Intermediates account for more than half the cost of insulin, USC Schaeffer study finds
Although it was discovered almost 100 years ago, the list price of insulin has gone up, not down, with trade secrets and other protections preventing researchers from determining who benefits from its sale. Meanwhile, the net price – what manufacturers receive after taking into account all discounts and payments to distribution system entities – has declined. So why don’t patients see the savings?
USC researchers analyzed the flow of money between all participants in the distribution system – manufacturers, wholesalers, pharmacies, pharmacy benefit managers (PBMs), and health plans. They found that middlemen in the distribution process now walk away with more than half – about 53% – of the net proceeds from the sale of insulin, up from 30% in 2014. Meanwhile, manufacturers’ share has declined by d. ‘a third.
This redistribution of benefits has caused net expenditure, or the total cost to the health system, to remain relatively stable.
“While manufacturers receive less, the savings from manufacturers who take less do not benefit patients,” said Karen van nuys, Executive Director of the Value of Life Sciences Innovation Project at USC Schaeffer Center for Health Policy and Economics. “These savings are captured by others in the distribution system, and any policy solution must take into account the entire supply chain.”
The insulin delivery system is a complex network
To understand how the money in the insulin delivery system has flowed over time, Van Nuys and his colleagues Rocio Ribero, Marthe Ryan and Neeraj Sood leveraged 15 different data sources to create a database of insulin expenditure between 2014 and 2018.
On a hypothetical $ 100 spent on insulin, they find that manufacturers racked up around $ 70 in 2014, falling to $ 47 in 2018. Meanwhile, the share going to pharmacies has increased from around $ 6 to $ 20. , Pharmacy Benefit Managers ‘share increased from $ 6 to $ 14, and wholesalers’ share increased from $ 5 to $ 8. Health plans have seen their share drop from $ 14 to $ 10 for every $ 100 spent on insulin.
“It is clear that all entities in the pharmaceutical distribution system benefit from the sale of insulin,” said Sood, principal investigator at the USC Schaeffer Center. “But these data suggest that increasing the profits of system intermediaries plays a key role in keeping net spending high.”
Build a single data set
Due to the system’s lack of transparency, researchers had to leverage multiple sources to develop a dataset that allowed them to map spending flows at each stage of the distribution system. The sources included data from Medicare and Medicaid, files from the Securities and Exchange Commission as well as state-level audit reports resulting from drug price transparency laws enacted in recent years.
“It is telling that we had to combine data from more than a dozen sources to understand spending for a single class of drugs over a five-year period,” said Ribero, a researcher at the USC Schaeffer Center.
Regulations must target all players in the distribution process
About 9.1 million Americans with diabetes need insulin to effectively manage their disease. Uninsured patients as well as those with high deductible health plans have increasingly felt the burden of high and rising list prices, sometimes with fatal consequences. Policy makers have taken note.
The Medicare and Medicaid Service Centers recently introduced a model that would limit personal expenses to $ 35 per 30-day insulin supply. While the researchers note that such measures would bring immediate financial relief to patients, they would not address the overall cost of insulin to the system, nor the inordinate market power and influence of middlemen.
Many of the system’s intermediaries operate in highly concentrated markets where they can influence prices, the researchers conclude. In 2018, the top three pharmacy benefit managers accounted for over 70% of all claims, and the top three wholesalers accounted for 95% of distribution revenues.
“Obviously there are problems throughout the system,” Van Nuys said. “Policymakers should bring together all players in the distribution system, demand transparent accounting of financial flows at every stage and, from there, develop solutions that improve system-wide health and affordability. “
The USC Schaeffer Center for Health Policy & Economics supported this study. The USC Schaeffer Center is supported by unrestricted donations from various public and private entities, including manufacturers, pharmacies, and health plans. These are listed in the centre’s annual report, which can be viewed at the site of the center.
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