Insulin manufacturer and PBM execs testify before a bipartisan Congress motivated to address insulin pricing “as quickly as we can” – April 15, 2019

Wednesday’s hearing marked the first time PBMs and insulin manufacturers appeared before Congress together to discuss paths forward on insulin pricing. The hearing, which lasted nearly three hours, can be viewed here, along with written testimony from the pharmaceutical and PBM representatives. It comes amidst a series of other drug pricing hearings including Tuesday’s, where PBM reps were grilled by the Senate Finance Committee, and last week’s, where diabetes leaders testified before this same Subcommittee.

 Those testifying included:

• Mike Mason (SVP, Lilly Connected Care and Insulins)

• Doug Langa (EVP, North America Operations, Novo Nordisk)

• Kathleen Tregoning (EVP for External Affairs, Sanofi)

• Thomas Moriarty (EVP, Chief Policy and External Affairs Officer, CVS Health)

• Amy Bricker (SVP, Supply Chain, Express Scripts)

• Dr. Sumit Dutta (SVP and CMO, OptumRx)

As one may have predicted, there was a great deal of frustration on the part of many of the Committee members (see below), as PBM and pharma reps “finger-pointed,” avoided divulging economic specifics, and stuck largely to scripted lines:  

• Insulin manufacturers cited declining net prices, as list prices are forced up by formulary competition and increasing rebates, while

• PBMs insisted that they only care about the net price, add value by negotiating lower rates, and pass the majority of rebates through to employers and health plans.

It was also acknowledged by some that various Congresspeople coming in and out of the room (there were other hearings going on) were mainly concerned with showing constituents “action” but then leaving to focus on other issues.

Everyone agreed that the system is broken:

• Patients who are using the medications that are subject to rebates are often not seeing the fruits of the PBM negotiations; and

• those who are uninsured, or are in the Medicare Part D donut hole, or in the deductible phase of high-deductible plans pay high list prices. All three insulin manufacturers have patient assistance programs in place; while these were characterized as “band-aid” solutions by some of the Representatives, it was our sense that there was not much familiarity with the programs (similar to a range of nonprofit organizations, Congressional offices seem overloaded, with often one staff person assigned to all healthcare issues). There is also not clear data on how many patients need the programs and how many access the programs and how many are denied, which would be very valuable information to have.

When the Representatives weren’t discussing lack of affordability or asking clarifying questions about the complicated system for their own (or constituent) edification, they probed the impact of hypothetical policy interventions:

• What would happen if legislation eliminated rebates?

• What if administrative fees paid to the PBM were not tied to the price of the medication?

• What if the economics of the drug supply chain were forced to be more transparent?

Each proposal was met with pushback from one or both sides – see below for some responses.

There were various proposed government interventions; it was difficult to understand which would be pursued since there did not yet seem to be unity among the Congresspeople (or much collective work). Frank Pallone (D-NJ) asked the manufacturers, “Why don’t you just bring the list price down, or do you want us to set it?”; and John Sarbanes (D-MD)  suggested that “PBMs should be utilities, or converted to nonprofits … or something.” Although they were effective in communicating frustration and anger, it’s unclear whether these ideas are to be interpreted as more rhetorical or actionable.

No definitive next steps were laid out with respect to policy, and as the hearing came to a close, Ms. DeGette said the Subcommittee will continue to work with PBMs, manufacturers, and “everyone in the distribution center” to figure out how to provide insulin to people with diabetes at a cost they can afford “as quickly as we can.” The Subcommittee is “prepared to talk now and to bring [PBMs and manufacturers] back in July or September to talk about the progress we’ve made.” Ms. DeGette urged avoiding “unjustly assigning blame to any one player.” There have not yet been hearings where payers are in front of the Congress, and we look forward to this, particularly government payers, to better understand the environment.

Lines of questioning from the Representatives:

• What if the government set the price of insulin – making the list price the net price – and got rid of rebates? Manufacturers asserted that if list price were lowered they would lose formulary position, but they would consider lowering list price in the absence of rebates so long as they “could guarantee access and affordability” to patients. Sanofi EVP Ms. Kathleen Tregoning noted that the rebate system is working – net prices are coming down – but the results of the negotiations are not benefitting patients. Express Scripts EVP Ms. Amy Bricker cautioned against doing away with rebates, since if you remove rebates, “no one is advocating for the patient … PBMs are critical in affordability and access.” We were curious how they learned about patient needs.

