Your Insulin of the Future Could Be "Made in China" if Big PBMs Have a Say in the Matter

Back on June 16, 2022, I published an article on LinkedIn entitled "How the Civica Insulin Announcement May Be Disruptive to the PBM Kickback Scheme" (see the article at https://www.linkedin.com/pulse/how-civica-insulin-announcement-may-disruptive-pbm-scheme-strumello/ if you wish to read it) which predicted that a growing number of insulin biosimilars whose active pharmaceutical ingredients (API's) are cultured in offshore laboratories are forecast to hit the U.S. market in the next few years. According to the FDA and the individual companies whom I also follow on LinkedIn, the U.S. Food and Drug Administration (FDA) typically reviews their various insulin biosimilars Biologics License Applications (BLA's) about 11 months from the date the BLA's are filed, which means we are likely to start seeing the first of them hitting the market sometime towards the end of 2024. 

However, the thesis of my article was that of the five companies (Biocon, Sandoz, Lannett, Amphastar and Civica) now anticipating FDA decisions on insulin biosimilars in the next year or two, only ONE of them was likely to have a truly "disruptive" impact on patients' insulin prices. Because of the very broken U.S. insulin market whereby PBMs are behind-the-scenes, manipulating prices to their own financial benefit while patients and employers alike pay ever-more and insulin manufacturers realized net prices have continued to decline, it really took the presence of a nonprofit drug company to fundamentally shake insulin prices up.

On September 21, 2023, a sixth company known as Meitheal Pharmaceuticals, Inc. announced (see https://blog.sstrumello.com/2023/09/another-three-biosimilar-insulins.html for the news) that it would also pursue bringing biosimilars of insulin glargine, insulin aspart, and insulin lispro to the U.S. market with clinical trials expected to happen starting in 2024. As I covered in my recent post on Meitheal's insulin biosimilars, those will be cultured in a Chinese laboratory owned/operated by Tonghua Dongbao Pharmaceutical Co., Ltd. However, Meitheal's insulin biosimilars will be about six years behind those of many of its rivals (including Biocon, Sandoz, Lannett, Amphastar and Civica) The others are a mixed bag.

Recall that Civica, Inc. is a non-profit generic drug company established in 2018 by some leading U.S. health systems and three philanthropies to respond to acute and chronic shortages of essential medicines used primarily in hospitals and associated price hikes. In 2020, Civica established a business unit known as CivicaScript incorporated as public benefit corporation (PBC) to bring affordable versions of common but high-priced generic medicines to market. 

Until the March 3, 2022 Civica insulin announcement https://www.businesswire.com/news/home/20220303005321/en/Civica-to-Manufacture-and-Distribute-Affordable-Insulin/, many people failed to realize that insulin manufacturer's realized "net" prices had continued to fall (according to University of Southern California research, see https://jamanetwork.com/journals/jama-health-forum/fullarticle/2785932 for more), and yet patient out-of-pocket prices were concurrently rising steadily-upward to unaffordable levels. That is a sign of a market which is being manipulated by PBM middlemen known as Pharmacy Benefit Managers (PBMs), whereby the six largest among them are now being investigated by the Federal Trade Commission (FTC) https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-launches-inquiry-prescription-drug-middlemen-industry in a comprehensive 6(b) study. FTC is the only government agency with the ability to legally subpoena data without having a specific law-enforcement intent.

In fact, the very first insulin biosimilar made by a company other than Lilly, Sanofi or Novo Nordisk was originally brought to the U.S. market by Viatris, which had a joint-venture with India-based Biocon Biologics Ltd. Viatris had attained FDA approval for two identical copies of the branded reference product known as Sanofi Lantus on July 28, 2021. It had also attained FDA's "interchangeable" designation for those products, meaning it was approved so the products could be substituted for branded Lantus at the pharmacy counter, without the pharmacist needing to first get permission from a prescribing doctor. 

However, more recently, FDA has published a new Draft Guidance document entitled "Labeling for Biosimilar and Interchangeable Biosimilar Products, Guidance for Industry" https://www.fda.gov/regulatory-information/search-fda-guidance-documents/labeling-biosimilar-and-interchangeable-biosimilar-products/ in which "interchangeable" biosimilar products would not be allowed to disclose or explain their interchangeability designations on their products' labels. In effect, the revised guidance reversed FDA's previous stance on disclosing interchangeability in a product's labeling, even though pharmacists would still be enabled to switch the products with the brand-name reference products without permission from the prescribing doctors.

