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Diabetes Care 1 D STATEMENT ADA

William T. Cefalu,1 Daniel E. Dawes,2 Access and Affordability Gina Gavlak,3 Dana Goldman,4 William H. Herman,5 Karen Van Nuys,4 Working Group: Conclusions and Alvin C. Powers,6 Simeon I. Taylor,7 and Alan L. Yatvin,8 on behalf of the Insulin Recommendations Access and Affordability Working Group* https://doi.org/10.2337/dci18-0019

There are more than 30 million Americans with , a disease that costs the U.S. more than $327 billion per year (1,2). Achieving glycemic control and controlling cardiovascular risk factors have been conclusively shown to reduce diabetes compli- cations, comorbidities, and mortality. To achieve these desired outcomes, the medical community now has available many classes of and many formulations of insulin to effectively manage the metabolic abnormalities for people with diabetes. However, the affordability of medications in general, and for insulin specifically, is currently of great concern to people with diabetes, their families, health care providers, insurers, and employers. For millions of people living with diabetes, including all individuals with , access to insulin is literally a matter of life and death. The average list price of insulin has skyrocketed in recent years, nearly tripling between 2002 and 2013 (3). The reasons for this increase are not entirely clear but are due in part to the complexity of drug pricing in general and of insulin pricing in particular. As the price of insulin continues to rise, individuals with diabetes are often forced to choosebetweenpurchasingtheirmedicationsorpayingforothernecessities,exposing them to serious short- and long-term health consequences (4–9). To find solutions to the issue of insulin affordability, there must be a better understanding of the transactions throughout the insulin supply chain, the impact each stakeholder has on what people with diabetes pay for insulin, and the relative efficacy of therapeutic 1 ’ American Diabetes Association, Arlington, VA options. Thus, as the nation s leading voluntary health organization whose mission is 2Morehouse School of Medicine, Atlanta, GA “to prevent and cure diabetes and to improve the lives of all people affected by 3North Coast Health, Lakewood, OH diabetes,” the American Diabetes Association (ADA) is committed to finding ways to 4USC Schaeffer Center for Health Policy & Eco- nomics, Los Angeles, CA provide relief for individuals and families who lack affordable access to insulin. 5 In the spring of 2017, the ADA Board of Directors convened an Insulin Access and University of Michigan, Ann Arbor, MI 6Vanderbilt University Medical Center, Nashville, Affordability Working Group (Working Group) to ascertain the full scope of the insulin TN affordability problem, to advise the ADA on the execution of strategies, and to provide 7University of Maryland School of Medicine, high-level direction to the ADA related to this issue. The composition of the Working Baltimore, MD 8 Group is provided in Supplementary Table 1. The Working Group identified increased Popper & Yatvin, Philadelphia, PA transparency throughout the insulin supply chain and a number of other interventions Corresponding author: William T. Cefalu, wcefalu@ as important steps toward developing viable, long-term solutions to improve insulin diabetes.org. access and affordability. This article contains Supplementary Data online at http://care.diabetesjournals.org/lookup/suppl/ Throughout 2017, the Working Group assembled existing public information about doi:10.2337/dci18-0019/-/DC1. insulin prices and patient cost-sharing, and convened a series of meetings with *A complete list of the members of the Insulin stakeholders throughout the insulin supply chain to learn how each entity affects the Access and Affordability Working Group can be cost of insulin for the consumer. The Working Group also had ongoing conversations found in the Supplementary Data online. with researchers focused on insulin pricing at both the global and national levels. The This ADA statement was reviewed and approved Working Group talked with more than 20 stakeholders who were representatives of by the American Diabetes Association Board of pharmaceutical manufacturers, wholesalers, pharmacy benefit managers (PBMs), Directors in March 2018. pharmacies, pharmacists, distributors, health plans, employers, and people with This article is featured in a podcast available at diabetes and caregivers (Supplementary Table 2). Despite the attempt to interview as http://www.diabetesjournals.org/content/ many stakeholders as possible, it is important to note that due to time constraints and diabetes-core-update-podcasts. schedules, the Working Group may have inadvertently overlooked inviting some © 2018 by the American Diabetes Association. Readers may use this article as long as the work relevant stakeholders, and there were a small number of individual stakeholders is properly cited, the use is educational and not who declined to meet with the Working Group. To guide the discussion with each for profit, and the work is not altered. More infor- stakeholder interviewed, the Working Group developed a set of standard questions mation is available at http://www.diabetesjournals focused on determining the role each entity plays in the supply chain, the issues the .org/content/license. entity faces, and recommendations for change (Supplementary Table 3). See accompanying article, p. 1125. Diabetes Care Publish Ahead of Print, published online May 8, 2018 2 ADA Statement Diabetes Care