• What would happen if PBM fees were standardized and made flat (rather than a percentage of the list price)? Lilly SVP Mr. Mike Mason and Novo Nordisk EVP Mr. Doug Langa said both of their companies had tried to negotiate flat fees, but were “pushed away.” CVS Health EVP Mr. Thomas Moriarty said that flat fees would likely result in higher costs, but CVS would adopt such a model if it resulted in lower cost. Ms. Bricker later added that, “If you de-link the fee from list price, nothing stops the manufacturer from increasing list price” – we’re not sure why the PBM’s administrative fee would directly have an impact on the manufacturer’s list price.

  • According to Mr. Moriarty, CVS Health’s PBM makes ~$300 million in administrative fees each year (a ~2% cut of total rebates). If accurate, that puts total rebates in the neighborhood of $15 billion annually for CVS Health.

• Should PBMs be more transparent? Dr. Raul Ruiz (D-CA), Yvette Clarke (D-NY), and John Sarbanes (D-MD) were among the Representatives who pressed the PBMs on transparency. Sanofi’s Ms. Tregoning came out in favor of greater transparency in the supply chain, but Express Scripts’ Ms. Bricker unsurprisingly said that making PBM rebates public would reduce negotiating power and result in higher prices.

• Should Medicare Part D leverage its >43 million beneficiaries to directly negotiate prescription drug prices? Pharmaceutical reps gave answers ranging from “I don’t think it’s needed” (Mr. Mason) to “We’d consider everything if it’d help the patient” to “PBMs are very effective negotiators, the question is what we do as a result of those discounts” (Ms. Tregoning). On the other side, PBM reps collectively said that they drive effective discounts, so government negotiation is not needed. There were not any Medicare Part D patients on the panel, which would have been helpful in our view; the US national population of patients is extremely heterogeneous and many have voiced requests for more type 2 patient representation in these hearings.

• Why are follow-on biologics (biosimilars) that are already on the market not driving down cost more? Greg Walden (R-OR) noted that Admelog has a 15% lower list price than Humalog, but Ms. Tregoning said it is not on any commercial formularies, only Medicaid managed care. Why? Ms. Bricker explained this is because the net cost of Admelog is still greater than that of competing products. Meanwhile, OptumRX SVP Dr. Sumit Dutta believes that the most effective way to impact the insulin market is to open it up to biosimilars and generics (we point out it’s been open for some time).

• How easy are patient assistant programs to use? Early in the day, Mr. Kennedy and Ms. Tregoning got into an exchange where he cited testimony from last week’s hearing suggesting that these programs (characterized as homogenous) are not very user-friendly. “There were people here last week that said those programs take weeks to get into, there’s not transparency, they can’t wait six weeks to get an insulin shot.” Ms. Tregoning replied that, on the contrary, people could access the Sanofi programs in a matter of minutes online or on the phone. We were initially surprised to hear all programs described in the same way since there is a range of experience with various programs, including different ways to prove income (not required by Merck or Sanofi, but required by all other manufactures), different income levels accepted (usually 250% to 400% of the federal poverty level), different approaches required, different products offered (Sanofi is the only one to offer “next-generation” products and the same price for insulin no matter what dose needed, etc.) – see diaTribe.org/access (“How to Get Diabetes Drugs for Free”) for more detail. Could the programs be standardized? This was not addressed.

• How big of a concern is vertical integration of PBMs and insurers (i.e., Aetna-CVS, Cigna-Express Scripts, and UHC-OptumRx)? PBM reps didn’t have the chance to respond, but Mr. Carter (R-GA) expressed concerns with the fact that PBMs are returning money to plan sponsors which, in some cases, are owned by the same parent company. Mr. Peters (D-CA) also cited this trend as a “real risk of anti-competitive behavior.”

