Politicians for years have been making a show of wringing their hands over sky-high prescription drug prices. And no drug has drawn more scrutiny, or calls for action, than insulin.
Insulin was discovered 100 years ago by a trio of Canadian scientists. They sold the patent to the University of Toronto for a mere $1.
The patent was made available royalty-free to drug companies to foster widespread use of the life-saving hormone.
Drug companies, in turn, did what they do best: They cashed in.
After decades of steady price hikes by manufacturers, a vial of insulin now costs about $300 — roughly 30,000% more than the original cost of the patent.
“Insulin has been the poster child for illogical drug pricing for some time,” said Geoffrey Joyce, director of health policy for USC’s Leonard D. Schaeffer Center for Health Policy & Economics.
And now comes new research showing that the three drug companies that dominate global insulin sales — Novo Nordisk, Eli Lilly and Sanofi — may not be entirely to blame for the soaring costs to people with diabetes (including myself).
Blame a profit-hungry hoard of middlemen as well.
Researchers at USC found that drugmakers’ share of revenue from insulin sales has declined in recent years — and a greater share is being siphoned off by pharmacy benefit managers, drugstores, wholesalers and insurers.
In 2014, the researchers determined, 30% of insulin revenue went to middlemen. By 2018, those same middlemen were receiving 53% of insulin expenditures.
Is it any wonder American drug prices are the highest in the world? More than half the revenue from one of the most widely prescribed medicines is being gobbled up by layers of intermediaries standing between manufacturers and patients.
“The middlemen, and particularly pharmacy benefit managers, have been effective in negotiating lower prices from manufacturers,” said Karen Van Nuys, an assistant professor at the USC Sol Price School of Public Policy and one of the lead researchers of the study.
“What they haven’t been doing is sharing gains from those lower prices with patients,” she told me. “They’ve been keeping them.”
Pharmacy benefit managers, or PBMs, are companies that haggle with drugmakers on behalf of insurers and large employers. In theory, they play a vital role in preventing drug companies from charging whatever they please for prescription meds.
In reality, as the new data show, PBMs keep much of the savings for themselves rather than passing them along to patients.
But, again, they’re only one of multiple layers of middlemen cutting themselves in for a piece of the action.
“Everyone thinks drug manufacturers are the problem,” Van Nuys said. “In the case of insulin, it’s not just them — even though the middlemen are happy to have people think it’s the manufacturers.”
Making matters worse, she observed, the greater share of insulin revenue going to intermediaries places pressure on the drug’s manufacturers to keep raising prices so their own profits don’t suffer.
“It’s unconscionable,” Van Nuys said. “Market forces are working in favor of shareholders rather than patients.”
Asked to comment on the USC study, which was published this month in JAMA Health Forum, Pharmaceutical Research and Manufacturers of America, the drug industry’s main lobbying group, was happy to point an accusing finger at pharmacy benefit managers.
“Pharmacy benefit managers play a powerful role in determining how much patients pay out of pocket for prescription medicines, yet these middlemen operate with very little transparency and accountability,” said Debra DeShong, a spokesperson for the organization.
“Every year they extract tens of billions of dollars in rebates from drugmakers, yet too often these savings are not shared with patients at the pharmacy,” she said, adding that “PBMs help perpetuate a broken system.”
Greg Lopes, a spokesperson for the Pharmaceutical Care Management Assn., representing PBMs, countered that high insulin prices are primarily the fault of “pricing strategies used by drug manufacturers to avoid competition.”
“PBMs have stepped up efforts to help patients living with diabetes by providing clinical support and education that result in better medication adherence and improve health outcomes,” he said.
Neither side deserves a get-out-of-jail-free card.
David Lazarus, a Los Angeles Times columnist, writes on consumer issues. He can be reached at email@example.com.