Recent debates over skyrocketing drug prices are directly impacting diabetes patients, but it’s an extremely complex situation said Aaron Kowalski, chief mission officer at the Juvenile Diabetes Research Fund (JDRF).
At the heart of the battle is insulin, a vital therapy for more than 6 million Americans. Three major pharmaceutical companies dominate the market, including Novo Nordisk.
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The Danish Pharmaceutical company ceased development of its experimental insulin pill in October — a move attributed to poor reimbursement potential.
Chief Executive Lars Rebien Sorensen explained the company’s decision at a recent industry conference. As quoted in a Reuters article, Sorenson told the audience:
“The problem is that in the reimbursement market we are now facing it is unlikely that such a tablet could be made available at a price that would be acceptable to the payers.”
An insulin pill has long been coveted by some in the industry as an alternative to the status quo. For Kowalski, the aim for the field is much broader.
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“We have to have innovation here,” Kowalski said. “At JDRF we always think of our mission as people achieving better diabetes outcomes. And if you don’t have access to these advances you won’t receive better outcomes.”
Novo’s insulin pill was reportedly making progress on a technological front. However, for enough insulin to move through the gut and into the bloodstream, the pill required an active dose around 50 times higher than the typical injection.
That’s 50 times more insulin, which is a significant manufacturing cost. The net gain for patients was more about quality of life than therapeutic benefit, which casts doubt over whether insurers would pay ‘new drug prices.’
What is strange, is why the price of insulin is so high after years on the market…
Insulin prices spike
On Nov. 3, Sen. Bernie Sanders (D-Vermont) and Rep. Elijah E. Cummings (D-Maryland) submitted a letter to Congress asking the Department of Justice and the Federal Trade Commission to launch an investigation into “whether pharmaceutical companies manufacturing insulin products have engaged or colluded in anticompetitive behavior in setting their drug prices.”
As the letter notes, the original patent for synthetic insulin expired 75 years ago. Despite this, the price of insulin more than tripled between 2002 and 2013, from $231 to $736 per patient per year.
To be fair, the products have vastly improved over the years. New longer-acting versions can substantially improve patient outcomes and decrease hypoglycemic events.
But Sanders’ letter also cites a 2015 Bloomberg article that discusses potential market manipulation by the three major insulin producers. According to the author:
“On May 30 last year, the price for a vial of the blockbuster diabetes medication Lantus went up by 16.1 percent. On the next day, Lantus’s direct competitor, Levemir, also registered a price increase — of 16.1 percent.”
That two-step price increase, a practice known as shadow pricing, was one of 13 documented examples between these two drugs over a period of 6 years.
Levemir is manufactured by Novo Nordisk. In a statement forwarded by a company representative, the company responded to questions about the increase in insulin prices by differentiating between the list price and the net price paid.
While it may be accurate that insulin list prices have increased over time, PBMs and insurers negotiate rebates, discounts and other concessions to reduce what they actually pay for our medicines – this is referred to as net price. List prices do not reflect the rebates, discounts and other price concessions we offer to PBMs/payers in order to obtain coverage on their formularies nor what an insured patient actually pays at the pharmacy. PBMs/insurers independently establish what the insured patient will pay for the medicine via co-pays. Insured patients on average pay a co-pay for Novo Nordisk insulins between $1-$1.40 per day.
But it hasn’t gone unnoticed by patients.
“This is an issue that our constituents care a lot about and I hear a lot about,” Kowalski said. “This is a challenge for us because developing insulins is obviously very, very expensive. We want to encourage development, but we also want to make sure they’re accessible.”
Novo Nordisk shares plummet
With such high insulin inflation, you might expect Novo to be laughing all the way to the bank. But the Danish pharmaceutical giant has taken a battering this year, with share prices down 42 percent.
Much of the stock turmoil has been caused by the company downgrading its forecasted earnings based on possible price controls. The overall market for insulin is booming worldwide, but the U.S. is responsible for over half of Novo’s sales and investors aren’t sure if it can sustain the current pricing.
That’s not simply a result of political pressure, a Financial Times article states, highlighting the role of pharmacy benefit managers. With recent consolidations in the field, the top three companies now control four-fifths of the market, boosting their negotiation power.
Kowalski said JDRF’s concern is what impact this might have on innovation. But it’s also trying to understand what lies beneath the claims of shadow pricing and why its members are struggling to pay for insulins that were approved years ago.
“I will confess, in the United States this is a very complicated issue with lots of players, even beyond the insulin companies,” said Kowalski. “It’s that balance between affordability and innovation and obviously we’re not at that sweet spot right now.”
Photo: Sezeryadigar/Getty Images