BACKGROUND: SCOPE OF THE by has also shown degrees of negotiating power, which adds PROBLEM an increasing and accelerating trend. For to the complexity. The following narrative Approximately 7.4 million Americans with example, Medicare spending by utiliza- represents the Working Group’sunder- diabetes use one or more formulations of tion on rapid-acting insulin in vials had standing of the U.S. insulin delivery system insulin (10,11). People with diabetes using a compound annual growth rate (CAGR) as obtained by research and in specific insulin come from varied economic, racial, of 10% per year between 2006 and 2013 interviews with the stakeholders. and ethnic backgrounds. Almost 20% of but a CAGR of 13% between 2011 and Overview of Insulin Supply Chain African Americans with diabetes use in- 2013.Asspendingoninsulinshasincreased, so too have patient out-of-pocket costs. Dynamics sulin,eitheraloneorwithoralmedications, Thecomplexityoftheinsulinsupplychain Between 2006 and 2013, average out-of- as do 14% of Caucasians and 17% of is outlined schematically in Fig. 3. The pocket costs per insulin user among Medi- Hispanics with diabetes (10). Of adults insulin supply chain mirrors that of many care Part D enrollees increased by 10% per with diabetes earning below the poverty otherprescriptiondrugs.Asoutlined,man- year for all insulin types (Fig. 2). Compar- level, approximately 24% use insulin, ei- ufacturers set the list price for each insulin atively,overallinflationduringthistimewas ther alone or with oral medications (11). product. Manufacturers typically sell their 2.2%, medical care service costs increased Currently, there are only three insulin medications to wholesalers, who handle by 3.8%, and spending for all prescription manufacturers serving the U.S. market: distribution to individual pharmacies. But drugs increased by an average of 2.8%. , , and Sanofi. Almost sometimes a pharmacy chain will deal Insulin affordability and accessibility 100 years ago, the discovery of insulin, directly with the manufacturer. Whole- issues, however, are not restricted to the derived from animal sources, literally salers typically purchase the medications U.S. Data from the global ACCISS (Ad- began to save human lives. The advent for close to the list price, often receiving a dressing the Challenges and Constraints of brought human handling fee from the manufacturer that of Insulin Sources and Supply) study found insulin formulations to patients with di- is calculated as a fixed percentage of severaloverarching trends. First, evenfor abetes in the 1980s. Rapid-acting and the list price. Wholesalers then sell the the same insulin product, there is a wide long-acting human insulin analogs were medications to pharmacies, with little to no range of prices across the world. Second, introduced in the 1990s. The patents for markup. They may, however, charge the there is a large price differential between many of the human insulin and human higher list price. Pharmacies dispense the the lower prices of human insulin for- formulations in current to individual patients and col- mulationsandthe higherpricesof human clinical use have expired. lectcost-sharingrequiredbythepatient’s insulin analog formulations on a global Working Group members from the health plan (if any). Pharmacies then submit level.Third,therehasbeenincreasinguse USC Schaeffer Center for Health Policy a bill to the individual’shealthinsurance of human insulin analogs compared with &Economicshavesignificant experience in plan (if any) to be reimbursed for the cost normal human insulin over the recent studying medication pricing (12,13). Using of the medication dispensed to the patient, past, which is greater in more developed Centers for Medicare & Medicaid Services less any cost-sharing collected, plus a dispens- parts of the world (14). This study also ing fee. If a patient does not have or use data on National Average Drug Acquisi- reported that the global insulin market is fi health insurance for the medication, the tion Cost (NADAC), they identi ed 30 in- dominated by the same three large mul- pharmacy typically charges the patient a price sulin products with NADAC data available tinational corporations that manufacture relatively close to its purchase price, with between October 2012 and December 2016 and sell insulin in the U.S. Those com- a markup. and categorized them by product type: panies represent 99% of the total insulin Whilethemedicationitselftakesarather short-acting insulin vials, rapid-acting insulin byvalue,96%bytotalmarketvolume,and direct path from manufacturer to whole- vials, rapid-acting insulin pens, and long- 88% of global product registrations. acting insulin pens/vials (Table 1). For each salertopharmacytopatient,theflow of product, they collected monthly Wholesale COMPLEXITY OF THE INSULIN money is far less direct and transparent. Acquisition Cost (WAC) from First Databank SUPPLY CHAIN AND PRICING Furthermore, PBMs often manage the fi and calculated average monthly WAC MECHANISMS pharmacy bene t portion of a health plan on behalf of their clients. Their clients are the and NADAC for each category by aver- Pricing of drugs in general, and for insulin payersforhealthcare,suchaslargeemploy- aging across products in each category. specifically, is very complex. Numerous ers, health insurers providing pharmacy They used Medicare Part D claims from stakeholders (i.e., manufacturers, whole- benefits to Medicare enrollees, health in- 2006 to 2013 to calculate the average in- salers, PBMs, pharmacies, health plans, surers covering state Medicaid program sulinexpenditureandout-of-pocketspend- andemployers)areinvolvedintheinsulin enrollees, or health insurance plans sold ing per insulin user and the Medicare supply chain, and the distribution and directly to individuals. It is important to spending by utilization (i.e., the total spend- payment systems involve multiple trans- note, therefore, that PBMs’ primary cus- ing divided by the number of insulin users actionsamongthesestakeholders(Fig.3). tomers are health plans and employers, not times mean annual day supply). With this system, there is no one agreed- patients. The average U.S. list price (WAC) of the upon price for any insulin formulation. four insulin categories increased by 15% The price ultimately paid by the person The Increasing List Prices of Insulin to 17% per year from 2012 to 2016 (Fig. 1). with diabetes at the point of sale results Formulations Over the same period, the price phar- from the prices, rebates, and fees nego- Much of the public discussion regarding maciespaid topurchase insulins(NADAC) tiated among the stakeholders. Stakehold- insulin affordability and accessibility has increased at similar rates. Spending on ers in the insulin supply chain have varying focused on the rapidly increasing average care.diabetesjournals.org Cefalu and Associates 3

Table 1—Categories of insulin Category label on Figs. 1, 2, and 5 Description Delivery Productsdbrand namesa Productsdgeneric names Short-acting insulin Short-acting, intermediate- Vial Humulin R, 10-mL vial Insulin regular, human (vials) acting, or mixed Humulin R, 3-mL vial Insulin regular, human intermediate/ Novolin R Insulin regular, human short-acting vials Novolin R (Relion) Insulin regular, human Humulin N, 10-mL vial Insulin NPH, human isophane Humulin N, 3-mL vial Insulin NPH, human isophane Novolin N Insulin NPH, human isophane Novolin N (Relion) Insulin NPH, human isophane Humulin 70/30 Insulin NPH, human/ HM Novolin 70/30 Insulin NPH, human/regular insulin HM Novolin 70/30 (Relion) Insulin NPH, human/regular insulin HM Rapid-acting insulin Rapid-acting or mixed Vial Humalog, 10-mL vial (vials) intermediate/rapid- Humalog, 3-mL vial Insulin lispro acting Apidra vials NovoLog Humalog Mix 75/25 Insulin lispro /lispro Humalog Mix 50/50 Insulin lispro protamine/lispro NovoLog Mix 70/30 Insulin aspart protamine & aspart Rapid-acting insulin Rapid-acting or mixed Pen or Humalog cartridge Insulin lispro (pens) intermediate/ cartridge Humalog KwikPen U-100 Insulin lispro rapid-acting pens Apidra SoloSTAR Insulin glulisine NovoLog cartridge Insulin aspart NovoLog FlexPen Insulin aspart Humalog Mix 75/25 KwikPen Insulin lispro protamine/lispro Humalog Mix 50/50 KwikPen Insulin lispro protamine/lispro NovoLog Mix 70/30 FlexPen Insulin aspart protamine & aspart Long-acting insulin Long-acting vials Vial or pen Lantus (vials/pens) and pens Levemir Lantus SoloSTAR Insulin glargine Levemir FlexPen Insulin detemir Categories of insulin products evaluated by the USC Schaeffer Center for Health Policy & Economics investigators as part of the Insulin Access and Affordability Working Group. aIn the case of the Novo Nordisk products (Novolin R, Novolin N, Novolin 70/30), one is the Novo Nordisk–branded product, while the other corresponds to the same drug sold under the Relion brand. Each has a different national drug code and sells for a different price. In the case of the Eli Lilly products (Humulin R, Humulin N, Humalog), different vial sizes are referenced (3 mL vs. 10 mL).

