Why the Real Fix for U.S. Insulin Prices Was Hidden in Tax and Medicaid Rules

Sanofi's former "unbranded" version of Lantus

Several years ago, all of the big branded insulin manufacturers in the U.S. had introduced something they referred to as "unbranded" insulin products as a way to address a problem they helped to create: a patient affordability problem driven by their payment of multi-million dollar rebates to Pharmacy Benefit Managers (PBMs) for exclusive formulary placement on big insurance companies' health plans.

Those "rebates" as they are known (a more correct way of describing them is "legally-exempted rebate kickbacks" due to a HHS "safe-harbor exemption" to the Federal Anti-Kickback Statute) sent U.S. insulin prices into orbit, with no relief in sight. To put the scale of this distortion in perspective, Adam J. Fein of the Drug Channels Institute estimated that total gross-to-net reductions for all brand-name drugs reached a stunning $356 billion in 2024 (see https://www.drugchannels.net/2025/07/gross-to-net-bubble-hits-356b-in.html for his estimate). 

Some relief came with the passage of the American Rescue Plan Act (ARPA) of 2021 signed into law by President Joe Biden (see https://www.kff.org/medicaid/medicaid-provisions-in-the-american-rescue-plan-act/ for more). That law contained a seemingly innocuous provision which became effective on January 1, 2024. Previously, under federal rules, total Medicaid drug rebates for a single brand-name drug were capped at 100% of the Average Manufacturer Price (AMP). 100% sounded reasonable, but in the U.S. drug distribution system, rebate kickbacks accounted for the vast majority of the inflated cost for drugs such as insulin.

And ARPA of 2021 removed this cap effective on January 1, 2024. Suddenly, manufacturers of older, heavily-rebated [to PBMs] drugs such as insulin products were faced with a choice they never faced before: either to voluntarily slash their artificially-inflated insulin list prices to strip out exorbitant PBM rebates, thereby avoiding severe financial penalties and negative realized "net" revenues triggered by the removal of the Medicaid rebate cap, or else continue absorbing massive revenue losses on insulin products.

Dr. Robert Popovian, founder of Conquest Advisors, Chief Science Policy Officer at the Global Healthy Living Foundation, Senior Health Policy Fellow at the Progressive Policy Institute, member of the Board of Councilors at the University of Southern California School of Pharmacy, and advisor to the Value of Life Sciences Innovation program at the USC Schaeffer Institute, addressed the looming impact of the ARPA of 2021 at https://progressivepolicyinstitute.medium.com/are-we-on-the-cusp-of-a-new-drug-pricing-paradigm-fdf611c009b3 if you care to read it.

Guess which option Lilly, Novo Nordisk and Sanofi chose?

They slashed their insulin list prices.

And, we have proof that the list prices for insulin have fallen.

You can see evidence of the insulin list price reductions in the data. 46brooklyn Research offers a tool called "Brand Drug List Price Change Box Score" which is accessible at no charge to anyone at https://www.46brooklyn.com/branddrug-boxscore/, but using it takes some practice. If you don't want to look-up the numbers for yourself, it's not necessary. GoodRx published a study in January 2025 showing the same insulin list price reductions (see https://www.goodrx.com/healthcare-access/research/how-much-does-insulin-cost-compare-brands for the GoodRx study/article which may be easier to digest). 

That was also the reason Sanofi felt comfortable eliminating its unbranded version of Lantus (pictured above) in March 2026. Its move followed rival Novo Nordisk which discontinued its unbranded insulin products around the same time. Lilly remains an exception, and the reason is simple: in the U.S., "unbranded" Humalog sells as well as branded Humalog. That's quite remarkable if you think about it. Patients think they're using a biosimilar, when in reality, they are just using Humalog sold under its generic drug name.

The list price cuts (including on insulin) really pissed-off PBMs who had been profiting from the kickback scheme. But it actually worked out rather well for Lilly, Novo Nordisk and Sanofi, because they were able to slash their insulin list prices, and they could simply blame the government, and the PBMs were kind of powerless to stop them.

To be sure, not every covered patient has seen their insulin prices fall yet. And the reason is due to contracts insurance companies (and their PBMs) have with employers. The reductions only apply to NEW insurance company and PBM contracts, not to any existing contracts or renewals of those existing contracts. So, unless your employer has switched insurance carriers, PBMs [or both] or it signed a brand-new contract with either, then patients covered under those plans might not yet notice that insulin list prices had fallen by more than 70% in 2025.

We have started to see more and more new healthcare plan contracts typically now cover insulin products pre-deductible. I advocated for that particular change a number of years ago and was pleased when the new IRS rule finally enabled that to happen. That did not fix every problem which existed, but it was a move in the right direction.

The change in pre-deductible insulin coverage is also due, in part, to the IRS adding diabetes to the list of medical conditions for which high-deductible insurance plans could actually cover pre-deductible. The IRS did that back on July 17, 2019 after years of patient complaints about it. The press release for that particular change can be seen at https://www.irs.gov/newsroom/irs-expands-list-of-preventive-care-for-hsa-participants-to-include-certain-care-for-chronic-conditions. Notice 2019-45 (see https://www.irs.gov/pub/irs-drop/n-19-45.pdf for the complete list) outlines a number of new types of medical care that were finally allowed under IRS rules to be treated as "preventive care" for this purpose. There are important tax implications for healthcare insurance companies for offering these benefits.

For anyone who thinks there is a magic wand which could fix all these issues, I hate to break it to them: there isn't.

The U.S. healthcare "system" is big and complex, and fixing one problem sometimes means a new problem arises in its place. There are a lot of moving parts, and a lot of different things needed to happen before U.S. insulin prices started to come back down to earth. The good news is that many of the changes which we needed several years ago were implemented thanks to tireless activists (including myself), and that means today, more and more patients can enjoy the benefits of those, but keep in mind that employer contracts and renewals could mean some patients have yet to realize those benefits. You can blame the underlying architecture of the U.S. healthcare system for that.