Senate Finance Committee Uncovers ‘Opaque Business Practice’ That Caused Rising Insulin Cost

January 15, 2021 Updated: January 15, 2021

The Senate Finance Committee released a report on Jan. 14 detailing the “opaque” business dealings between drug manufacturers and pharmacy benefit managers (PBMs) that led to the higher cost of insulin for the past 15 years.

The report (pdf) is a result of an almost two-year bipartisan investigation led by Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) into marketing practices and drug pricing of insulin.

“There is clearly something broken when a product like insulin that’s been on the market longer than most people have been alive skyrockets in price,” Grassley said in a statement.

The report includes over 1,700 pages out of the 100,000 documents of contracts, internal emails, and presentations from the three manufacturers (Eli Lilly, Sanofi, and Novo Nordisk) that provides insulin to the United States and three of the largest PBMs (Express Scripts, CVS Caremark, and OptumRx) who act as middlemen in the distribution chain of prescription medications.

chuck grassley
Chairman Sen. Chuck Grassley (R-Iowa) speaks at a Senate Finance Committee hearing on Capitol Hill in Washington, on June 17, 2020. (Andrew Harnik-Pool/Getty Images)

“We found that the business practices of and the competitive relationships between manufacturers and middlemen have created a vicious cycle of price increases that have sent costs for patients and taxpayers through the roof,” Grassley said.

The report pinned most of the blame on PBMs for encouraging drugmakers to raise their list price, or the Wholesale Acquisition Cost (WAC), to offer greater rebates and discounts to PBMs and ensure that their product is included on the formulary, “absent significant advances in the efficacy of the drugs.”

“These price increases appear to have been driven, in part, by tactics PBMs employed in the early 2010s. At that time, PBMs began to more aggressively pit manufacturers against each other by implementing formulary exclusions in the insulin therapeutic class, which effectively stopped manufacturers from reaching large blocks of patients,” the report states.

“As a result, pharmaceutical manufacturers continued to raise WAC prices aggressively—increases that were often closely timed with price changes made by competitors (a practice that has been referred to as ‘shadow pricing’).”

The report also said that PBMs are given “tremendous bargaining power in negotiations with pharmaceutical manufacturers” considering the largest three PBMs serve “over 180 million people, representing roughly 80 percent of people.”

PBMs are corporations that handle the “the prescription drug benefit component” of people’s health plans and act on behalf of insurance companies and insurers, including Medicaid and medicare. They are supposed to keep drug costs to a minimum by negotiating with the drug manufacturers and pharmacies to secure lower drug prices and then passing those discounts to insurance plans.

PBMs also manage a list of drugs, known as a formulary, approved for reimbursement by health plans, that influences what drugs people can take and the out-of-pocket fee people will have to pay.

The Pharmaceutical Care Management Association that represents PBMs said that they share in the committee’s urgency to address the rising insulin price spikes and argued that PBMs have increased their efforts to help make insulin affordable.

“While we are reviewing the committee’s findings, it’s important to understand that PBMs have stepped up efforts to help patients living with diabetes afford their medications and improve health outcomes,” said PCMA President and CEO JC Scott.

“For example, some PBMs have introduced new programs to cap, or outright eliminate, out-of-pocket costs on insulin. PBMs also are providing people with diabetes clinical support and education that result in better medication adherence and health outcomes,” he added.

Scott says that the rising list prices for insulin are mostly due to “limited competition … a lack of alternative generic and biosimilar insulins, and drug manufacturers’ overuse of patent extensions” resulting in a $32 billion increase of total gross sales for insulin from 2012 to 2019.

The effects of rising insulin costs have had some insulin-dependent patients resorting to rationing their medication.

“As a result of these price increases, some diabetic patients have reportedly resorted to rationing their insulin medication, putting their lives at risk,” the report states.

Governments at the state level have begun to pass legislation to address the insulin price spikes.

Colorado became the first state to cap insulin co-pays at $100 per month for diabetics with private insurance in 2019. Prior to that, Coloradoans were paying between $600 to $900 for a month’s worth of insulin.

Since then, more than 10 states have passed bills to cap insulin costs.

President Donald Trump’s administration made a deal in May 2020 with 1,750 insurance plans to cap costs of insulin for Medicare recipients at $35 a month that begins this year.

Diabetes affects over 34 million Americans and is the 7th leading cause of death in the United States.