list prices of insulin over the past two to insulin costsdboth to the health care The Working Group found a number of decades, which nearly tripled between system and to many patients (17,18) (hu- examples from public sources showing 2002 and 2013 (3). The list price is defined man insulins are available at the pharmacy that the net price to the insulin manu- as the price manufacturers set for their for $25 to $100 per vial compared with facturers has grown at a slower rate, or medication (Table 2). Along with yearly human insulin analogs at $174 to $300 hasgone down, compared to list prices. increases, the published data also suggest per vial [19]). This is further discussed For example, the net price of the insulin that when one insulin manufacturer in- below in DECISIONS AND PATIENT formulation Lantus (glargine) increased creases the price for a given insulin for- FINANCIAL BURDEN. more or less in parallel with the list price mulation, the other insulin manufacturers from 2007 to 2013 (20). However, the often increase their prices by a similar The Growing Gap Between the List net price has decreased in recent years amount shortly thereafter (15,16) (Fig. 4). Price and Net Price (2014–2016) (Fig. 6) (20). As a result, While the list price is defined as the price the net price increased by 57% between The Increasing Use of Higher-Priced manufacturers set for their medication, 2007 and 2016, increasing 23% as fast as Insulins the list price is not ultimately what is the list price reported as a 252% increase Another important trend affecting overall paid for the medication (with some excep- over the same period (Fig. 6). costs for insulin in the last decade is the tions),norisitwhatmanufacturersreceive Reports on other insulin products also shift in insulin utilization from the less for their products. The net price manu- illustrate the difference between the rapid expensive human insulins to more expen- facturers receive for their medications increase in list price as compared with the sive human insulin analogs (14,17–19) (Fig. is the list price less any fees paid to slower increase in net price to manufac- 5). While the prices of both types of insu- wholesalers, and/or discounts paid to turer, a trend that may have started ear- lin have increased, the difference in pricing pharmacies, and any rebates paid to lier for some insulin formulations (17,21). between them has substantially added PBMs or health plans. Bloomberg News reported an estimate by 4 ADA Statement Diabetes Care

Figure 1—Average WAC for insulins, by product category, 2012–2016. Source: USC Schaeffer Center analysis of First Databank data.

an independent market research firm that a NovoLog vial and 270% (2003–2016) the other insulin products will be necessary the list price of Eli Lilly’shumaninsulinan- for a FlexPen. In contrast, net prices for clarity on this aspect of pricing in the alog, Humalog, increased by 138% between received by the manufacturer increased insulin supply chain. 2009 and 2015, while the net price to the at a more modest rate with CAGRs of This finding of greater increases in list manufacturer increased by 6% (21). 3–36%dmore in line with the rate of prices than net prices raises the following Novo Nordisk also published data for inflation for the overall economy. Novo questions. Who else has benefited or two of their insulin products, NovoLog Nordisk, Eli Lilly, and Sanofi have reported lost from the substantial increase in in- and NovoLog FlexPen. Since the early that rebates have grown rapidly in recent sulin list prices over the last decade? And 2000s, the CAGRs for the list prices for yearsdrepresenting more than 40% of why has the financial burden for people NovoLog and NovoLog FlexPen (Fig. 7) U.S. gross sales in some cases (21,23). The with diabetes who use insulin continued have been in the range of 9.8–9.9% (22). Working Group found the transparency in to increasedespecially for those without This translated into large total increases list versus net pricing for these two insulin insurance who may have to pay the full in the list prices: 353% (2001–2016) for formulationshelpful,butsimilardataonall list price?

Figure 2—Average Medicare out-of-pocket spending for insulin, per user, by product category, 2006–2013. Source: USC Schaeffer Center analysis of Medicare Part D claims data. care.diabetesjournals.org Cefalu and Associates 5

Figure 3—Schematic of insulin supply chain.

Role of Rebates and Discounts in the medications are on the formulary and at where the dollars from increased rebates Pricing of Insulin which tier, setting the parameters for flow. The widening gap between the net and patient access to and cost-sharing for Health plans, pharmacists, and people listpriceof insulinin recentyears appears insulins. Nationally, PBMs administer the with diabetes also called for increased to be the result of increasing rebates prescription medication benefit for more transparency,includingsheddingalighton anddiscounts negotiatedbetween stake- than 266 million Americans, and the how the list price is set by the manufac- holders. Manufacturers negotiate with a three major PBMs (CVS Caremark, Express turer. Health plans stated that while there PBM for discounts from the list price to Scripts, and OptumRx) manage about 70% is no requirement to report factors that have their medications placed on a lower of all prescription claims (13,24). Argu- determineincreasinglistprices,privateand cost-sharing tier and/or to avoid con- ably, this gives PBMs considerable lever- public payers are paying for the majority of straints on utilization on the PBM’s client age in any rebate/discount negotiation thecostsaslistpricescontinuetorise.Payers formulary. In this process, manufacturers with stakeholders. would like more transparency in pharmacy agree to fees and price concessions, typ- acquisition prices and want more informa- ically paid to the PBM after health plan Transparency and Flow of Dollars tion on the therapeutic benefits of more enrollees receive the manufacturer’s A consistent observation made to the expensive analog insulins. Pharmacists, medication. These retroactive discounts or Working Group was the lack of transparency patients, and providers also would like rebates are in addition to the fees paid to throughouttheinsulinsupplychain.Many formulary decisions to be more transparent. PBMs by the payers to provide the phar- interviewed stakeholders recommended After research and stakeholder discus- macy benefit management services. The increased transparency from entities across sions,itisstilluncleartotheWorkingGroup rate of increase in these rebates has ac- the insulin supply chain. Manufacturers precisely how the dollars flow and how celeratedtoapproachapproximatelyhalf reported that without knowledge of the much each intermediary profits. In the vast of the list price of insulin (21,23). PBMs also negotiations that take place between majority of cases, discounts and rebates negotiate with pharmacies to determine PBMs and health plans, they are at a negotiated between PBMs and manufac- how much participating pharmacies will disadvantage in determining pricing for turers and between PBMs and pharmacies, be paid for medications dispensed to their insulin products. Manufacturers which affect the cost of insulin for people enrollees in the PBM client’s health plan. state that the need to provide a higher with diabetes, are confidential. Even PBM BecausePBMsdesigntheformularyfor rebate to achieve preferred formulary clients are not privy to many of these ne- their clients, some stakeholders believe positioning impacts the list price of insu- gotiations, nor do they know the net price PBMs have significant input into which lin. However, manufacturers do not know obtained by the PBM for insulins. 6 ADA Statement Diabetes Care

