How the Civica Insulin Announcement Could Be Disruptive to the PBM Kickback Scheme

Yours truly has written an article. I have given some more serious thought to the Civica insulin announcement made on March 3, 2022 (my article has a link to the original press release) and I think it could be very disruptive to what I have dubbed the "PBM Kickback Scheme". You can read my assessment below, on LinkedIn at https://www.linkedin.com/pulse/how-civica-insulin-announcement-may-disruptive-pbm-scheme-strumello/ or at https://www.slideshare.net/ScottStrumello/civica-insulin-assessment.

Ironically, this month's New England Journal of Medicine also has a very interesting (and similar) analysis of the exact same topic (the Civica insulin announcement) in its "Perspective" section in an article entitled "A Radical Treatment for Insulin Pricing" (the link to the article can be found at https://www.nejm.org/doi/full/10.1056/NEJMp2203001, although I'm not sure you can buy per-article access to NEJM as unless you subscribe to NEJM, which is different from other journals).

I opted to to self-publish my own article in Scribd because there were points which others have chosen to gloss over which I believe the diabetes world should understand. Those elements happen to be core business strategies. 

Still, my underlying assessment is essentially the same as the NEJM article, and I'm generally in agreement with Harvard's Leemore Dafny: the Civica insulin effort stands to be disruptive. She generalizes it as being disruptive to pharmacy supply chain entities, whereas I believe it will be most disruptive to the PBM kickback scheme (hence my own article title).

In her article, Harvard's Leemore Dafny did identify what she saw as potential risks for Civica which she felt were worthy of acknowledging. For example, she speculated on what types of specific barriers Civica might encounter in executing its insulin plan.

I was especially bothered about the first element she wrote about, because it would be very easy to envision PBMs' doing such a thing using their creepy retail pharmacy contracts (if those don't already contain provisions which they could threaten pharmacies with if they carry Civica insulins), in which she writes:

"Civica will face important barriers to executing this plan, though. In addition to usual implementation and regulatory challenges, intermediaries threatened by this approach may introduce new obstacles; for example, they might pressure pharmacies not to carry Civica's insulin products."

It's easy to envsision PBM's attempting to pressure pharmacies within their retail networks from carrying Civica insulins. After all, the PBM kickback scheme is dependent on patients buying heavily-rebated, branded insulins. If they carry a less costly insulin, that scheme is disrupted. Hence we can imagine PBM's threating pharmacies within their networks that they'll consider it a violation of the PBM contract if they were to carry Civica insulins. The pharmacy contracts PBM's use are now subject to recently-announced FTC scrutiny, which will conduct a study of the impact which PBM contracts have on prescription drug prices for patients and other entities in the prescription drug supply chain.

That said, I believe the other risk she identified isn't a threat at all. She opined: "intermediaries won't try to block Civica's end run and will instead promote new diabetes agents that would be subject to the existing system".

That idea is far-fetched because a vast majority (by some estimates, around 77%) of U.S. insulin users have the autoimmune form (Type 1) of diabetes, and while they use significantly less insulin volume than patients with Type 2 use, the reality is that not one new agent has been ever been developed which has FDA approval for Type 1 diabetes. As a result, no alternative therapies to insulin exist for treating T1D; there are NO new "diabetes agents" for them to promote to that patient population, hence that will not happen.

For the record, NEJM did a very short (7:35) interview with Leemore Dafny about her NEJM article. The NEJM interview link can be found at https://www.nejm.org/doi/full/10.1056/NEJMp2203001 or you can catch that short interview below.
 

I also managed to locate the URL for the MP3 of NEJM interview (NEJM didn't make finding it easy):
https://www.nejm.org/doi/do_file/10.1056/NEJMdo006587/NEJMdo006587.mp3. The article source can be accessed at https://www.nejm.org/doi/full/10.1056/NEJMp2203001 (as noted above).