The Insulin-PBM Rebate Kickback Scheme Appears to Be Coming to an End

Last year, on March 3, 2022, in what I believe was a fantastic accomplishment relatively early in Aaron Kowalski's tenure as CEO, the JDRF and Civica, Inc. (via the company's CivicaScript operating unit) jointly announced Civica's intention to commercialize biosimilars of the three bestselling insulin analogues at an affordable price of $30/vial or $55/box of five insulin pens. The Civica press release can be seen at https://www.businesswire.com/news/home/20220303005321/en/Civica-to-Manufacture-and-Distribute-Affordable-Insulin/ and a concurrent press release from JDRF can be seen at https://www.prnewswire.com/news-releases/jdrf-announces-support-of-civica-to-manufacture-and-distribute-low-cost-insulin-301495050.html. The plan is to introduce lower-priced biosimilars of the three bestselling insulin analogues now on the market (of Lantus, Novolog and Humalog, respectively), potentially as soon as 2024 (assuming they don't encounter unexpected regulatory delays). 

My followers may recall that not long after the Civica insulin announcement, I published an article on LinkedIn entitled "How the Civica Insulin Announcement May Be Disruptive to the PBM Kickback Scheme" (see the original at https://www.linkedin.com/pulse/how-civica-insulin-announcement-may-disruptive-pbm-scheme-strumello/ for the article). It appears as if the predictions I made were correct (that the biggest loser from the Civica insulin announcement would not be pharma, rather the likely loser from the Civica insulin deal would instead be the vertically integrated [with commercial healthcare insurance companies] PBM's), and those predictions appear to be coming to fruition now.

For example, in the year that's followed, on March 1, 2023, Eli Lilly & Co. announced (see the press release at https://www.prnewswire.com/news-releases/lilly-cuts-insulin-prices-by-70-and-caps-patient-insulin-out-of-pocket-costs-at-35-per-month-301758946.html for more) list price reductions of up to 70% on its most commonly prescribed insulins, as well as an expansion of its Insulin Value Program. Beyond that, Lilly announced that effective May 1, 2023, its unbranded prandial insulin analogue called simply Lilly Insulin Lispro Injection U-100 will be repriced to just $25/vial. Finally, Lilly also announced it would introduce an interchangeable biosimilar version of Sanofi's Lantus (sold in insulin pens only at this time) branded as Rezvoglar, at a price that's marginally less than Sanofi Winthrop's own unbranded product, but not necessarily the lowest-price Lantus copy, as Biocon's version remains slightly less costly.

Exactly two weeks later, on March 14, 2023, rival Novo Nordisk made a remarkably similar announcement, saying that on January 1, 2024, it too would be reducing the U.S. list prices on its branded prandial, basal, pre-mixed and biosynthetic human insulins, as well as reducing the list prices of its unbranded (including both aspart and degludec) analogue insulins (see the full PR at https://www.prnewswire.com/news-releases/novo-nordisk-to-lower-us-prices-of-several-pre-filled-insulin-pens-and-vials-up-to-75-for-people-living-with-diabetes-in-january-2024-301771409.html for details).

Then, two days later after Novo Nordisk's "me-too" repricing announcement, on March 16, 2023, the last of the "big three" insulin makers known as Sanofi announced it was also cutting the list price of branded (and unbranded) Lantus by 78% and it would establish a $35 cap on out-of-pocket costs for Lantus for all patients with commercial insurance (see the full PR at https://www.globenewswire.com/en/news-release/2023/03/16/2629188/0/en/Press-Release-Sanofi-cuts-U-S-list-price-of-Lantus-its-most-prescribed-insulin-by-78-and-caps-out-of-pocket-Lantus-costs-at-35-for-all-patients-with-commercial-insurance.html for details).

Neither Lilly, Novo Nordisk nor Sanofi expect their own insulin profit margins to fall as a result of these insulin list price reductions, raising the question: what changed? The reality is the latest pricing moves from Lilly, Novo Nordisk and Sanofi did not occur by accident. It involved many different things with a singular goal of ending the U.S. price disparities on insulin compared to the rest of the developed world.

For example, the looming threat of fines from Medicaid on their insulin list prices rising faster than inflation was a factor (and having an administration threatening to actually fine them over it). The real impetus was likely the American Rescue Plan of 2021; that law contained several provisions including one in which drug-makers generally (including insulin makers), who raised drug list prices faster than inflation (which applies when they raise list prices to give PBM's bigger rebates on the back-end) might have been forced to pay Medicaid programs more than the price of their insulin products every time a Medicaid program had to cover one, likely totaling tens of millions of dollars in payments to Medicaid.

Beyond that included a new FTC policy statement https://www.ftc.gov/legal-library/browse/policy-statement-federal-trade-commission-rebates-fees-exchange-excluding-lower-cost-drug-products for the statement, and a formal bipartisan FTC announcement to study the PBM industry https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-launches-inquiry-prescription-drug-middlemen-industry loomed large, as did the nonprofit drug maker Civica's announced plans to sell biosimilars of the 3 bestselling insulin analogs for $30/vial or $55 for a box of 5 pens as soon as 2024. In addition, there are now a host of other biosimilars in development from Sandoz/Gan & Lee, Lannett/HEC, as well as Amphastar/ANP in addition to Civica/GeneSys Biologics. These factors all contributed to the most recent insulin pricing announcements.

USC research https://bit.ly/3JyBKlO has proven that middlemen (PBM's) now take home approximately 53% of the "net" proceeds from the sale of insulins, up from just 30% in 2014; while at the same time, the share going to insulin manufacturers has fallen by one-third (from $69.71 to $46.73). Big insulin is getting blamed for prices they do not control, and their margins are falling. Is it any wonder why they now want to escape from the PBM commercialization route (at least for patent-expired insulins)? They certainly are no longer benefitting from PBM sales model on insulin anymore.

Alas, with Lilly's, Novo Nordisk's and Sanofi's most recently announced insulin list price reductions, it's kind of a bad day to be a vertically integrated (with a commercial healthcare insurance company) PBM. One of their biggest cash cows (insulin rebates) appears to be headed to the proverbial slaughterhouse by these insulin pricing moves. But no one should worry about the PBM's; they don't care, and they'll likely just make up for it on rebates collected on a completely different therapeutic class of prescription drugs, because right now, there's nothing to stop them.

However, in the meantime, patients with insulin-requiring diabetes could soon breathe a bit easier without worrying about how they can afford to either pay rent or pay for insulin because prices are finally coming down to earth (mostly at the expense of PBM's who were stealing the money intended for patient price relief in the first place). No one should really be thanking our Congressional lawmakers because they did NOTHING to make this insulin price reduction happen except for seniors on Medicare. In fact, Congress recently extended the widely-abused (by PBM's) "safe harbor" exemption from the Antikickback Statute (see page 80 of the signed copy of the Inflation Reduction Act at https://www.congress.gov/117/plaws/publ169/PLAW-117publ169.pdf for that language, largely to boost the score the bill got from the Congressional Budget Office). On the upside: there now at least appears to be bipartisan support and understanding for how PBM's are hurting consumers (see https://youtu.be/8zdaCKH_BBA for more), which is a good omen for fixing a problem our own government created in the first place. Watch this space!