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 other federal health programs get through negotiations, House Democrats argue in a new report.
On December 10, Democrats on the House Committee on Oversight and Reform released a final majority staff report, which they say is the culmination of 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 says.
Documents from insulin makers Eli Lilly, Novo Nordisk, and Sanofi indicate these firms “raised their prices in lockstep in order to maintain ‘pricing parity’,” with senior executives encouraging the practice, the committee staff writes in the report.
“In a discussion among Novo Nordisk employees about an Eli Lilly price increase for a different diabetes product on December 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 states.
House Democrats are seeking to use the report findings to aid their Senate colleagues’ attempt to pass the sweeping Build Back Better bill, which includes many provisions addressing drug costs.
It’s still unclear when the Senate will act on the measure. The House passed the Build Back Better bill, 220-213, in November. It includes a provision that would allow Medicare to negotiate the 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 negotiations to insurers that cover Part D plans.
Republicans have long argued 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, said Speaker Nancy Pelosi (D-CA) at a December 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 a myriad of decisions about formularies and other factors that affect pricing.
For drugs administered by clinicians, and thus covered by Medicare Part B, the program pays a premium of 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.
In contrast, federal law calls for steep reductions in drug prices for people on Medicaid.
The Department of Veterans Affairs (VA) and the Defense Department (DoD)’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.
The CBO report examines how those different federal agencies’ approaches played out in terms of 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. And for VA and DoD, the average prices were $190 and $184, respectively, for drugs dispensed at the agencies’ medical facilities or by mail.
But for Medicare Part D, the average price was $343, CBO said in the report, which was one of the sources consulted by House Oversight staff when developing their report released on December 10.
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 pharmaceutical companies have used to thwart generic competition. On Monday, the trade group America’s Health Insurance Plans separately released its own report looking at patents and delays to the introduction 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 the allowance of generic competition for the essential 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 Part D spent about $2.5 billion in 2019 on Sanofi’s Lantus Solostar insulin, or about $2585 per person in the program using it. The program also paid about $1.1 billion for another form of Lantus, or about $2746 per patient.
Medicare Part D also spent about $1.84 billion in 2019 on Novo Nordisk’s NovoLog FlexPen, or about $3063 per person.
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 $5619 to $1462.
“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.
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.
GOP members of the committee released a separate report on December 10. They call for greater clarity into the role middlemen in the drug-supply chain — known as pharmaceutical benefit managers — may play in the rising costs of medicines. The GOP report notes that there are bills pending in the House that would seek to steer any discounts offered on insulin within the supply chain toward consumers (Insulin Price Reduction Act H.R. 4906, Insulin Cost Reduction Act H.R. 5623).
Democratic staff in the committee’s report seek to draw attention to how manufacturers priced their insulin products, including the comment by the Novo Nordisk employee about wishing for a price hike for a competitor’s product.
In a statement provided to Medscape Medical News, 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 healthcare 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 insulin-pricing decisions independently from competitors. Sanofi said the net price of its insulins has 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 to Medscape Medical News.
“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, the company told Medscape Medical News. 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.”
In 2020, Lilly had announced that people with commercial insurance and those without insurance would be able to get monthly prescriptions of Lilly insulin for $35.
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 state in the report.
People enrolled in Medicare can already choose to enroll in a Part D plan participating in a federal test program that can secure certain insulin products for them at a monthly copayment of $35. In 2022, a total of 2159 Part D plans will participate in this model, a 32% increase in participating plans since 2021, KFF said.
Kerry Dooley Young is a freelance journalist based in Washington, DC. She is the core topic leader on patient safety issues for the Association of Health Care Journalists. Young earlier covered health policy and the federal budget for Congressional Quarterly/CQ Roll Call and the pharmaceutical industry and the Food and Drug Administration for Bloomberg. Follow her on Twitter at @kdooleyyoung.
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