Many diabetics are aware that insulin out-of-pocket costs have increased significantly in recent years, making these costs affordable for some diabetics.
In response, lawmakers from both parties want to “do something.” But “doing something” is not necessarily the same as developing an effective solution.
Indeed, when Congress enacts a badly designed “solution,” it often causes new problems or exacerbates the original problems.
It’s a bipartisan Senate Diabetes Caucus, Senator Jeanne Shaheen, DN.H. , And Susan Collins, sponsored by R-Main Co-Chair, for the latest proposal to address the cost of insulin.
Their proposal differs from other proposals in that it takes an indirect approach rather than offering “golden handcuffs” transactions to insulin makers, rather than directly imposing government-directed price controls. increase.
Under the Shaheen-Collins Act, manufacturers can voluntarily apply to “certify” one or more insulin products by the government. In order for an insulin product to be “certified”, the manufacturer must agree to charge beyond the “maximum list price” set by the Department of Health and Human Services.
HHS sets these highest prices based on the net price paid for insulin products by Medike Apartment D’s drug program in 2021 and increases annually with common inflation rates.
In exchange, the federal government publishes an annual list of such “certified” insulin products and requires all Medicare, Medicaid, and private health insurance to cover those products.
The federal government has also banned health insurance from charging subscribers more than $ 35 per 30-day supply of “certified” insulin products, with plans for further direct or indirect “price concessions.” It is prohibited to get (discounts, rebates, etc.). From the manufacturer.
Healthcare plans are also prohibited from imposing “pre-approval or other medical management requirements, or other similar conditions for such insulin” on the registrant.
Basically, in exchange for a manufacturer who has agreed to set the highest price for a product, the government will have to buy the product and manufacture a restrained market for customers who are forbidden to get low prices. We will provide it to the vendor.
The result is a government-sponsored “insulin cartel.” Below that, the “upper limit” price is also effectively the “lowest” price.
There are many problems with this particular “solution”.
In the first place, it undermines recent efforts by the Food and Drug Administration to strengthen market competition by creating a simpler regulatory pathway for approving “exchangeable biosimilars” (ie, “generic”) insulin products. Will make it.
Still, encouraging more general competitors makes a difference only if health insurance can motivate subscribers to choose cheaper products. This is almost completely eliminated in Shaheen-Collins’ proposal.
Second, Congress’s enactment of this law will create a price control system that can be applied to more medicines in the future. As a result, not only is it discouraging the development of new medicines, but it also reduces the significant savings American consumers are currently making when older medicines become generics.
This is because these generic versions no longer have to offer significantly lower prices to gain market share.
To make matters worse, adopting this approach effectively sets a parliamentary precedent for private health insurance, a “budget” funded by a “stealth tax” in the form of increased premiums for employers and employees. Will turn into an “outside” government program.
Once Congress begins mandating benefits at the level of detail contained in the Shaheen-Collins law, Congress cannot stop doing the same for other medicines and medical services. Boosts the cost of health insurance for 170 million Americans with private compensation.
In fact, one implication of the Parliamentary Budget Department’s analysis is that the Shaheen-Collins Act will increase the cost of health insurance plans sponsored by private employers and purchased by individuals by about $ 1.5 billion annually in 2024, 2032.
A more fundamental flaw is that Shaheen-Collins’ proposal presupposes a fundamental misunderstanding of the underlying problem.
Specifically, the cost of insulin problems is primarily for patients to pay for their insulin at their own expense, and secondarily for what insulin manufacturers charge for their products. Nevertheless, Shaheen-Collins’ proposal takes the opposite approach, primarily regulating manufacturer prices and then regulating patient out-of-pocket costs.
Not surprisingly, the focus has been on patients who are paying more. Still, at the same time, some patients do not, as their health insurance charges them a reasonable out-of-pocket cost.
So the more relevant question is why some patients face high and soaring out-of-pocket costs, while most others do not.
If you dig deeper into the data, you’ll see that insulin makers are actually paying much less for their products than they are nominally claiming as a “fixed price.” Furthermore, in recent years, while the “fixed price” has risen, the “net” price has also fallen at the same time.
According to a recent study of system-wide insulin prices, the average list price of 100 units of insulin increased from $ 19.60 in 2014 to $ 27.45 in 2018, a 40% increase over five years. Still, over the same period, the average net price received by manufacturers fell 31% from $ 10.53 in 2014 to $ 7.29 in 2018.
It raises the following related question: If some patients are paying more, but manufacturers are receiving less, who is making the difference?
Answer: Most of the differences are pocketed by intermediaries, especially pharmacy benefits management companies.
These companies negotiate with pharmaceutical companies on behalf of their health insurance clients. Instead of charging for services, you usually reduce your savings. Still, it induces them to favor manufacturers who give them big rebates from high prices.
Therefore, in order for their products to be covered by health insurance, manufacturers need to raise their list prices to give brokers significant price cuts. This twisted dynamics explains the paradox that manufacturers received a 30% decrease in net payments, while a 40% increase in list prices.
For patients, the effect depends on the design of their health plan. Patients with high out-of-pocket costs are those who plan to pay a certain percentage of the list price of the drug (joint insurance). In contrast, patients with joint insurance plans based on net prices (rather than lists) or plans that charge registrants a fixed $ cost share (out-of-pocket) are largely unaffected.
Instead of Shaheen-Collins’ suggestion, a better solution is for Congress to clarify that the pharmacy benefit management company should be treated as a trustee in the customer’s health plan.
Therefore, you are obliged to act in the best interests of the plan and its registrants, such as giving away all discounts and rebates received from the manufacturer and prioritizing products with low net costs for plans and patients.
This work originally appeared in The Daily Signal
