Illinois Gov. J.B. Pritzker signed a bill into law that caps the out-of-pocket price of insulin at $100 for a 30-day supply.
According to the governor’s office, 1.3 million adults in Illinois rely on insulin “but regular price hikes make insulin difficult to afford for the uninsured and those whose coverage requires significant cost sharing.”
The bill, formerly known as S.B. 667, was signed into law on January 24. Illinois follows Colorado, which passed a similar bill in May 2019.
The Heart of the Problem
Lawmakers and the public are largely unaware of the factors that make insulin so expensive, said Roger Klein, M.D, J.D., a physician, attorney, and policy advisor to The Heartland Institute, which publishes Health Care News.
“There are many reasons for the high cost of insulin,” Klein said. “The cost of production has undoubtedly risen, so some of the price increases are justified.”
The price of insulin is complicated by the pharmacy benefit managers (PBMs) who work for large payers to negotiate drug prices, Klein says.
“There are three insulin manufacturers, Sanofi, Lilly and Nova Nordisk who compete with each other to get their products on PBM formularies,” Klein said.
Insurance companies assign drugs into formularies, lists of medications that they will cover.
“PBMs gravitate to brands that give them the highest rebates,” Klein said.
Insulin producers might increase the price of their drugs so they can entice PBMs with bigger discounts, says Klein.
“As long as insurance premiums can rise to reflect the high prices, the game goes on,” Klein said. “It seems like there is little concern for the patient who either has no insurance or is left paying a higher co-pay. Rebates are actually kickbacks, as they enrich the middleman and not the end consumer.”
Price Controls Lead to Shortages
Price controls frighten producers because they could lose money if the cost of production rises. Producers may cut back on production which could lead to product shortages, Klein says.
“They will look to reap profits elsewhere,” Klein said. “Only real unencumbered competition will put prices just where they need to be.”
There are ways government can improve competition by exploring alternatives, says Alieta Eck, M.D., physician and policy advisor to The Heartland Institute.
“Our regulatory apparatus needs to find ways to increase competition through facilitated approval of new insulin products, particularly biosimilars,” Eck said. “We [also] need to better understand the advantages and disadvantages of newer, highly expensive insulin analogs relative to human insulin and perhaps make great use of the latter. This would result in substitution of much less costly products without loss of clinical effectiveness while placing competitive pressure on prices for human insulin analogs.”
Insulin analogs refers to synthetically made product, genetically altered to create better delivery.
Patients in the Driver Seat
Direct primary care (DPC) could also help bring down drug costs because DPC members typically pay for drugs out of pocket, Klein says. DPC does not accept third-party payers but instead charges members a low flat fee for care.
“Patients who pay [directly] will learn that buying insulin in 10cc bottles is far less expensive than buying the fancy 3cc pens where the dose is dialed in,” Klein said. “The latter may be more convenient, but the technology makes the pens far more expensive. When patients care what medicines cost, they will purchase the best value, and competition will drive prices down.”