In the midst of the chaos in Washington, D.C. in January 2021, the United States Senate Finance Committee released the results of their investigation into the skyrocketing price of insulin. The investigation took place over the course of almost two years and involved the review of more than 100,000 pages of internal documents, memoranda, and rebate agreements produced by Sanofi, Novo Nordisk, and Eli Lilly (the three largest insulin manufacturers) and CVS Caremark, Express Scripts, and OptumRx (the three largest pharmacy benefit managers (PBMs)).
According to the report, “a combination of factors contributed to consumers facing higher costs for insulin over the last 15 years,” including that pharmaceutical manufacturers “have complete control over setting the list price…for their products.”
The investigation found that insulin manufacturers “aggressively raised the list price of their insulin products absent significant advances in the efficacy of the drugs.” The investigation actually found that Novo Nordisk and Sanofi went a step further than just closely monitoring each others’ price increases by increasing prices in lockstep – sometimes within just hours or days of each other. These actions, according to the report, “kept a high price floor for their products, and left consumers paying more for insulin at the pharmacy counter.”
The investigation also found that manufacturers were also sensitive to the bottom lines of PBMs and of health plans that set formularies. The report cites an example of Eli Lilly and Novo Nordisk executives considering that PBMs largely make their money on rebates and fees that are based on a percentage of a drug’s list price, when considering whether to lower their list prices. The Board of Directors at Novo Nordisk even went so far as to vote down a proposed insulin price decrease based on financial downsides, risk of backlash from PBMs and payers, and expected pressure to take similar action on other products.
PBMs also received some heat from the report, which noted that the PBMs did not make much of an effort to discourage manufacturers from increasing the list price of their products and instead, often used their size and aggressive negotiating tactics to win more generous rebates, discounts, and fees from insulin manufacturers.
Key Findings
Key findings of the report include:
– The wholesale acquisition cost (WAC) prices of long- and short-acting insulins have risen steeply
– Spending on insulin products has increased significantly for the Medicare program and its beneficiaries
– Sanofi aggressively increased its list price in 2013 and 2014, in response to market pressure and competition
– Novo Nordisk repeatedly tracked Sanofi’s price increases
– Insulin research and development spending was a fraction of manufacturers’ revenue and sales and marketing expenses
– Rebates for insulin have increased exponentially since 2013 – increasing from between 2-4% in July 2013 to as high as 56% in 2018
– Manufacturers are keeping more revenue from insulin when compared to the 2000s, even as the net price is declining
This is the third bipartisan investigation of drug pricing and marketing practices from Senators Grassley and Wyden. It follows the 2020 report detailing how opioid manufacturers use tax-exempt organizations as extensions of their sales and marketing strategy and the 2015 report focused on the pricing of Sovaldi and Harvoni, costly “blockbuster” hepatitis C therapies.