Table 2—Glossary of drug pricing and health insurance terms insulin manufacturers still control the list Term Definition price of insulin, but a meaningful share of the negotiating power has shifted from Formulary List of drugs covered under the health insurance plan. Often manufacturers to the PBMs. PBMs at- has tiers with increasing cost-sharing. Also includes utilization management requirements such as prior tempt to keep medication costs down by authorization, step therapy, or quantity limits. moving market share between compet- List price The price manufacturers set for their medications. Also called ing products, and their market power is wholesale acquisition cost or launch price. This price is directly related to their ability to provide often the basis for rebates, discounts, and fees exclusive formulary coverage for particu- throughout the insulin supply chain. lar brands of medications. Rebate A discountpaid after the patient has receivedthe medication. The PBMs told the Working Group that Typically, manufacturers pay rebates to PBMs for formulary determinations are first and fi ’ prescriptions lled by the PBM s clients. Rebates foremost based on clinical considerations. negotiated between manufacturers and PBMs are often However, when the PBM’s clinical experts contingent on placement of the drug on the PBM’s formulary. determine that one type of medication is Benefits Healthcareitemsorservicescoveredunderahealthinsurance necessary on a given formulary tier but plan. there is no clinical preference for one brand Coinsurance Cost-sharing for covered benefits based on the percentage of or formulation over another, the PBM will the plan’s cost (for example, 20%). For example, if the cost- approach manufacturers to seek rebates sharing for a doctor’soffice visit is 20% coinsurance, the in exchange for preferential formulary tier- enrollee will pay 20% of the plan’s cost for the visit. ing. These types of negotiations help to Co-payment Cost-sharing for covered benefits that is a flat dollar amount determine whether a particular insulin will ($20, for example). be available at all to insured individuals Cost-sharing The portion of the cost of benefits covered by insurance that with diabetes under a given health plan, the plan enrollee pays out of his/her pocket. This term and on which cost-sharing tier an insulin generally includes deductibles, coinsurance, and formulation will be placed. Sometimes co-payments, or similar charges, but it does not include premiums. a PBM will exclude a medication from ’ Deductible The amount health plan enrollees pay for covered health care its national formulary if the PBM snetcost services before the insurance plan starts to pay. With for the medication is higher than a com- a $2,000 deductible, for example, the plan enrollee must petitive or similar product. In addition to pay the first $2,000 of covered benefits before the formulary placement, PBMs determine insurance plan will pay for care. which and how many medications on the Premium The amount paid each month for a health insurance policy. formulary are subject to utilization man- Often health plan enrollees are responsible for paying agement,such as prior authorization, step a portion of the cost of the care they receive in addition to therapy, or quantity limits to steer pre- themonthlypremiumamount(seecost-sharingdefinition). scribers and patients to medications with Prior authorization Requires prescribers to obtain preapproval from the health fi fi plan before a medication will be covered. Often requires better safety or ef cacy pro les and/ clinical information about the medical necessity of the or lower net costs. PBMs may also medication. develop a list of preventive or essential Step therapy Requirespatientstotryandfailoncertainmedicationsbefore medications, recommending the health the requested medication will be covered by the plan. plan cover medications on the list with- Often requires clinical information about the patient’s out patient cost-sharing. Some types or history with medications preferred by the health plan. brands of insulins may be included on these lists, but it varies from PBM to PBM and health plan to health plan. How rebates and discounts are distrib- the plan than to use them to reduce The Working Group was informed that utedisalsounclear.Tolowerpatientcosts patients’ cost-sharing for insulin at the the PBMs generally pass a portion of the for insulin, the rebates would need to be point of sale. The Working Group could rebates received from manufacturers passed through to individuals with di- not confirm these claims. back to the employer or health plan abetes at the point of sale. Health plan An additional argument presented to and that in some cases, less than 10% representatives who met with the Work- the Working Group was that the current of the rebate is retained by the PBM. ing Group pointed out that this would system appears to transfer profits from These statements were not confirmed minimize the incentive for PBMs to select one stakeholder to another. So, it is not by the Working Group. In addition to for their formulary medications with clearwhoreallybenefitsfromtherebates negotiating rebates with manufacturers, higher rebates. On the other hand, rep- and discounts provided to the various PBMschargeemployers,plans,andphar- resentatives of the PBMs told the Work- stakeholders. maciesadministrativefeesforavarietyof ingGroupthatwhentheyofferpartofthe services. Specifically, health plans and rebates to their customers, it is more Formulary Decisions and Incentives employers pay PBMs a fee for utilization common for their customers to use the Based on the Working Group’s review of management, such as prior authorization rebates to lower overall premiums for the insulin supply chain, it is clear that the requests for plan enrollees. To ensure the care.diabetesjournals.org Cefalu and Associates 7

Figure 4—NADAC for five rapid-acting insulin pen or cartridge products, 2012–2016. Source: USC Schaeffer Center analysis of Centers for Medicare & Medicaid Services NADAC data.

