Right Care Alliance Presentation

Assessing Blame for U.S.
Insulin Prices Today
Presented by: Scott Strumello
November 15, 2020

© 2020 Scott Strumello for presentation on behalf of the Right Care Alliance. Content may be shared in its entirety only. November 15, 2020
› Some know me from my Twitter handle at https://twitter.com/sstrumello or the place I began my
work in diabetes, a blog I call "Scott's Web Log" at https://blog.sstrumello.com which I started in
Sept. 2005 at the encouragement of my friend (RIP), Deb Butterfield who authored the book
"Showdown With Diabetes". My blog is still active, its just not updated as often as it once was.
› I was diagnosed with autoimmune Type 1 diabetes (T1D) at age 7 in 1976 (you do the math).
That also means I'll become eligible for a 50-year Joslin Medal in about 4 years, in 2026.
› At the time of my diagnosis, the country was celebrating the American Bicentennial which was a
big deal that year (hence the logo on the upper right side). My recollection of Independence Day
that year was an unquenchable thirst and going to the bathroom every 15 minutes.
– When I was diagnosed, we did not (yet) even have self-testing of blood glucose. We used Clinitest urine testing which
was close to useless. But the standard treatment at the time was regular insulin injections (up to 4x/day) and following
an exchange diet, but that was about it. The DCCT wouldn't be published until 1993, after I'd lived with T1D for >16 yrs.
› I'm not a pharma defender or apologist, I currently have NO conflicts-of-interest, nor have I had
any previously.
Who Is Scott Strumello?

Patient Insulin Prices in the U.S. are Out-of-Control
› Over the past decade alone, insulin prices have tripled in the U.S., while patient out-of-
pocket costs per prescription more than doubled.
› Peer-reviewed evidence from Yale University shows one-in-four U.S. patients with T1D are
rationing their use of insulin because they cannot afford it. This is no surprise to patients.1
– The most dramatic statement we hear from patient advocacy organizations is: "We need to do better".
Really?!
› To better understand the situation, I investigated. I discovered that solving the question of
where blame lies is like peeling an onion; whereby each layer is peeled away to reveal yet
another layer that shares some responsibility for today's insulin prices.
› There is PLENTY of blame to go around, but I believe the entity which deserves the most
blame are the nation's commercial healthcare insurance companies, who are seldom (if
ever) blamed for the problem. Insurance happens to be doing several things which
significantly increases patient costs for insulin. In this presentation, I'll make the case why I
think insurance rightfully deserves blame for runaway insulin prices.
– Most notably, changes in benefit designs (specifically the advent of high-deductibles) means many
patients have been regularly subjected to the bogus "wholesale acquisition costs" (a.k.a. list prices) for
insulin which are higher here than in any other country on earth

Why does insulin cost more in the U.S. compared
to everywhere else on earth?
› First, I learned how pharma competes on price for insulin. Its not due to a lack of
competition, but because of the manner in which pharma actually competes on price
for formulary placement. Volume-based discounts are given in the form of secretive
rebates paid to intermediaries in the drug distribution system. But it also enables Rx
rebate money to be misused for other purposes, and that's exactly what's happened.
› The most effective solution is legislative action. To date, 8 states (from red Utah to
purple New Hampshire to blue Washington) have passed price caps into law, and a
dozen more have introduced bills to cap insulin prices. While price caps leave
underlying market dysfunction intact (and leave things like glucose testing supplies
untouched), they force insurance plans to share the benefit of Rx rebates with patients
whose purchases actually generated the rebates — which is the reason they work.
– Public pressure is forcing states to fill a void left by the federal government
› We'll discuss this more a bit later, but know that patient activism is working. After
public shaming before Congress and a stream of bad press in late 2019 and early 2020,
both Lilly and Novo Nordisk in 2020 launched "half-priced" authorized generic versions
branded as U-100 Lilly Insulin Lispro and U-100 Novo Nordisk Insulin Aspart.2, 3
– Half-price was an arbitrary percentage; but we know from seeing the companies' quarterly
earnings reports filed with the SEC throughout 2020 that neither company saw any adverse
profit impact from the introductions of lower-cost products. So what took them so long?