Since Semglee was approved by the FDA, Viatris has exited the U.S. insulin biosimilars space. On February 28, 2023, its partner Biocon Biologics formally acquired Viatris' half of their joint venture biosimilars assets in an acquisition which was structured as part-cash, part-equity. Viatris received an up-front payment of $2.3 billion, and compulsorily convertible preference shares in Biocon Biologics, which were valued at $1 billion. Viatris agreed to provide commercialization and certain other transition services for an expected two-year period following the closure of the deal intended to ensure business continuity for patients, customers and colleagues.

Biocon had a Biologics License Application (BLA) of Novolog (insulin aspart) pending, but on Jan 7, 2022, the FDA denied the aspart biosimilar. A second denial was procedurally-based, rather than based on scientific matters. The FDA's second Complete Response Letter (CRL) for its denial on its insulin aspart biosimilar product was received in February 2023. The company said that the CRL did not identify any outstanding scientific issues with the product, but it did cite deficiencies at its insulin manufacturing facility in Johor, Malaysia initially observed in August 2022. The company has since told investors the company will respond to the CRL to satisfy the FDA's requests (see https://www.business-standard.com/article/current-affairs/usfda-rejects-biocon-viatris-application-for-insulin-aspart-122010701442_1.html for more). I am not currently aware that Biocon has any biosimilars of Humalog, Apidra or Levemir in development even though patents have expired on all of those insulin analogues (although Biocon could potentially have biosimilars in development for one or more of them).

At the time their Lantus copy was introduced, Viatris/Biocon was forced to launch two identical versions of its insulin glargine-yfgn product including both a branded high-priced/high-rebate version known as Semglee whose target market was PBMs with their rebate-contracting model, and a second unbranded (sold under the generic drug name) lower-priced version of the biosimilar which had a Wholesale Acquisition Cost (WAC) list price which was 65% lower than that of the branded reference product (Sanofi's Lantus). 

In other words, a vial of the high-price/high-rebate version of branded Viatris/Biocon Semglee (insulin glargine-yfgn) had a Wholesale Acquisition Cost (WAC) list price $295.11, while an identical unbranded version called Viatris Insulin Glargine Injection (insulin glargine-yfgn) had a Wholesale Acquisition Cost (WAC) list price of $98.65. The decision to sell both a branded, high-price/high-rebate product and an identical lower-price/low-rebate version was documented by Pembroke Consulting's President Adam J. Fein in his "Drug Channels" blog found at https://www.drugchannels.net/2021/11/why-pbms-and-payers-are-embracing.html which is worth a read.

As I suggested in my LinkedIn article, of the different biosimilar insulins planning to enter the U.S. market, so far, Civica, Inc.'s CivicaScript PBC operating unit will come from GeneSys Biologics, Ltd. which is located in Hyderabad, India. As noted, Biocon Biologics insulin laboratories are located in Johor, Malaysia, and is similar to labs based in India, in that FDA inspectors are free to inspect those facilities on-demand anytime FDA deems appropriate.

By comparison, my assessment is that Chinese laboratories remain somewhat more problematic insofar as FDA inspectors are not free to inspect those laboratories anytime on-demand; inspections in China must be arranged through the Chinese government in advance, which means the Chinese labs could theoretically try to clean-up known noncompliance with Good Manufacturing Protocols (GMP) standards before the FDA inspectors arrive to make it appear as if the laboratory had been compliant all along. However, U.S.-based partners retain free access to Chinese labs anytime in accordance with Chinese contract law. By comparison, India-based and Malaysia-based laboratories can be inspected freely by the U.S. Food and Drug Administration inspectors anytime without advance notice. That risk to the manufacturer of a random FDA inspection makes insulins procured from those sources safer than those procured from Chinese laboratories.

Aside from not knowing what happens behind-the-scenes in Chinese biotech laboratories, another critical reality of having even just a single entity like Civica looking out for the best interests of patients rather than pharma and drug distribution system entities has already had a very disruptive impact on the U.S. insulin market. Consider this:

PBMs' contracts with retail pharmacies do not permit the pharmacies to set cash prices at any amount that would be lower than any PBM would ever reimburse them for the same drugs, and patients with deductibles to satisfy may be charged for insulin at the artificially-inflated cash prices set by those pharmacies, rather than the deeply-discounted prices their insurance companies' PBMs pay for the same drugs. PBMs have been emboldened by the pharmaceutical industry's unhealthy co-dependency on their rebate-contracting commercialization model for most drugs deployed by their insurance company's PBMs (including a number of heavily-rebated drugs like insulin whose patents have already expired). Simply stated, pharma marketers didn't know nor did they wish to explore any other way to sell drugs than by rebating them to PBMs. That's also why disruptors like Mark Cuban Cost Plus Drug Company have been fairly successful in disrupting that kickback scheme.

