The Senate’s Insulin Price Reduction Act: What You Need to Know

The Senate’s Insulin Price Reduction Act: What You Need to Know

-Craig Idlebrook

On July 22nd, a bipartisan bill was filed this week that attempts to incentivize a significant reduction in the list price of many leading brands of insulin.

Senators Jeanne Shaheen (R-NH), Tom Carper (D-DE), Kevin Cramer (R-ND), and Susan Collins (R-ME) filed legislation which they said would “create a new insulin pricing model” which had the potential to lower the list price of leading insulins back “to a level no higher than the price of the product in 2006,” according to a statement released from Senator Shaheen’s office. The bill, known as the Insulin Price Reduction Act, was endorsed by JDRF and the American Diabetes Association. 

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However, it should be noted that this bill is just one of several legislative efforts by Congress and measures proposed by the Trump administration to bring down prescription drug prices, and it may compete for votes against other bills and face opposition from other quarters.

What the legislation seeks to fix

In hearings this year about the high price of insulin and other prescription drugs, spokespeople from pharmaceutical companies have blamed Pharmacy Benefit Managers (PBMs) for the high cost that American consumers pay for medications, and vice versa. This legislation presents an attempt to break the logjam of blame by changing the incentives for both sides by which the list price of a drug is set.

To understand how the bill works, it’s important first to review how the price for a prescription drug is set in the United States. A pharmaceutical company sets a list price for a drug – the price that someone without insurance might pay at the pharmacy. A PBM then negotiate with that pharmaceutical company to offer that drug at a discount to an insurer’s customers through a rebate to the insurer – essentially, a coupon off the list price. The PBM then receives a cut from that rebate.

Health care advocates argue that this process leads to higher list prices. This is because PBMs will have an incentive to exclude lower-priced drugs from an insurer’s formulary because there will be little opportunity for PBMs to negotiate lower prices and receive a cut of the money saved. In addition, a pharmaceutical company might feel compelled to set a high list price for a drug, with a correspondingly high rebate, or risk being left off a formulary. For the insurance company, the end result is the same – but for an uninsured or under-insured consumer without that negotiating power, the result is expensive medicine.

The new legislation attempts to level the playing field by eliminating this incentive to raise list prices. The goal is to make the price an insurer pays for a drug closer to that which an uninsured individual might pay for the drug.

What the legislation would do

According to a summary provided by Senator Shaheen, here are some key provisions of what the bill would do: 

-If an insulin manufacturer voluntarily lowers the list price of an insulin product to no higher than what the list price of the product would have been in 2006, then PBMs and insurers would be blocked from receiving rebates for that insulin product. The rebate restrictions would apply for all private insurance and Medicare Part D plans.

-Private insurance providers would also be required to waive the deductible for insulins that meet the 2006 list price requirement. 

-The PBM or insurer would also be barred from excluding such an insulin from formularies or otherwise adding other new roadblocks to access to that insulin.

-If an insulin entered the market after 2006, then the insulin manufacturer can set the price by a “weighted average list price” of comparable insulins on the market at that time.

-Once insulin manufacturers set the price to no higher than 2006 prices, it can maintain this shield from rebates by only raising the list price of insulin by no more than the rate of annual medical inflation.

Possible obstacles to this bill’s success

While the Insulin Price Reduction Act was filed with the backing of the Congressional Diabetes Caucus, those endorsements do not necessarily ensure that the bill will be passed in Congress or be signed into law by President Donald Trump. 

One obstacle to the bill’s passage may be competing legislative measures. For example, the day after this bill was filed, another bill capping drug prices for Medicare recipients made it out of a key Senate committee. That bill has garnered more headlines than the Insulin Price Reduction Act. Every legislative session in Congress, there are competing measures to address an issue – some might cancel out support for others, and it’s even possible for some provisions of one bill to be folded into another bill. 

As the clock ticks closer towards the 2020 election, it also may prove harder to find bipartisan consensus on drug pricing legislation, although the bipartisan nature of this bill may help its chances.

Even if the measure were to become law, it still may face a legal challenge from organizations that would be impacted by the new regulations. This could either delay or derail the potential new law from going into effect. For example, a federal judge recently blocked a Trump Administration regulation which would require drug companies to include the prices of some drugs in television ads. 

In other words, there are many twists and turns that the Insulin Price Reduction Act must navigate before it might become the law of the land. T1D Exchange Glu will track this bill’s fate in the coming weeks.

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