Quotable Quotes

• “I reserve most of my frustration in this setting for PBMs – the lack of transparency is allowing for a lot of manipulation. The rebate system is totally screwed up – without transparency, there’s room for a lot of hocus pocus to go on with rebates … I think, just to get the lobbyists to shudder a little, that the PBMs should be utilities. Or converted to nonprofits or something … If we can’t get it from a for-profit entity like PBM, we should look at other ways to do it, including getting government involved to compete.” – John Sarbanes (D-MD)

• “I asked [a 9-year-old with type 1 diabetes] what she wanted me to ask today, and she said, “Why do we have laws to protect children’s safety, like bike helmets, seat belts, and indoor smoking bans, but not laws that would allow them to get the medicines they need to stay alive.” Things have got to change … Seems to be that just about everyone in the supply chain except the patient is benefitting from increasing list prices.” – Kathy Castor (D-FL)

• “You know why we’re here, you know the challenges. I can tell you how frustrating it is to be here and watch every one of you do this [points fingers]. I hope you know that if that’s the result of this hearing – you’ve got bipartisan frustration on this – the status quo is not going to continue. It can’t. Patients are literally rationing, putting their lives on hold and their children in danger to get access to medications that were patented and sold for a buck.” – Joe Kennedy (D-MA)

• “Innovation is very important to us as an organization, we’re an innovative company. It’s most important that we keep the patient in mind. Even that word, ‘incremental,’ it’s not incremental to the patients. You think about 4-6 injections per day, to 1. Think about being able to take mealtime insulin at or right after you eat vs. 1-1.5 hours before. Think about basal insulin, our long-acting products today that give you the support of hypoglycemia. The best way to describe it is we have patients that want to work for Novo Nordisk because of the mission we’re on to defeat diabetes. This individual lives with night terror, hypoglycemia at night. It makes him do things that are out of what he normally does. Because of Tresiba, which reduces hypoglycemia by 40%, he hasn’t had a night terror since.” – Mr. Langa (Novo Nordisk)

• “The issue here is not one of negotiation, the PBMs are very effective negotiators. It’s what happens as a result of those negotiations. Those rebates are not necessarily going all the way through to patients, they are being used in other parts of the system. We don’t have visibility in how those rebates are suses, those rebates are how we secure formulary placement and cost-sharing for patients.” – Ms. Tregoning (Sanofi)

• “I just want to say, all I hear from my constituents, they’re totally disgusted, insulin has been around a long time. They don’t even believe in a market-based system anymore. Frankly, I do believe in that. But they tell me just set the price. ‘You, in Congress, just set the price and that’s it.’ They don’t believe in the competitive model anymore. The system doesn’t work, but why doesn’t it work anymore? What’s happened?” – Frank Pallone (D-NJ)

• “How is it that if net price is going down, it’s still unaffordable? Rebate shenanigan – that’s what it is at the end of the day.” – Yvette Clark (D-NY)

• “If we could ensure patient access and affordability, then we would certainly be willing to lower the list price if we moved away from a rebate system.” – Ms. Tregoning (Sanofi)

  • “We support the rebate rule. We also support that as long as there’s access and affordability, we are open to that option.” – Mr. Langa (Novo Nordisk)

• “This is where Congress has to step in and do something. It’s because of profits, greed … the American public is tired. When people die – that is what’s happening – we hear about it, it’s outrageous. Completely outrageous.” – Nanette Diaz Barragán (D-CA)

• “We want the same thing. We’re not defending the system, we’re just explaining the system. We want reform, we want anything that provides better access to the patients. The heart of what we’re hearing from patients is that those in high deductible plans – about half of those high-deductible plans will take the rebates that are given to them and use those for affordable care for chronic disease. About half decide to put that back and lower premiums for the general population. What we hear, is that for For those individuals in those high deductible plans, where the employer has decided to pick plan design to lower premiums, to prioritize that, that leaves individuals with chronic medication paying list price. That is a gap in the system right now, that is leading to what we are hearing the most from patients. We are providing now a stop-gap measure to buy all of those people down to $95, but that’s a short-term fix. The long-term fix is to be really focused on what can we do with high deductible plans so they have affordable coverage from day one, and that decision is universal?” – Mr. Mason (Lilly)

Manufacturer/PBM Testimony Highlights

• In the course of their testimony, PBM and pharma leaders endorsed a number of steps that they believe would help lower costs for patients:

  • Mr. Mason (Lilly) and Dr. Dutta (OptumRx) both pointed to the Creates Act, which would enhance competition by making it easier for medicines with expired patents to be sold as less expensive generic versions. Mr. Mason and Mr. Moriarty (CVS) also called for an end to pay-for-delay tactics, and Dr. Dutta called for the prohibition of evergreening.