"It's the Rx Rebates, Stupid!"
› Realized "net" prices paid to drug companies for insulin have been flat or declining for at least 5 years (although companies
in the space contend it has been going on since around 2003)5, yet patient prices are rising rapidly. The Drug Channels
Institute estimated that in 2018, total pharma rebates were $166 billion, which increased to $185 billion in 2019. Certain
classes of drugs including insulin are much more heavily-discounted thru rebates. We also know that rebates amount to
about 70% of the list price for insulin4, 5. So where is all that money going?
› As noted, pharma discounts on insulin happen thru undisclosed rebates paid to intermediaries in the drug distribution
system, a practice the industry defends and protects as "trade secrets". They artificially raise the list price of insulin so they
can give ever-bigger rebates to insurance co's who pay for most prescriptions. But insurance companies fail to share the
prescription drug rebates with people with diabetes who generate those rebates. Instead, insurance is giving the insulin
rebates to employers as "premium offsets" in order to sell more new policies.
– Surveys reveal that more and more employers admit that they're increasingly 'hoarding' Rx rebates rather than sharing
the savings with the covered employees whose very prescriptions generated the rebates
› This is why former FDA commissioner Dr. Scott Gottlieb made headlines on March 7, 2018 at a conference organized by the
health insurance industry known as the National Health Policy Conference of AHIP when he told the attendees (see
https://cnb.cx/2y51uEb for details):
“You're doing it wrong! Sick people aren't supposed to be subsidizing the healthy. That's exactly the opposite of what most people thought they were
buying when they bought into the notion of having insurance."
And yet, that is exactly what is happening today.
› In September 2019, Aaron Kowalski, PhD and the CEO of the JDRF, wrote in a journal submission to the American Journal of
Managed Care (see https://www.ajmc.com/journals/evidence-based-diabetes-management/2019/september-2019/jdrfs-
kowalski-sees-hope-in-bipartisan-support-for-insulin-pricing-reform):
"We see the issues related to the rebate system as being the biggest challenge for us right now. In a normal capital market where you have at least 3
similar products, as we do for most types of insulin, you'd see competition driving retail prices down. The rebate system lets the 3 insulin makers chase
the prices up rather than chase them down. It hurts everyone, but it is extremely painful to people who are uninsured, who are underinsured, and who
have high deductibles or copays."

What to know about PBM's
› In early 2017, the pharma trade group Pharmaceutical Research and Manufacturers of America
(PhRMA) announced plans to spend in the "high" tens of millions of dollars each yr. for 4-5 years
(including print, TV and online ads). PhRMA identified Pharmacy Benefits Managers (PBM's) as
the entity responsible for pushing up drug spending by their demanding higher rebates from
drug makers. The aim was to shift blame away from pharma, but was mostly self-serving.
– In fact, PBM's play a role, but the PhRMA narrative omits the party perhaps most responsible for runaway
pharmaceutical prices: healthcare insurance companies. PhRMA concluded it would not bite the hands that feed it.
– Vertical integration means PBM's are now wholly-owned subsidiaries of big healthcare insurance companies (drugstore
chain and PBM CVS Health acquired an insurer of its own when it bought Aetna for $69 billion in 2018). These entities
pay for more than 75% of all U.S. Rx drug spending.
› PBM's contribute to high drug prices, but they work for (or are owned by) insurance companies

Insurance Companies: Enormously Profitable, But
Ethically Bankrupt
(Patients with diabetes are one of their ATM's)
› Health insurance is enormously profitable. In October 2020, when the country's largest
commercial health insurer, UnitedHealth Group, reported a better-than-expected $3.2
billion in quarterly profit, the Associated Press observed that even after offering
policyholders' cuts in premiums and co-pays, UHC still raked in over $1 billion/MONTH.
› As noted, insurance collects billions in insulin rebates each year, but (1) they're giving
the rebates to employers (not to patients) in order to sell more policies. (2) They also
force patients to pay the bogus list price (calling that "plan cost") for insulin. Finally, (3)
insurance only gives patients credit (applied towards deductibles) for their own deeply-
discounted insulin prices — totaling about 30% of what patients actually pay.
› Healthcare insurance companies also successfully lobbied the Financial Accounting
Standards Board (FASB) for an exemption to ordinary net cost accounting standards
for prescription drug rebate dollars, and misclassify that money (which amounted to
$185 billion in 2019, up from $166 billion in 2018) as "general revenue," making it
difficult for even forensic accountants to follow the money.
– BTW: I know RCA is based in Boston, although I don't know how many of this audience are based
there. I earned my B.S. from Bentley University in Waltham, which is a school known for teaching
accountancy. I mention it because I think the FASB exemption request was highly unusual.

Any Guess on How Long Before Humalog and Novolog
Disappear Into History?
(Over my 46 yrs. with T1D, Insulin Varieties I Once Relied On Have Been Routinely "Retired" by Pharma)

Next-Gen Insulins are Designed to Keep Prices Sky-High
and Patent-Protected (Glycemic control? Yeah, that too.)
Novolog
(insulin aspart
rDNA origin)
has been
usurped by
Fiasp
Humalog
(insulin lispro
rDNA origin)
has been
usurped by
Lyumjev

