by DeGette’s subcommittee. The Oversight and Investigations subcommittee also heard from diabetes experts last week about the struggles of patients to afford insulin, a drug first brought to the US market in 1923.

Insulin has been modified over the years into forms that are more convenient for patients to use, such as the long-acting glargine (Lantus SoloStar, Sanofi). Yet lawmakers on Wednesday noted even these more advanced products have been on the market for many years, making the continual price increases a surprise. Medicare has reported, for example, that its Part D plans saw a 9.8% increase in annual growth rate for average spending per dose of Lantus Solostar between 2013 and 2017.

The high cost of insulin is helping erode consumers’ faith in the free market approach to pharmaceutical pricing, said House Energy and Commerce Chair Rep. Frank Pallone Jr. (D-NJ). Although he still favors this method, many of his constituents do not, Pallone said.

“What they tell me is ‘Just set the price.’ They’ll literally say to me, ‘You in Congress or some government agency should just set the price and that’s it,'” Pallone said at the hearing. “They just don’t believe in the competitive model anymore.”

The comment from Pallone was striking, given the location of his district on the edge of the historical American cradle of the pharmaceutical industry.

Pallone’s New Brunswick, New Jersey, district office is a few blocks from Johnson & Johnson’s headquarters. It’s also within about 40 miles of major offices of Merck, Bristol-Myers Squibb, and Novartis.

And within about 20 miles of Pallone’s New Brunswick office are the US headquarters of two insulin makers whose executives attended the Wednesday hearing: Novo Nordisk, with US operations based in Plainsboro, New Jersey, and Sanofi, in Bridgewater.

While addressing questions from Rep. Joe Kennedy III (D-MA), Kathleen W. Tregoning, Sanofi’s executive vice president of external affairs noted her company on Wednesday had unveiled an expansion of its insulin savings program.

Launched a year ago, Sanofi’s program initially allowed customers who pay cash to pay the set prices of $99 for one 10-mL vial or $149 for a box of pens. The program now will allow them to purchase as much as 10 boxes of pens and/or 10-mL vials for $99 per month, Sanofi said in a statement.

Kennedy questioned what he seemed to see as convenient timing of this expansion, observing to Tregoning that the change had been “announced today when you are in front of Congress.”

Like many members of the Oversight and Investigations Subcommittee, Kennedy expressed frustration about the seemingly endless loop of PBMs blaming insulin makers for high costs and the pharmaceutical companies, in turn, blaming the benefit managers.

“If you are in my position, what do we do to try to make sure that the patients in this country get access to life-saving medication?” for which initial rights were sold for about $1, Kennedy said, referring to the price those who discovered insulin charged the University of Toronto for the patent.

Separately, Senate Finance Chair Charles E. Grassley (R-IA) said in a statement Wednesday that Sanofi’s move, and a similar announcement from Cigna last week, raise many questions.

“Why was Sanofi charging so much more before this announcement? What took them so long to offer the price reduction?” Grassley said. “It shouldn’t take months of bad press, persistent public outcry, and increasing congressional scrutiny to get a company to charge a fair price. That’s not how a functioning marketplace works.”

“Prescription drug companies and pharmacy benefit managers should take very seriously their responsibility to patients and taxpayers,” Grassley added. “Right now, they’re not. And that’s a status quo that’s not going to last.”

Grassley and Sen. Ron Wyden of Oregon, the ranking Democrat on the Senate Finance Committee, are in the midst of their own investigation of insulin prices. Grassley and Wyden on Wednesday also said they had asked the Inspector General of Health and Human Services (HHS) for an analysis of PBM’s business practices, specifically regarding certain pricing in Medicaid.

In the House, DeGette, as chair of the Energy and Commerce Committee’s Oversight and Investigations panel, and Rep. Brett Guthrie of Kentucky, the panel’s ranking Republican, are spearheading their chamber’s examination of high insulin prices and conducting their own investigation.

Smoke-and-Mirrors System

After DeGette and colleagues grilled representatives of drugmakers and PBMs for several hours on Wednesday, she said she may call them back in June or September to update the subcommittee on their progress on their efforts to lower insulin costs.

“This is not optional and it is going to happen,” DeGette told the witnesses.

In her view, a “smoke-and-mirrors” system is triggering continual increases in the list prices for insulin, so that PBMs can then negotiate to somehow bring the price back down. She cited as an example insulin lispro (Humalog, Eli Lilly), a drug used by her daughter, Francesca, who has type 1 diabetes. The price has risen from about $35 a vial in 2001 to $275, DeGette said.