  • Mr. Moriarty advocated for $0 copays for preventive medicines, such as insulin. This is a tactic already being implemented by some employers/health plans, and bears resemblance to the Insulin for All Act, which aims to eliminate cost sharing (deductibles, copayments, and coinsurance) for insulin for Medicare and Medicaid beneficiaries.

• Speakers also shared a number of statistics regarding rebates and pricing:

  • Lilly hasn’t increased the list price of its insulins since 2017, and it caps Lilly insulins at $95 for those in the deductible phase at the pharmacy counter; 95% of monthly Humalog prescriptions are $85, 90% cost <$50, and 43% are $0; 75% of list price is paid out in the form of rebates and discounts. Clearly 5% of the prescriptions are where the focus needs to be, which is where Sanofi is targeting its efforts.

  • In 2018, 68% of Novo Nordisk gross sales went to rebates, discounts, and fees (amounting to ~$18 billion in 2018); the company’s net insulin prices have declined YOY since 2015; Novo Nordisk human insulin available at Walmart and CVS for <$25 is used by nearly 775,000 patients today; nearly 50,000 people have received free Novo Nordisk insulin through its patient assistance program since 2013. Companies would be smart in our view to disclose how many patients are denied insulin through these programs and why.

  • In 2018, Sanofi’s average list price increased 4.6%, while the average net price decreased by 8% (the third consecutive year in which overall net pricing declined); the net price of Lantus as fallen >30% since 2012, and is now lower today than it was in 2006, yet the average out-of-pocket costs for patients with commercial insurance and Medicare was up 60%; ~75% of people pay <$50 month for Sanofi insulin.

    • Last week, Sanofi announced a notable new program where, beginning in June, uninsured patients will be able to access any combination of up to 10 boxes of pens and/or 10 ml vials of Sanofi insulin for $99/month. While Mr. Kennedy expressed indignation by the idea that the company would announce such a program the day they face Congress for questioning, others emphasized that more criticism at innovative programs was eminently unconstructive. The program appears to be a clear and very positive step toward affordability for those who fall through the cracks of the rebate system – presumably this program could improve pricing for millions of patients. It’s also the program that offers the most advanced insulins; this message may not be getting through to patients, however, because there is so much din about insulins being “no different today than 100 years ago.” We find this narrative particularly damaging since it reinforces the idea that all patients should be satisfied with NPH or other insulins that can for many patients prompt significant severe hypoglcyemia.

  • CVS, in 2018, negotiated discounts reducing cost of diabetes drugs including insulin by 1.7% YOY, “despite brand inflation of 5.6%”; By replacing Lantus and Toujeo with Basaglar on the formulary, CVS saw member out-of-pocket costs decline by >9%, and A1cs declined by 0.43% according to CVS (no source given – we find it hard to imagine this move could prompt better A1c outcomes, all else equal); CVS offers its own employees and their families $0 copays for insulin (it would be very positive for all employers to offer this); CVS passes 98% of rebates through to employers/health plans.

  • In collaboration with all three manufacturers, Express Scripts/Cigna announced last week a Patient Assurance Program that caps out-of-pocket insulin costs at $25 per month; Half of Express Scripts clients receive 100% of rebates, and overall, 95% of rebates, discounts, and price reductions are passed through; 2018 saw a 1.5% decrease in spending on insulin for Express Scripts plans.

  • 76% of people OptumRx serves pays nothing for insulin or has a fixed copay, most commonly $35/month; we are not sure about the other 24%.

-- by Brian Levine, Terry Vance, and Kelly Close