Material suppliers, manufacturers, pharmacies, and rebate programs all contribute to the rising prices of insulin, according to Alan Carter, PharmD, principal investigator and senior advisor at MRIGlobal, and adjunct faculty at University of Missouri–Kansas City School of Pharmacy.
Transcript (slightly modified) Who are the major players contributing to rising insulin prices?
Well that’s a complex question with many different players being involved. The major players that impact the price of insulin are the raw material suppliers and equipment suppliers, it’s a base cost. Then you have the manufacturer that has to produce the insulin and make sure it’s high quality, so that impacts the price. You have a wholesale distribution center that adds about 3% to the overall cost of insulin. Then you have the pharmacy, which at this point in time is making around 10% margin, so it’s not a huge burden of cost given the infrastructures required to maintain the supply chain to the wholesalers and the pharmacy. Then you have the pharmacy benefit managers (PBMs), who oversee the formularies, then the physicians have a little bit to pay with it, and then the patient themselves actually has an impact on their cost depending on how well they manage their diabetes and what options they choose for their insulin therapy.
It’s a complex question, but the primary impact to the cost is the rebate programs of both the federal government requires through the Medicaid rebate program, and the PBM’s rebates that they force the manufacturers to take. It’s a paid place system, if they don’t pay the PBM a rebate that the PBM thinks is fair, it becomes a negotiation of what the PBM wants versus what the manufacturer is willing to give up. Once that is agreed upon, then that contract is private and hidden so nobody sees it and the manufacturers pay the PBM for formulary tier status. The only thing that stops that, and I’ve been on a formulary committee for major healthcare plan under the Part D program, as a formulary committee they ask us which products in a category that we think are superior to another. If there is no clinical data that says one is superior to another, I cannot, and my colleagues on the panel, cannot agree to say that this must be on formulary versus another drug because of a specific reason.
So, without that data, we say it appears to be a class effect as long as a drug in that class reaches the achieved endpoint. There’s no significant difference to us from a therapeutic standpoint. They take it from there and go to a finance committee and that finance committee then negotiates the rebate prices for the manufacturers based on how many lives they have covered under their particular program. That’s where a lot of the money goes to that doesn’t really have anything to do with therapy for the patient. It just gets in the way of the physician and the patient and the pharmacy being able to ensure the patient gets an affordable priced product for them to use to manage their disease. That works on anything besides just insulin, that’s how all of it works. The generics are pretty much open season, but on biologics the generics are not really applicable because no biologic is going to be exactly the same, where small molecule chemical can be almost exactly the same, you’d be undetectable in differences—biologics aren’t that way, and that’s why we have the issue. So, that’s the primary player in cost.