“The generic Humalog that Lilly has come up with, good news, it’s only $137 a bottle. So it’s still way beyond where it was in 2001,” DeGette said.

Appearing as witnesses at the hearing, representatives of Cigna’s Express Scripts, UnitedHealth’s Optum, and CVS maintained that drugmakers are responsible for setting high list prices. Thomas M. Moriarty, executive vice president, chief policy and external affairs officer for CVS, said list prices for insulin have increased nearly 50% in the last 3 years alone.

“Over the last 10 years, the list price of one product, Lantus, rose by 184%,” Moriarty said. “The primary challenge we face is that unlike most other therapeutic classes, until recently, there have been no generic alternatives available.”

Drugmakers have maintained that PBMs actually encourage them to raise list prices, putting their firms at risk of losing business if they dropped the cost of their insulin. They also said the list prices may provide a deceptive view of their potential profit from medicines, with rebate money flowing to insurers and PBMs.

In written testimony, Michael B. Mason, Lilly’s senior vice president for Connected Care and Insulins, included a chart that showed Lilly’s net price for its most widely used insulin product, Humalog U100, dropping even as its list price spiked.

The average list price rose from $391 in 2014 to $594 in 2018, a gain of more than 50%, according to Lilly’s chart. Yet, the average net price that Lilly realized from these sales slipped from $147 in 2014 to $135 in 2018, a decline of about 8.2%.

In addition, Humalog “is essentially free to Medicaid programs,” as Lilly pays a rebate of about 100%, Mason said, noting the expansion of the health program as a result of the Affordable Care Act of 2010. The number of people enrolled in Medicaid increased from 54.5 million in 2010 to 73.4 million in 2017.

“Providing insulin to this population at little or no cost is a significant step towards ensuring affordable access for those in need,” Mason said.

Lawmakers have introduced a number of bills intended to foster greater transparency about drug prices and speed generic competition for medicines. It’s unclear how much of this proposed legislation will be enacted, with drugmakers in opposition to some proposed changes.

PBMs face perhaps a more immediate commercial threat from an HHS proposal. In January, HHS Secretary Alex Azar proposed an overhaul of how PBMs get paid for Medicare and Medicaid transactions.

Azar said he intends to address what he calls a “perverse incentive” with rebates, in that PBMs stand to profit more if pharmaceutical companies set higher list prices. Azar is seeking to amend federal rules, originally meant to prevent patient harm from industry kickbacks, to reroute the flow of discounts. He’s seeking to have these savings on drugs flow more directly to patients at the pharmacy counter. HHS is seeking to create new fixed fee services arrangements between drugmakers and PBMs.

The proposal has split industry groups, with the trade group for drugmakers, the Pharmaceutical Research and Manufacturers of America (PhRMA), supporting the move and the trade group for PBMs, the Pharmaceutical Care Management Association (PCMA), criticizing it.

In their testimony during the Energy and Commerce subcommittee hearing on Wednesday, PBMs noted that HHS’s own proposed rule includes analyses that suggest it would raise premiums for consumers. The actuary of the Centers for Medicare and Medicaid Services estimates that Part D premiums will increase by as much as 25% and federal spending will increase by $196 billion over 10 years, said Amy Bricker, RPh, senior vice president of the supply chain of Express Scripts in her testimony.

Still, lawmakers appeared skeptical about how well the rebate system benefits consumers.

At Wednesday’s hearing, Rep. Morgan Griffith (R-VA) suggested simply dropping the rebates and moving to a system in which PBMs would get a flat fee for serving as go-betweens. He questioned what justifies cases where PBMs base their fees on list prices for medicines.

“It doesn’t cost your company any more to process a $4 drug than it does a $40,000 drug,” Griffith said. “Wouldn’t it make more sense just to have a flat fee for doing what y’all do?”

Rep. Earl L. “Buddy” Carter (R-GA) said concerns about the business practices of PBMs and drugmakers have sparked rare unity among Democrats and Republicans in Congress.

“What you’ve witnessed here today is bipartisanship,” Carter, who owns community pharmacies, told the witnesses.

He predicted that HHS would prevail in its efforts to overhaul the drug rebate system, particularly efforts to apply discounts at the point of sale.

“That’s going to happen. We’re going to make sure that happens,” Carter said. “That’s going to bring more transparency to the system and we’re not going to stop there.”

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