However, the nonprofit entity I cited in the article was the unique CivicaScript model, which is driven by what the company calls its Unilateral Pricing Policy ("UPP") which sets a Maximum Retail Price (MaxRP) for all CivicaScript products which are printed on the packages of all medicines sold which are clearly visible to patients (see https://civicascript.com/upp/ for more). Pharmacy violations or refusal to participate in CivicaScript's UPP could result in loss of a retailer's ability to purchase CivicaScript products, many of which are vastly cheaper in price than comparable products purchased from drug wholesalers.

On March 3, 2022, Civica, Inc. announced plans to develop biosimilar versions of the three bestselling insulin analogues on the U.S. market: glargine, aspart and lispro. Civica also intends to set a maximum recommended price to the patient of no more than $30 per vial of insulin, and no more than $55 for a box of five prefilled insulin pens (we know those will be the Ypsomed UnoPen device, see https://www.businesswire.com/news/home/20230131005294/en/ for the Ypsomed UnoPen licensing announcement; at least one other biosimilar-maker [specifically Lannett Company, Inc.] has also licensed the Ypsomed UnoPen thus far). I anticipate others may choose Ypsomed's ready-to-use insulin pens as well.

Thanks to disclosures from China-based Gan & Lee (which will manufacture biosimilars of glargine, aspart and lispro for Sandoz) data revealed in the company's 2022 Annual Report (see page 62 of 375 of the report at https://www.ganlee.com/uploads/files/2023/0428/ILHLDWv4RJ5kJaR1AVfVZOMa8FgQrC13lKU6VnGH.pdf for more detail), we know that underlying costs of goods sold for lispro and aspart is less than $8.70 per vial (prices were disclosed in Chinese Yuan). The Civica insulin products will be cultured in Hyderabad, India-based GeneSys Biologics, while Biocon's lab is in Malaysia but all the others are based in China. But we know that unless CivicaScript had not announced its biosimilar insulin plan, the biosimilar industry would likely have instead followed the very dysfunctional path that Biocon Biologics had already pursued, which was to rely primarily on the rebate-contracting model promoted by the largest Pharmacy Benefit Managers (PBMs). That would have otherwise guaranteed that all of the benefit of offshore manufacturing of biosimilar insulins would have gone to insurance company-affiliated PBMs rather than to patients.

Consider this uncomfortable reality: 

On October 20, 2021, Viatris kind of boasted that branded Semglee would become the "preferred" basal insulin (see the press release at https://www.prnewswire.com/news-releases/viatris-first-ever-interchangeable-insulin-biosimilar-preferred-on-express-scripts-largest-formulary-301404843.html for details) on Express Scripts formularies for 2022, and that the branded Semglee product would be on Express Scripts' National Preferred Formulary (NPF). The NPF is Express Scripts' largest commercial formulary, with more than 28 million [covered] lives. Express Scripts also highlighted the exclusion of the Lantus reference product from its NPF. In fact, the unbranded product would be relegated to Express Scripts' National Preferred Flex Formulary, which favors drugs with lower list prices over the high-list/high-rebate versions of these products. The reason PBMs offer multiple formularies is to satisfy demands from some big employer plan sponsor clients. For example, some employer healthcare plan sponsors won't select a PBM formulary that gives preference to expensive but heavily-rebated branded high-price drugs, and instead they demand preference for lower-cost generics. But many smaller, less sophisticated employer plan sponsors buy into the bogus notion that the biggest PBM formularies offering the lowest "net" drug prices will somehow save them money when they receive no proof or evidence validating that presumption. As Adam Fein said it: "Put another way: Viatris had to nearly triple the list price of [branded] Semglee before Express Scripts would add the product to its formulary."