Planned Insulin Obsolescence is a Pharma Strategy
› Novo Nordisk A/S announced on September 29, 2017 that it had
received FDA approval for a marginally-faster version of Novolog
(insulin aspart injection rDNA origin) branded as Fiasp
– The company discovered, rather unpleasantly, that insurance company
payers refused to pay a cent more for Fiasp than they did for Novolog, but
it was still worth launching in order to secure ongoing patent-protection
› Likewise, on June 15, 2020, rival Eli Lilly & Company, Inc. received
FDA approval for a marginally-faster version of Humalog (insulin
lispro injection rDNA origin) branded as Lyumjev
› We have yet to see evidence that Humalog and Novolog will be
imminently retired (payers will decide that), but biosimilar versions
are either already on the market (including Sanofi Admelog) or are
pending FDA review which could accelerate their retirements,
and history has proven what pharma will likely do

New Tools Everyone Now Has Access To
› The great news is that new tools now enable patients to access to
the same deeply-discounted PBM-negotiated prices for
prescription drugs (including insulin) even without insurance or if
you're still trying to satisfy a deductible.
– Not every app/website offers the same discounts, and some don't even
offer discounts on insulin, so your job is to search them all
› When you use these tools, you become a cash-paying customer.
But going thru insurance means you pay an unacceptably high price
for insulin and receive next-to-nothing applied towards your
deductible. Patients are better-off paying cash and
getting insulin with readily-available coupons.
› Not all pharmacies cooperate, but some do.
Most notable in my experience is Walgreens.

How Rx Coupon-Generating Tools Work
› Coupon-generating tools/apps work in the following way:
1. Start with the pharmacy's bogus cash prescription price
2. Save money for consumers by providing easy access to a PBM's discounted
network rates on Rx drugs (GoodRx partners with multiple PBM's, including
Cigna's Express Scripts, United Healthcare's OptumRx, MedImpact, and
Navitus)
3. Collect a portion of the fee that pharmacies ordinarily pay to a PBM
> One tool which I'll talk about is called GoodRx. It raised $1.14 billion
in an IPO on Sep. 23, 2020. GoodRx is already very profitable. Its
adjusted net income — meaning earnings before interest, taxes,
depreciation and amortization (EBITDA) — is currently 40%!

Check out the 75% savings on insulin with these coupons!
(Coupons redeemable at Walgreens; Lilly says the list price for Humalog is $275.00/vial. To use
these, have your Dr. write your script for either "Insulin Lispro" or "Insulin Aspart")

https://www.goodrx.com/
Rx Coupon-Generating Tools Are Offering Big
Discounts on Authorized Generic Insulins
› Already noted is the first tool which is GoodRx. GoodRx
offers coupons on Lilly Insulin Lispro (Humalog) for
$68.38/vial at Walgreens. GoodRx also offers coupons
on Novo Nordisk Insulin Aspart for about $4 more/vial.
Insulin pens are slightly more costly.
› A rival is RxSaver by RetailMeNot which offers coupons
on Novo Nordisk Insulin Aspart (Novolog) for
$67.00/vial at Walgreens. It also offers a slightly-less
generous coupon than its rival for Lilly Insulin Lispro, plus
insulin pens for both are slightly more costly.
› Both apps/websites offer these discounts on the
authorized generic versions of Humalog and Novolog
sold at Walgreens and some smaller pharmacies
– CVS refuses to carry the less-costly versions, so patronize
Walgreens instead (at least until you satisfy a deductible)
› Patients can download these apps right now!
https://www.rxsaver.com/

How I learned to slash my insulin expenses
Step 2:
$99.00/vial
with mfg
coupon
Step 1:
$275.00/vial
Pharmacy
Cash List Price
Step 3:
$68.38/vial
with GoodRx
Coupon

Endnotes/References
1. One in four patients say they've skimped on insulin because of high cost, Yale Daily News, December 3 2018,
https://news.yale.edu/2018/12/03/one-four-patients-say-theyve-skimped-insulin-because-high-cost
2. Lilly to Introduce Lower-Priced Insulin, PR Newswire, March 4 2019, https://www.prnewswire.com/news-releases/lilly-to-
introduce-lower-priced-insulin-300805560.html
3. Novo Nordisk launching additional US insulin affordability offerings in January 2020, PR Newswire, September 6 2019,
https://www.prnewswire.com/news-releases/novo-nordisk-launching-additional-us-insulin-affordability-offerings-in-
january-2020-300913167.html
4. Sanofi, Fighting Back in Insulin Price Debate, Says Its Net Prices Fell 11%, Wall Street Journal, March 4 2020,
https://www.wsj.com/articles/sanofi-fighting-back-in-insulin-price-debate-says-its-net-prices-fell-11-11583340721
5. Novo Nordisk A/S Q3 2020 Earnings Slideshow Presentation, November 30, 2020, Slides #99 and #101
https://investor.novonordisk.com/q3-2020-presentation/ or archived at https://seekingalpha.com/article/4383283-novo-
nordisk-s-2020-q3-results-earnings-call-presentation

'Big Pharma never Sleeps'
Artwork by NYC artist Appleton (Artworks) https://appletonartwork.com/

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