PBM does not have a financial incentive of the plan year the total dollar amount medications they handle, even though tied to the number of medications requiring of rebates it will pay to the employer or their handling costs may not differ from utilization management, some employers health plan. one product to another. Thus, there are or plans outsource the processing of uti- The health plans the Working Group incentives throughout the insulin supply lization management requests and appro- interviewed reported that plans and chain for high list prices. vals to another company. PBMs have an incentive to select med- In contrast, stakeholders have noted The insulin manufacturers told the ications for their formularies that offer thatthecurrentstructureoftheMedicaid Working Group that they are not privy a higher rebate. It was also suggested to best price requirements limit the amount to the negotiations that take place be- the Working Group that the need to offer of discounts or rebates manufacturers tween PBMs and health plans. Further, higher rebates in order to achieve pref- provide in the commercial market. If a employers and health plans that work erential formulary positioning from PBMs manufacturer agrees to provide specific with PBMs noted that they are not privy to creates an incentive for manufacturers to rebatestotheMedicaidprogram,allofits the net prices the PBM negotiates with raisethelistprice.Inaddition,wholesalers medications will be covered (with some manufacturers on their behalf. Instead, are paid for their distribution services exceptions) (25). The basic Medicaid re- the PBM guarantees at the beginning as a percentage of the list price of the bate calculation defined in federal law is

Figure 5—Medicare market share of four insulin product categories, 2006–2013. Source: USC Schaeffer Center analysis of Medicare Part D claims data. 8 ADA Statement Diabetes Care

providers, and could be undermining pa- tient health (31,32). The Working Group noted concern about the increased burden on people with diabetes and reduced adherence to effective management strategies. The ADAwasprovidedwithnumeroussto- ries and complaints from constituents regarding this concern. One such exam- ple comes from Kathy Sego, who signed the ADA’s Make Insulin Affordable petition and whose son, Hunter, has type 1 diabetes. Hunter requires approx- imately four vials of insulin per month to properly manage his diabetes, at a monthly out-of-pocket cost of $1,948 until the family meets the health plan deductible. Knowing the impact of this cost on his family, Hunter, a college student in 2016, began skipping insulin doses, which can lead to serious and even deadly complications (33). Hunter Sego is one example of the many individuals who struggle to obtain the insulin they need to survive. Whenpeople are unable to afford their cost-sharing, many resort to ration- ing or skipping doses in order to make their insulin supply last longer, risking Figure 6—Report of changes in list and net prices for Lantus. Reprinted by permission of the Wall their health and their lives. Street Journal, Copyright © 2016, Dow Jones & Company, Inc. All Rights Reserved Worldwide. License number 4321941207734 (20). Formulary Decisions and Patient Financial Burden Formulary exclusions and frequent formu- the larger of a standard percentage of the affect formulary choice may not be in lary changes increase financial costs for medication’s average net price, or the thebestfinancialormedicalinterestofthe patients. In addition, patients are bearing average net price minus the “best price” patient. People with diabetes informed more of the cost of medications because the manufacturer provided to another the Working Group that they have little of high-deductible plans, increased use of payer. In addition, if a medication’sav- choice in medication coverage, particularly coinsurance, growing number of formulary erage net price increased by more than for those enrolled in employer-sponsored tiers, and fewer medications covered per inflation, the manufacturer must pay an plans. PBMs often exclude from for- tier (34–36). Since negotiateddiscounts or additional rebate to Medicaid. If a man- mulariestheinsulinsmadebytheman- rebates are usually not passed directly to ufacturer’s rebate agreement with a ufacturer who offers the lowest rebate. people with diabetes, their financial ob- non-Medicaid PBM or health plan re- As a result of these negotiations, rules ligations for purchasing insulin are often sults in a net price lower than the net for coverage differ from plan to plan and based on the list price. Clearly, this varies price Medicaid would receive using the year to year, or even within the same depending on the type of insurance the standard percentage rebate calculation, plan year. When insulins are excluded person has and the type of insulin pur- the manufacturer must use that rebate from the formulary, moved to a differ- chased(seebelow)butspecificallyimpacts agreementamounttocalculatethe entcost-sharingtier,orremovedduring those with a high deductible, those who medication’s rebate for all Medicaid the plan year (sometimes called “non- have to pay coinsurance, or those who are enrollees. Stakeholders shared that the medical switching”), providers and people in the Medicare Part D coverage gap. Medicaid best price requirement essen- with diabetes can be inconvenienced People without insurance are often re- tially sets a floor for negotiations with and patients’ health may be adversely quired to pay list price for insulins. PBMs and health plans since manufac- affected. For example, patients with high Health plans noted that out-of-pocket turers are hesitant to provide a very cost-sharing may be less adherent to insulin costs could be lower for some largerebatetonon-Medicaidplansthat recommended medication dosing and people with diabetes if health savings will also have to be paid to Medicaid. administration, resulting in harm to their account–eligible high-deductible health health (9,26–30). In addition, formulary plans could exempt insulin from the Formulary Decisions and Patient Health exclusions and frequent formulary changes deductible. Manufacturers agree that It is clear that decisions made from ne- cause uncertainty, increase financial costs exempting insulin from the plan’sde- gotiations between stakeholders that for patients, increase work required by ductible is a critical step in lowering care.diabetesjournals.org Cefalu and Associates 9

manufacturing sector and whether intro- NovoLog® Vial duction of biosimilar insulins will lead to 500 +353% lower prices. The Working Group spoke 450 with manufacturers who want to introduce 400 a biosimilar insulin into the U.S. market 350 who said the increased regulatory bur- 300 den associated with the development, 250 as well as U.S. Food and Drug Admin- Index 200 istration (FDA) approval, of biosimilars 150 +36% is deterring manufacturers from pro- 100 ducing biosimilar insulins.

