Despite its discovery nearly 100 years ago, the list price of insulin has gone up, not down, with trade secrets and other protections preventing researchers from determining who benefits from its sale. Meanwhile, the net price – what manufacturers receive after taking into account all discounts and payments to distribution system entities – has declined. So why don’t patients see the savings?
The researchers analyzed the flow of money between all participants in the distribution system; manufacturers, wholesalers, pharmacies, pharmacy benefit managers (PBMs) and health plans; and find that intermediaries in the distribution process now earn around 53% of the net proceeds. insulin sales, compared to 30% in 2014. At the same time, the share going to manufacturers fell by 33%.
This redistribution of benefits has resulted in the total cost to the health system -; net expenditure -; stay relatively flat.
While manufacturers receive less, the savings made by manufacturers who take less are not accruing to patients. These savings are captured by others in the distribution system, and any policy solution must take into account the entire supply chain. “
Karen Van Nuys, Executive Director of the Value of Life Sciences Innovation Project at USC Schaeffer Center
The insulin distribution system: a complicated network
To understand how money in the insulin delivery system has flowed over time, Van Nuys and colleagues Rocio Ribero, Martha Ryan and Neeraj Sood used 15 different data sources to create a database of spending in insulin between 2014 and 2018.
On a hypothetical $ 100 spent on insulin, they find that manufacturers racked up around $ 70 in 2014, falling to $ 47 in 2018. Meanwhile, the share going to pharmacies has increased from around $ 6 to $ 20. , PBM’s share increased from $ 6 to $ 14, and wholesalers’ share increased from $ 5 to $ 8. The share of health plans fell from $ 14 to $ 10 per $ 100 spent on insulin.
âIt is clear that all entities in the pharmaceutical distribution system benefit from the sale of insulin,â said Neeraj Sood, principal investigator at the Schaeffer Center. “But these data suggest that increasing the profits of system intermediaries plays a key role in keeping net spending high.”
Build a single dataset
Due to the system’s lack of transparency, researchers had to tap into multiple sources to develop a dataset that allows them to map spending flows at each stage of the distribution system. The sources included Medicare and Medicaid data, Securities and Exchange Commission files as well as state-level audit reports resulting from drug price transparency laws enacted in recent years.
âIt is telling that we had to combine data from more than a dozen sources to understand spending for a single class of drugs over a 5-year period,â said Ribero, a researcher at the Schaeffer Center.
Regulations must target all players in the distribution process
About 9.1 million Americans with diabetes need insulin to effectively manage their disease. Uninsured patients as well as those with high deductible health plans have increasingly felt the burden of high and rising list prices, sometimes with fatal consequences. Policy makers have taken note.
The Centers for Medicare & Medicaid Services recently introduced a model that would limit personal expenses to $ 35 per thirty-day insulin supply. While the researchers note that such measures would bring immediate financial relief to patients, they would not address the overall cost of insulin to the system, nor the inordinate market power and influence of middlemen.
Many of the system’s intermediaries operate in highly concentrated markets where they can influence prices, the researchers conclude. In 2018, the top three PBMs accounted for over 70% of all claims and the top three wholesalers accounted for 95% of distribution revenue.
âObviously there are problems all over the system,â Van Nuys said. âPolicymakers should bring together all players in the distribution system, demand transparent accounting of financial flows at every stage and, from there, develop solutions that improve system-wide health and affordability. “
Van Nuys, K., et al. (2021) Estimated share of net insulin spending captured by manufacturers, wholesalers, pharmacy benefit managers, pharmacies, and U.S. health plans from 2014 to 2018. JAMA Health Forum. doi.org/10.1001/jamahealthforum.2021.3409.