While the PBMs have correctly been identified by members of both political parties in Congress as a major problem thanks to their ability (enabled by lawmakers in Congress and Presidential cabinet members who run the Office of Inspector General of the U.S. Department of Health and Human Services who created the widely-abused "safe harbor" exemption to the Federal Antikickback Statute) to collect legally-exempted kickbacks from drug companies which are paid to PBMs to secure a preferred place on commercial healthcare insurance company formularies. 

The PBMs are a very bad element in an industry full of ethically-challenged entities, the reality is that the entity guiltiest of perpetuating the kickback scheme are the insurance companies themselves (CVS Health is a bit of a role-reversal, in that the parent of Caremark in 2017 also acquired the commercial healthcare insurance company Aetna). United Healthcare (parent of PBM OptumRx), CVS Health (parent of (PBM Caremark and insurer Aetna), and Cigna (parent of PBM Express Scripts) have all come to rely on their PBM revenues far more than they rely on insurance premiums anymore. In other words, it is the kickbacks PBMs collect that earns more than any other part of the insurance business. But those corrupt business practices are now under the microscope of the Federal Trade Commission. When the FTC's 6(b) study of PBM business practices wraps-up, we could soon see huge litigation similar to the lawsuit which broke the old telephone monopoly known as the Bell System back in 1982.

Health insurance whistle-blower Wendell Potter has extensively documented (see https://wendellpotter.substack.com/p/big-insurance-2022-revenues-reached for one such article) and has written quarter-after-quarter how United Healthcare, Cigna and Aetna/CVS Caremark have all seen explosive growth in the companies' pharmacy benefit management (PBM) businesses.  The big insurers are now getting far more of their revenues from the pharmaceutical supply chain and from taxpayers via their privately owned and operated Medicare replacement plans they market as Medicare Advantage than they do from traditional insurance premiums. Collectively, their PBM profits increased 438%, from $6.3 billion in 2012 to $27.6 billion in 2022. Cigna now gets far more revenue and profits from its PBM than from its health plans. And CVS gets more revenue from its Caremark PBM business than from either Aetna's health plans or its nearly 10,000 retail stores. That insanity has to stop.

There are some glimmers of more good news.

First, insulin is proving to be an exception, and I believe the nonprofit Civica decision to enter the insulin market is a major reason for that exemption. But in March 2023, in rapid-fire succession, Lilly followed by Novo Nordisk and eventually Sanofi all collectively announced they would all slash their Wholesale Acquisition Cost (WAC) list prices on insulins anywhere from 70% to 78%, and also cap insulin prices starting in 2024. To pay for those price-cuts, big insulin manufacturers will simply disintermediate the PBMs from the transactions.

Beyond that, as I have said in multiple recent posts, the best full explanation of how and why that happened on insulin comes from University of Southern California professor Robert Popovian in an article he co-authored with Erin Delaney (also of USC) and Michael Mandel entitled "Are we on the cusp of a new drug pricing paradigm?" published in the Progressive Policy Institute (see https://progressivepolicyinstitute.medium.com/are-we-on-the-cusp-of-a-new-drug-pricing-paradigm-fdf611c009b3 for the article). 

However, if it weren't for the prospect of at least one of the half-dozen biosimilars of the bestselling insulin analogues to be sold at a price of $30/vial or $55 for a box of five prefilled insulin pens by CivicaScript PBC in the first place, we COULD have seen the type of profound nonsense which we first saw when the Semglee biosimilar was introduced, with the company's focus on the rebate-contracting model while patients were once again, completely forgotten about. Thankfully, Civica had PATIENTS in mind with its own insulin biosimilars (and, while they'll be cultured in labs based offshore, those will be from labs in countries where FDA can freely inspect the laboratories, which is unlike Chinese labs).

There also happens to be legislation in Congress called The Modernizing and Ensuring PBM Accountability Act which would mandate flat-rate charges for PBM services, rather than enabling them to engage in shady practices like "spread pricing" and pocketing the difference for themselves, but there are also other bills including both the PBM Transparency Act and the Patients Before Middleman (PBM) Act, and impressively, many of them seem to have bipartisan support.

As for made-in-China insulins, that will soon be a real thing. The PBMs will take kickbacks from any company that want formulary placement, and the biggest kickbacks win. Now that Lilly, Novo Nordisk and Sanofi want out the kickback-driven mill, we may soon have a situation whereby instead of therapeutic choices being rendered by PBMs rather than doctors with their patients, we could potentially see a choice for patients and their doctors to choose which prandial insulin works best for THEM, rather than whoever is paying their insurance company's PBM the biggest kickbacks.