50 Insulin is a biologic medication made Net Price* CAGR +2.1% 0 from living cells and far more complex to manufacture than small-molecule med- ications, which are made by combining Solid Line: List Price* Dashed Line: Net Price* different chemical ingredients (37). Be- fore 2010, a regulatory path was not in place to allow for the development of NovoLog® FlexPen 400 +270% biosimilar medications, as there has been for decades for small-molecule drugs. If a 350 biologic medication no longer had patent 300 protection, another company could man-

250 ufacture its own version. In order to ob- tain FDA approval, the company would 200 not be able to rely exclusively on safety Index 150 +3% and efficacy data from the original ’ 100 manufacturer s research, as is the case Net Price* CAGR +0.2% with small-molecule generic drugs. To ad- 50 dress this problem, Congress enacted the 0 Biologics Price Competition and Innovation 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016** Act (BPCIA) as part of the Affordable Care Solid Line: List Price* Dashed Line: Net Price* Act in 2010. Under the BPCIA, companies developing alternatives to biologic med- * Adjusted for inflation ** 2016 reflects September YTD ications (called “biosimilar” medications) must prove that their medication is Figure 7—Reported changes in NovoLog list and net prices. Adapted from Hobbs (22). YTD, year “highly similar” to the original biologic to date. and that there are no “clinically meaning- ful” differences from the original biologic out-of-pocket insulin costs. Until there is in 2000 to $36 per vial of insulin in (39). According to the FDA, “[t]his generally a systematic plan that addresses a change 2010 (38). In addition, Working Group means that biosimilar manufacturers in benefitdesigntolowerout-of-pocket members with the USC Schaeffer Center do not need to conduct as many expen- insulin costs for people with diabetes, found that average Medicare Part D ben- sive and lengthy clinical trials, potentially human insulin may be a valid alternative eficiary out-of-pocket costs for all insulin leading to faster access to these prod- to more expensive analog insulins for types doubled between 2006 and 2013, ucts, additional therapeutic options, and somepatients(19,37).Inthisregard,there from $27 per month to $65 per month. reduced costs for patients” (39). The wouldneedtobesignificant education of However, it should be noted that these manufacturer of a biosimilar medication people with diabetes and health care pro- results are average costs and do not can submit additional data to the FDA to viders on the appropriate use of human capture fluctuations in cost-sharing that be deemed “interchangeable” with the and analog insulins, and careful selection patients experience throughout the year original biologic medication. These data of people who may benefit from analog (such as during the deductible phase), and must show that the biosimilar is “ex- insulin. they do not capture patient costs when pected to produce the same clinical re- While data on average patient out-of- their insulin is not on their health plan’s sult” as the original biologic medication pocketspendingforinsulinarenotwidely formulary. In addition, these studies do not and that “switching between the pro- available, one study found that patient include people who are uninsured. More posed interchangeable product and the out-of-pocket expenses for insulin dou- informationisneededtobetterquantify reference product does not increase bled over a 10-year period. Using a private insulin costs for people with diabetes. safety risks or decrease effectiveness insurance administrative claims database compared to using the reference product for all insulin prescriptions filled at least Biosimilar Insulins without such switching” (39). Depending once, the median out-of-pocket cost to Another issue raised by stakeholders was on state laws, if a biosimilar is deemed patients went from $19 per vial of insulin the lack of competition in the insulin interchangeablebytheFDA,apharmacist 10 ADA Statement Diabetes Care

may fill a prescription written for the treatments that improve health by low- an individual’s insulin costs, the Working original version with the biosimilar ver- ering or eliminating patient cost-sharing. Group provides several case scenarios, sion,muchliketheycurrentlydoforother Efforts to encourage value-based insur- using an insulin with a list price of $480 types of medications with so-called ge- ance design, wherein cost-sharing is linked per vial as an example. (See Table 2 for a neric medications. Prior to passage of to population health outcomes, may im- glossary of health insurance terms.) BPCIA, alternative versions of original prove adherence and lower patient finan- biologic medications were referred to cial burden (47). The Uninsured Person as“follow-onbiologics.”Asofthiswriting, An uninsured person with diabetes will there are no biosimilar insulins on the PATIENT COST-SHARING: pay the full $480 for the insulin, regardless market, but to date, three follow-on bi- INSURANCE TYPE MATTERS of any rebates offered by the manufac- ologic human insulin analogs have been There are many factors that impact how turer. He or she could directly receive approved by the FDA (40–42). Discussion much people with diabetes pay for in- payment assistance from the manufac- with stakeholders revealed differing sulin, including the amount and type of turer or a pharmaceutical patient assis- opinions on how much biosimilars would insulin and delivery system they use. An- tance program, but eligibility for those ’ lower the price of insulin. Currently, the other major factor is whether the person programs varies based on the individual s only follow-on biologic insulin on the hasinsuranceand,ifso,whattype.Whether income, state, and medication. market was introduced with a list price ’ the person s health insurance plan or its The Person With Commercial approximately 15% less than the original PBM has negotiated rebates with insulin Insurance version (43,44). manufacturers also impacts the cost A person with diabetes who has com- to people with diabetes. In the U.S., Patient Assistance Programs mercial insurance may pay less than the there are many different types of health The Working Group also reviewed in- $480 list price, but the amount paid insurance. formation regarding the value of phar- depends upon the person’s insurance Almost half of Americans have health maceutical patient assistance programs contract. If the person is required to pay insurance provided through their em- as a solution to help people with diabetes an annual deductible that has not yet ployer or a family member’s employer afford their insulin. However, it is beyond been reached (for example, if this is the (48). Employer coverage is generally reg- the scope of this current report to pro- patient’s first expenditure in the new year), ulated by federal law, but employers have vide details, benefits, and value of all the the person with diabetes will pay the full leeway in determining which benefits to available programs. People with diabetes $480 list price for the insulin until the cover and how much to charge enrollees. will need to discuss this option with their person spends enough to meet the de- Medicaid, a health insurance program for physician and health plan (if applicable) ductible. Once the deductible is met, if low-income individuals, covers more than to determine what, if any, benefit these the person’s insurance contract specifies 68 million Americans (20% of the popula- patient assistance programs could pro- afixedco-payment,heorshewillpayaflat tion) (49). Each state manages and admin- vide to them individually. Although the amount,forexample,$50perprescription, isters the Medicaid programs for their Working Group did not address this option even if the person with diabetes uses residents; however, they are required to in detail, it was not deemed to be a long- multiple vials of the same insulin product follow federal guidelines, which include term or comprehensive answer to the rising per month. However, if the insurance plan limits to the out-of-pocket costs to ben- cost of insulin for the vast majority of people requires coinsurance, the person with di- eficiaries. Medicare, the federal health with diabetes. abetes will pay a percentage, for example, care program for Americans over age 20% of the cost of each vial of insulin. Im- Continued Innovation for Diabetes 65 years, people with disabilities under portantly, the coinsurance is based on Therapies age 65 years, and people with end-stage the listprice ofthe insulin,not the net cost One issue of importance to people with renal disease, covers about 14% of Amer- after any rebates or discounts negotiated diabetes is the need for continued in- icans (48). Federal rules dictate the bene- bythe PBM. Inthiscase,the out-of-pocket fi novation in and ts covered under Medicare and how cost by the person with diabetes for the prevention. New technologies, pharma- much enrollees pay, including Medicare insulinis$96pervial(20%ofthe$480list ’ cotherapies, and strategies continue to be Part D, the program s price). neededtopreventthedisease,todiminish benefit. Approximately 7% of Americans adversesideeffectslikehypoglycemiaand purchase insurance on their own directly The Person With Medicare weight gain, to promote adherence, and from an insurer or through state health A Medicare beneficiary with Part D pre- to prevent complications. Such innova- insurance exchanges (called individual scription drug coverage could face an tion would generate substantial value to market insurance) (48). Federal and state arrayofdifferentbenefitdesignsandout- people with diabetes both now and in laws dictate which benefits are covered of-pocket expenditures, depending on the future (45). One of the best ways to in individual market insurance plans as the type of plan in which the person encourage innovation is to better link re- wellasenrollees’annualspendingoncare. with diabetes enrolls, where the pre- imbursement to value (46). With value- Roughly 2% of Americans are covered under scription is filled, and the phase of cov- based insurance design, the amount of other government programs like military erage. For example, in 2018 under the cost-sharing for a medical treatment or or Veterans Administration coverage, and standard benefit (see Fig. 8 for overview service is set according to its value rather 9% have no health insurance coverage (48). of Medicare standard benefit structure) than its cost. Value-based insurance design To further understand how having (50), beneficiaries face a deductible of provides coverage for evidence-based insurance and insurance type impact $405andacoinsurancerateof25%.Thus, care.diabetesjournals.org Cefalu and Associates 11

