Memorandum
Executive Highlights
- Insulet announced that CMS has issued guidance clarifying that insulin delivery systems like the Omnipod may be covered under Medicare Part D (prescription drug) for people with type 1 diabetes. Insulet is beginning formulary negotiations, which sound like they’ll take at least a few months to complete. For now, individual Medicare patients can apply to get Omnipod covered through a formulary exception.
- In line with the Part D decision, Omnipod will be distributed in the pharmacy channel – a big convenience win and potentially enabling lower out-of-pocket costs (vs. part B DME)
- Combining Medicare and likely expanded Medicaid access, Omnipod could now become available to an additional 450,000 US type 1s. This is a major win for patient access and a long-fought battle since Insulet’s Omnipod became available in the US – before today, it was the only FDA-cleared pump not covered by Medicare. Insulet has not shared details on pricing, revenue impact, or the expected cadence of new patients.
This morning, as we forecast in our Week in Review subscriber message yesterday, Insulet announced a very long-awaited and exciting update: CMS has finally issued guidance (one page) clarifying that insulin delivery systems like the Omnipod can be covered under the Medicare Part D (prescription drug) program. This is a major win for patient access, as Omnipod was previously the only FDA-cleared insulin pump not covered by Medicare.
Now, Insulet can begin negotiations with Medicare Part D carriers to formally add the Omnipod to formularies. The actual one-page Medicare guidance – addressed to “All Part D Plan Sponsors” – does not say specifically that Omnipod is officially covered, but Insulet’s press release and FAQ are clear that it is: “We are thrilled to now have the Omnipod System formally covered by CMS as a Part D benefit.” From here, it’s a matter of getting Omnipod on formulary with Medicare Part D carriers, which Insulet’s FAQ says “…is difficult to predict,” but “could take months.” It seems like this is a 2018 event, but we’re awaiting confirmation from the company.
Notably, this CMS guidance also gives Insulet a direct pathway to gain Medicaid coverage at the state level, as many programs follow CMS’ prescription drug guidance. Remarkably, Insulet estimates that obtaining both Medicare and Medicaid coverage extends Omnipod access to ~450,000 additional individuals with type 1 in the US. Wow – assuming a base of 1.5 million US type 1s, this unlocks nearly one-third of the US market for Insulet. We are thrilled to hear this, as this system is also a particularly easy one to teach and learn, and this should serve Medicaid and Medicare populations very well.
There is potential for patients to gain Omnipod access before part D formulary contracts are in place. Specifically, Insulet says it can work with Part D carriers to secure a “formulary exception” for individual patients – this process takes “about a week” to get a response, and could garner Omnipod coverage for patients before a formulary contract is in place. If it is denied, Insulet says it will help with an appeal. We salute Insulet for putting in place such a great, patient-focused FAQ so quickly – we imagine there will be a lot of demand.
The benefit category determination for the Omnipod – part D (prescription drug) vs. part B (DME) – has been the sticking point for Medicare coverage for years. While tubed pumps and therapeutic CGM are covered under part B, Insulet gains a big win in securing part D coverage, as it opens up the pharmacy channel for Omnipod. This could enable faster, lower-hassle access to Omnipod with potentially lower out-of-pocket costs over DME (our speculation). Insulet already has “a number of pharmacies that are dispensing the Omnipod,” which we had not realized.
Coverage for type 2s is also a possibility – Insulet is currently assuming that Medicare’s Insulin Infusion Pump National Coverage criteria will apply to Omnipod. Those criteria do not distinguish between type 1 and type 2. The FAQ is clear, however, that Insulet is focused on type 1 for now – presumably until the Lilly U500 and U200 products come out (2019-2020 launches).
The CMS guidance also leaves room for plans to cover other insulin delivery devices under Part D, a definite win for future patch devices that don’t meet Part B criteria. Plans may apply utilization management criteria if they wish, presumably meaning certain requirements will have to be met to obtain coverage.
As we’ve learned from Dexcom’s Medicare journey over the course of 2017, securing the benefit category is the major lead domino, and further administrative coverage hassles to iron out should not come as a surprise. We’ll listen keenly to management’s remarks tomorrow at JPM and in February’s call for more specifics on timing and the revenue impact in 2018 and beyond.
It’s amazing to see another Medicare win for diabetes technology, less than a year after Dexcom’s G5 and a week after Abbott’s FreeStyle Libre secured coverage. Of course, Insulet’s Omnipod is the only pump in the US not covered by Medicare, so this has been a long time coming. We salute patient advocates, professional organizations, and Insulet for working so hard on this for so long. See the Endocrine Society’s enthusiastic, supportive press release today here; see the letter from our sister organization, The diaTribe Foundation, advocating for this coverage, here.
Close Concerns’ Questions
Q: How quickly will Insulet get Omnipod on formulary? Should we expect this in 2018?
Q: How much pent-up demand is there for Insulet’s Omnipod in the Medicare population? Will Insulet see a revenue impact in 2018? How much uptake have other pumps seen in the Medicare population, particularly Tandem’s t:slim?
Q: What level of pricing will Insulet obtain from different part D plans? Will it be similar to private payers?
Q: Will Insulet try to pursue more pharmacy distribution with private payers?
Q: How will Insulet’s Medicare rollout compare to Dexcom’s? Will it be easier or just as hard?
Q: How quickly will Medicaid coverage broaden? Will this impact Omnipod coverage among private payers?
-- by Adam Brown and Kelly Close