Memorandum

New York Times publishes opinion piece on the high cost of insulin – February 22, 2016

The New York Times recently published an opinion piece by Dr. Kasia Lipska (Yale School of Medicine, New Haven, CT) on the high cost of insulin. Much of her critique focused on the lack of competition in the insulin market and the dramatic price increases for several products in recent years: the list price of Sanofi’s Lantus (insulin glargine) went up 168% between 2010-2015, the price of Novo Nordisk’s Levemir (insulin detemir) rose by 169%, and the price of Lilly’s Humulin U500 rose a (staggering) 325%. She also faulted the pharmaceutical companies for extending their insulin patents through formulation improvements that she characterized as “incremental” over older products. This argument is true in some respects (i.e., A1c-lowering efficacy), though in our view it understates the significance of the hypoglycemia reductions achieved with analog insulin vs. human insulin in particular. Dr. Lipska did express hope that the impending arrival of biosimilar insulins can lower costs by introducing more competition, though she argued that a large number of options will be required for truly meaningful improvements. Beyond the insulin manufacturers, Dr. Lipska also blamed pharmacy benefits managers (PBMs, like Express Scripts and CVS Health) and the opaque rebating system for the high cost of insulin. She suggested that rebates sometimes reach 50% of the list price of insulin, with the bulk of the savings going toward PBM profits and not being passed on to payers and patients. Dr. Lipska’s proposed solution on this front is to regulate the price negotiation process for greater transparency – or even to cut out the middlemen and allow the government to negotiate directly with manufacturers. The cost of insulin has been the focus of growing public and political furor through 2015 – see our 2015 reflections piece for an overview of the controversy. It’s certainly true there’s little room for prices to increase, although we believe increased volume will drive revenue, which will drive expansion in R&D that is important for future innovation (Dr. Lipska agrees in the piece this is important). We do think Medicare is probably on course to negotiate even lower prices (though it cannot currently negotiate prices directly with manufacturers), particularly when biosimilars emerge, and it will be important to watch how the US government through CMS addresses this. Overall, we felt this piece did a really valuable job in addressing how challenging insulin pricing is for uninsured and underinsured patients in the US who take insulin, particularly in pointing out that some are actually under-dosing due to concerns about costs. It did not address adequately the risks of hypoglycemia, particularly severe hypoglycemia, that can stem from taking older insulins like NPH or Regular - in particular, we were surprised  by the line "It's not clear whether the newer insulin products are significantly safer or more effective than their predecessors." We will have more on this story to follow.

-- by Helen Gao, Emily Regier, and Kelly Close