onthefirstfill,thefirst$405ispaidout-of- submit a request on his or her behalf stating + Manufacturers are rarely paid the pocket, plus 25% of the remaining cost the medical need for the drug. listpriceforinsulin.Theso-callednet of the drug (25% of $75) for a total of pricedwhichreflectswhattheman- $423.75. The 25% coinsurance rate ap- CONCLUSIONS AND ufacturers receivedis much lower; plies to additional fills until the person RECOMMENDATIONS however, in most cases, the data reaches the plan’s initial coverage limit Afterdiscussionswithmorethan20stake- are not available. ($3,750 in most plans in 2018) and enters holders in the insulin supply chain, the + In the vast majority of cases, dis- the coverage gap, commonly known as WorkingGroupremainsconcernedbythe counts and rebates negotiated be- the “donut hole.” Historically, beneficia- complexity of the system. As outlined, tweenPBMsandmanufacturersand ries paid 100% of the Part D plan’s brand- there are numerous stakeholders in- between PBMs and pharmacies, name drug costs in the donut hole, but volved in the delivery of insulin, with which affect the cost of insulin theAffordableCareActhasreducedsome multipleopaquetransactionsbetween for the person with diabetes, are fi of that burden. In 2018, bene ciaries pay and among these stakeholders (Fig. 3). It confidential. ’ 35% of the Part D plan s brand-name was also the consensus of the Working ▪ PBM clients (often large employers drug costs (or $168 per prescription Group that incentives throughout the in most cases) are not privy to these in this example) in the coverage gap insulin supply chain facilitate and may negotiations,nordotheyknowthe until their annual out-of-pocket expense even promote high list prices. The follow- net price obtained by the PBM for fi reaches $5,000. After that, bene ciaries ing sections provide the conclusions and insulins. ’ pay 5% of a drug s list price ($24) for the recommendations of the Working Group. + Formulary considerations and deci- remainder of the calendar year. Beginning sions are not transparent. in 2019, beneficiaries in the standard Conclusions c PBMs have substantial market power. plan will pay 25% (or $120 per vial in this c List prices of insulin have risen precipi- + PBMs’ primary customers are health example) of the cost of their brand-name tously in recent years. Between 2002 and plans and employers, not patients. prescription drugs once they meet their 2013, the average price of insulin nearly + PBMs negotiate rebates from man- deductibleuntiltheyreachtheout-of-pocket tripled. ufacturers using formulary place- maximum. c The current pricing and rebate system ment as leverage. encourages high list prices. ▪ PBMs often exclude from formular- + fi The Person With Medicaid As list prices increase, the pro ts of ies the insulins made by the manu- For a person with diabetes with Medicaid the intermediaries in the insulin facturer who offers the lowest rebate. drug coverage, co-payments are generally supply chain (wholesalers, PBMs, ▪ As a result of negotiation, rules for – limited to a nominal amount ($1 $5) for pharmacies) increase since each may coveragedifferfromplantoplanand drugs on the preferred drug list. Medicaid receive a rebate, discount, or fee cal- year to year, or even within the same drug coverage varies from state to state, culated as a percentage of the list price. plan year. however, all states include some insulins c There is a lack of transparency through- ▪ When insulins are excluded from on their preferred drug lists. If a Medicaid out the insulin supply chain. It is unclear the formulary, moved to a different enrollee needs a medication not on the precisely how the dollars flow and how cost-sharing tier, or removed during state’s preferred drug list, the prescriber can much each intermediary profits. the plan year, it places a burden on people with diabetes and providers and may have a negative health impact. + PBMs receive administrative fees from their clients (health insurance plans) for utilization management services (prior authorization, etc.). Often it is the PBM that determines which and how many drugs on the formulary are subject to utilization management. c People with diabetes are financially harmedbyhighlistpricesandhighout- of-pocket costs. + Regardless of the negotiated net price, the cost of insulin for people with diabetes is greatly influenced by the list price for insulins. ▪ Out-of-pocket costs vary depending upon the type of health insurance each individual has and the type of Figure 8—Standard Medicare prescription drug benefit, 2018 (50). insulin prescribed. The costs can be 12 ADA Statement Diabetes Care

significantly higher for people who c Cost-sharing for insured people with pricing. D.G. is also a consultant to Precision Health are uninsured, who have an in- diabetesshouldbebasedonthelowest Economics and owns equity in its parent company, surance plan with a high deduct- price available. Precision Medicine Group. W.H.H. serves as Chair, Data Safety Monitoring Board, Merck Sharp & c ible, or who are in the Medicare Uninsured people with diabetes should Dohme, and as a consultant for Janssen Scientific Part D donut hole. have access to high-quality, low-cost Affairs, LLC. K.V.N. received research support from + Manufacturer rebates often are not insulins. the ADA to examine trends in insulin pricing and has directly passed on to people with c Researchers should study the compara- consulted for Precision Health Economics. A.C.P. diabetes. tive effectiveness and cost-effectiveness has served on the Board of Directors for the ADA. S.I.T. has served as a consultant for Ionis Pharma- c Patients’medicalcarecanbeadversely of the various insulins. ceuticals; has received research support provided affected by formulary decisions. c List price for insulins should more closely to University of Maryland School of Medicine by + People with high cost-sharing are less reflectnetprice,andrebatesbasedonlist Regeneron Pharmaceuticals; and owns stock in adherent to recommended dosing, price should be minimized. The current pay- Celgene, , and . A.L.Y. ment system should rely less on rebates, served on the Board of Directors for the ADA and which results in short- and long-term owns stock in Amgen and Bristol-Myers Squibb harm to their health. discounts,andfeesbasedonlistprice. through a broker-managed account. No other + Formulary exclusions and frequent c Healthplansshouldensurethatpeople potential conflicts of interest relevant to this formulary changes cause uncertainty, with diabetes can access their insulin article were reported. increase financial costs for people without undue administrative burden with diabetes, and could have seri- or excessive cost. References ous negative consequences on the + Payers, insurers, manufacturers, and 1. Centers for Disease Control and Prevention. health of people with diabetes. PBMs should design pharmacy for- National Diabetes Statistics Report, 2017.Atlanta, GA, Centers for Disease Control and Prevention, c The regulatory framework for develop- mularies that include a full range of U.S. Department of Health and Human Services, mentandapprovalofbiosimilarinsulins insulin preparations, including hu- 2017 is burdensome for manufacturers. man insulin and insulin analogs, in 2. American Diabetes Association. Economic + There are not enough biosimilar the lowest cost-sharing tier. costs of diabetes in the U.S. in 2017. Diabetes – c PBMsandpayers shoulduserebatesto Care 2018;41:917 928 insulins on the market. 3. Hua X, Carvalho N, Tew M, Huang ES, Herman + Prices for biosimilar insulins are not lower costs for insulin at the point of WH, Clarke P. Expenditures and prices of anti- likely to be lower unless there are sale for people with diabetes. hyperglycemic medications in the United States: multiple biosimilars that can be sub- c There needs to be more transparency 2002-2013. JAMA 2016;315:1400–1402 situted for the brand-name analog throughout the insulin supply chain. 4. American Diabetes Association. Insulin stories [Internet].Availablefromhttps://makeinsulinaffordable c Payers, insurers, manufacturers, PBMs, insulin, rather than only one. .org/insulin-stories/. Accessed 1 March 2018 c Prescribing patterns have favored and people with diabetes should en- 5. Picchi A. Soaring insulin prices have diabetics newer, more expensive insulins. courageinnovationinthedevelopment feeling the pain [article online]. CBS News Money- + Newer insulins, including analogs, of more effective insulin preparations. Watch, 25 August 2016. Available from https://www are more expensive than older in- c The FDA should continue to streamline .cbsnews.com/news/soaring-insulin-prices-have- the process to bring biosimilar insulins diabetics-feeling-the-pain/. Accessed 1 March sulins including human insulins. 2018 + Human insulin may be an appropriate to market. 6. Lipska K. Break up the insulin racket [article alternative to more expensive analog c Organizations such as the ADA should online]. New York Times, 20 February 2016. Avail- insulins for some people with diabetes. do the following: able from https://www.nytimes.com/2016/02/21/ +Advocateforaccesstoaffordableand opinion/sunday/break-up-the-insulin-racket. html. Accessed 4 March 2018 Recommendations evidence-based insulin preparations 7. SchneiderA.Insulinpricespikeleavesdiabetes c Providers, pharmacies, and health for all people with diabetes. patients in crisis [article online]. Montana Stan- plans should discuss the cost of insulin + Ensure that health providers receive dard, 21 August 2016. Available from http:// preparations with people with diabe- ongoing medical education on how mtstandard.com/news/local/insulin-price-spike- to prescribe all insulin preparations, leaves-diabetes-patients-in-crisis/article_74cd6b23- testohelpunderstandtheadvantages, 7d9d-5f36-9df0-9c72c5de9f1a.html. Accessed 5 disadvantages, and financial implica- including human insulins, based on March 2018 tions of potential insulin preparations. scientific and medical evidence. 8. RamseyL.A93-year-olddrugthatcancostmore c Providers should prescribe the lowest- + Develop and regularlyupdate clinical thanamortgagepaymenttellsuseverythingthat’s priced insulin required to effectively guidelinesorstandardsofcarebased wrong with American healthcare [article online]. on scientific evidence for prescribing Business Insider, 16 September 2016. Available and safely achieve treatment goals. from http://www.businessinsider.com/insulin- + This mayinclude using humaninsulin all forms of insulins and make these prices-increase-2016-9. Accessed 5 March 2018 in appropriately selected patients. guidelines easily available to health 9. QuickStats:Percentage*ofadultsaged$45years † + Providers should be aware of the care providers. who reduced or delayed medication to save money risingcostofinsulinpreparationsand + Make information about the advan- in the past 12 months among those who were fi prescribed medication, by diagnosed diabetes howthisnegativelyimpactsadherence tages, disadvantages, and nancial im- status and age§ - National Health Interview Sur- totheclinicaltreatmentbypeoplewith plications of all insulin preparations vey, 2015. MMWR Morb Mortal Wkly Rep 2017;66: diabetes. easilyavailabletopeoplewithdiabetes. 679 + Providers should be trained to appro- 10. United States Diabetes Surveillance System. Diabetic medication use [Internet], 2015. Atlanta, priately prescribe all forms of insulin GA, Centers for Disease Control and Prevention. preparations based on evidence- Duality of Interest. 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